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Residential Vacancy Rates In Lagos, Others Hit 41 Per Cent

Although the Nigeria real estate market has continued to witness improved activities from last year’s performance, a new report released by Northcourt has shown an increase in the vacancy rates.

In the half year report known as Nigeria Real Estate Market Review, released at the weekend, Ikoyi and Katampe in Abuja topped the list of residential vacancy rates in the country with 41 per cent and 37 per cent respectively.

Also, Victoria Island had 23 per cent, followed closely by Lekki with a 22 per cent vacancy rate.

Oniru, and Apo, Abuja also had 15 per cent and 14 per cent respectively, while vacancy rates in Port Harcourt moved slightly when compared with End of 2018.

Old Government Reserved Area, GRA Phases 1, 2 and 3 recorded vacancy rates of 7 per cent , 9 percent , 9 percent and 15 per cent respectively, while Magodo Phase 11, Lagos has one of the lowest vacancy rates of one per cent.

The low vacancy rates recorded in many parts of Ogun State, South-West Nigeria, the report said was largely due to the affordable cost of housing in its capital city – Abeokuta. High to mid-income areas such as Ewang Housing Estate, Ibara Housing Estate, and Asero Housing Estate have vacancy rates of 1 per cent, 9 per cent and 14 per cent respectively.

Affordability, serene environment, adequate infrastructure, and proximity to both federal and state secretariat offices have been identified as major drivers of the high occupancy levels.

Low-mid income area, like Kuforiji, is a promising residential neighbourhood with a number of pipeline projects such as government-led Orange Valley Estate and AAK Degun Mitros.

Oyo’s leading gated community in Ibadan (another South-Western state) – Samonda Estate (Aerodrome) – is comprised mostly of 4- & 5-bedroom houses and is 98 per cent owner-occupied. Other prime locations such as New and Old Bodija have lower occupancies.

On the Office space, the report said, rents have continued to gradually decline in the Grade A office market. Three towers – Cornerstone, Greystone, and Kingsway brought 12,000sqm, 11,190sqm and 13,317sqm of leasable office space to the market. With Heritage Place, Wings Complex and Alliance Place recording vacancies circa 55 per cent.

In Maitama, rental values are considerably higher than in other areas in the nation’s capital – Abuja. Office spaces on average go ₦45,000 – ₦60,000/sqm. Major tenants include pharmacies, boutiques, and travel agencies. Commercial vacancy rates currently stand at 12 per cent. Rentals in the Utako area average ₦35,000/sqm with commercial vacancy rates at 52 per cent . More development pipelines are in the area as land prices average ₦112,000/sqm. In Wuse 1, rentals for office spaces go for ₦36,000/sqm on average. Shops go for slightly lower – ₦35,000/sqm.

The growing demand for coworking spaces, especially in Lagos state, has also encouraged conversions of grade B officers. Service providers are moving more into the ‘Space as a service’ model – upgrading, fitting out and managing grade B spaces to meet client specifications.

Strong occupancy levels in mainland areas like Yaba have only mirrored demand on the Island where spaces in Victoria Island and Lekki lead the charge.

The millennial demographic, tech start-ups, women-led enterprises and SMEs have remained the leading drivers of demand for coworking office space.

The recently launched Delta State Innovation Hub has also increased the demand for co-working in South-Eastern Nigeria. Leadspace partnered with FCMB to open Hub One, a co-working space in Yaba, Lagos. Grade
Year over year (YoY).

According to the report, security has also grown as a critical selector tool in the residential market.

Secure gated communities are priced higher than estates perceived to be less so as investment thinking in property continues to shift.

The residential real estate market is also gradually picking up as tenants pushed for better deals.

Landlords, the report said, is making little or no reductions. Mini flats, 1 and 2 Bed flats remain favourites.

According to the report, Coworking has continued to grow as business owners are unable to meet up to the dollar rent obligations for Grade A office space.

Most ongoing prime office developments or those that have been delivered in recent years are a testament to the fact that green buildings have come to stay.

Also, demand for Grade A warehousing, the report said has continued to be the case, especially in Lagos state as retailers look to circumvent the economic loss from the city’s traffic situation.

The land has continued to reprise its role as a stable investment, rising YoY in almost all the areas considered. Average prices in Ikoyi, is N450,000 Lekki Phase 1, is N200,000, Victoria Island, N340,000, while it goes for N30,000 in Sangotedo.

In his summary of the report, Northcourt Chief Operating Officer and Director, Real Estate Research & Advisory Lagos, Nigeria, Ayo Ibaru Noted that the demand for property assets will continue to mirror general market conditions fuelled by the efficiencies gained through technological advancements.

Artificial Intelligence, Virtual Reality, and Proptech, he said are changing our interaction with the real estate value chain – from design to construction and completion.

“As materials science breakthroughs force their way into existing construction frameworks, we can safely expect improvements.

Green buildings continue to feature in conversations, waiting for a general traditionalist market to catch up”, he noted. Ibaru stressed that land values have continued to appreciate and the Grade A office market’s struggle with unhealthy vacancy rates remains the case.

“Coworking models are also evolving and, for the first time, we will be including property prices from emerging cities for your investment consideration”, he added.

Source: Guardianng

The Illusion And Reality Of FG’s 2020 Budget

The 2020 appropriation and finance bills of the Federal Government (FG) were presented to the National Assembly by President Muhammadu Buhari last week, CHIMA NWOKOJI in this report dissects the policy document through lens of economic and finance experts.


Nigerians are happy with the quick submission of the bill to the legislators because it should give ample time for deliberations and hasten final approval, especially as the current leadership of the National Assembly is supportive.

Also, many people are slightly comforted by the finance bill which proposes the increase in Value Added Tax (VAT) rate from 5.0per cent to 7.5 per cent as well as business friendly tax reforms. Although, the president called it job creation budget, most analysts see it as budget of taxation because the bulk of the budgeted revenue is expected to come from the VAT.

However, most economic and finance experts have criticised the estimates based on a lot of unrealistic assumptions.

The budget is underpinned by four pillars including fiscal consolidation, infrastructure & human capital development, incentivising the private sector and enhancing social investment programmes. These goals seem laudable at first glance, but experts are worried by the small sizes of budget allocations which they said suggest a shaky foundation that could affect progress. Their conclusion is that the budget needs re-visiting but not padding.”

To put this in context, the Chief Economist at a global investment consultancy and advisory services firm, PriceWaterHouseCoopers (PWC), Dr. Andrew S. Nevin while discussing the Budget presentation on Channels TV said that Nigeria which was growing at an average of 6 per cent in the 1990s and early 2000, needs to grow at 6-8 per cent, and that this requires private & public sector investment of N40 trillion a year. The 2020 budget estimates is N10.33 trillion.

In this context, the economist says, “We continue to get poorer and poorer as our growth is lower than population growth; with population growth of 2.7 per cent per annum, even if we grow GDP at 2.5 per cent at 2019, we are getting poorer and poorer. And even if we grew at 3.5 per cent per year, it would take about 100 years to double GDP per capita.”

The International Monetary Fund (IMF) did not differ from this idea when recently, it warned that Nigeria could face up to eight years of getting poorer and poorer – 2015-2022 – unless something different is done.


Test of countercyclical Economic theory

There is a school of economic thought founded by the United Kingdom economist John Maynard Keynes (1883-1946) and developed by his followers. Keynesian economics prescribes countercyclical spending as an orthodox stimulant for slowing economies as Nigeria’s. A ‘countercyclical’ fiscal policy is the idea that government should reduce spending and increase taxes during a boom period (Nigeria is not in boom period); increase spending and cut taxes during a recession or a period of high inflation and slow GDP growth (inflation is still in double digits and GDP growth is very slow).

The 2020 budget is theoretically in deficit but could be a balanced budget, if the Excess Crude Account (ECA) accruals are backed out. The budget deficit is projected at N2.2 trillion.

Keynesian economists would recommend that Nigeria should embark on deficit spending (allocate more money) on labour-intensive infrastructure projects in order to stimulate employment and stabilise wages in this period of economic downturn.

Managing Director, Financial Derivatives Company Limited Mr. Bismarck Rewane observed in the company’s monthly economic bulletin that in the last 3years, Federal Government of Nigeria (FGN) budgetary expenditure has been growing at an average of 12.7 per cent compared to the average inflation rate of 13.57 per cent.

“This means that after adjusting for inflation, Nigerian budgets have actually declined. If you go further to adjust for exchange rate depreciation, the decline gets more troubling. In effect, the budget expenditure in 2020 is approximately 5.78 per cent lower than the actual budget in 2016,” he said, agreeing with Dr. Nevin that Nigeria is not spending enough during this economic downturn.

It means that the N2.5 trillion or 24.3 per cent allocations to capital spending cannot provide the boost needed in infrastructure.

This explains why for example, pursuant to a motion moved by Babajimi Benson (APC, Lagos), the House of Representatives  called for more funding for the education sector in the 2020 budget, a prayer the House adopted.

The House also urged the federal government to increase the annual budgetary allocation to the health sector from 5 per cent to 15 per cent as had been pledged by successive governments in order to curb unnecessary deaths caused by the failing health system.

The call followed a motion entitled: Deplorable State of Government Owned Healthcare Facilities in Nigeria, sponsored by Mr. Ntufam Mbora (PDP, Cross River) during plenary on Wednesday.

Mr. Mbora noted that the health sector is in shambles as hospitals have been reduced to mere consulting clinics without drugs, water and health equipment does not function optimally. According to him, the decay in the nation’s health sector calls for a re-evaluation of the annual budgetary allocation to the sector, which is barely sufficient for adequate provision of medical facilities and maintenance. This call can be replicated in other sectors.


Doubtful Revenue Expectations

A herd of experts have also raised their eyebrows over some of the expectations about revenue.

They are worried that 2020 budget ignores lessons from the recent difficulties the FG encountered as regards budget performance.

For context, the Chief Executive Officer, Afrinvest (West) Africa Limited Mr. Ike Chioke said FG’s revenue projections underperformed actual collection by 47.8 per cent in 2017 and was little changed at 44.7 per cent in 2018 and 41.6 per cent as at first half (H1) :2019.

Available records show that the FG projected revenues of N8.2 trillion in 2020, is 17.1 per cent higher than N7.0 tillion in 2019 and more than twice the actual collection of N4.0 trillion in 2018.

Oil revenue projection was lowered 29.7 per cent to N2.6 trillion (vs. 2019: N3.7 trillion), reflecting prudent adjustments in the wake of lower for longer oil prices and weak oil production due to the slow pace of oil and gas reforms.

Specifically, crude oil price and production assumptions were revised downward to $57.0/bbl. and 2.18mbpd (vs. 2019: $60.0/bbl. and 2.3mbpd) respectively.

According to Chioke and his team of experts at Afrinvest, Oil revenue would be higher if the exchange rate assumption of N305.00/$1.00 is adjusted to the market rate of $365.00/$1.00.

On the other hand, non-oil revenue projections (customs & excise duties, VAT and CIT) increased by 28.6 per cent to N1.8 trillion (vs. 2019: N1.4 trillion) showing a marked 94.7 per cent surge in independent and other revenues budgeted at N3.7 trillion (vs. 2019: N1.9 trillion).

“Although the recent trend in core non-oil revenue has been positive, the projected increase is steep and unlikely to be achieved. The projections for non-core, non-oil revenues such as independent revenue, asset sales, recovery and fines, which have historically underperformed, are ambitious,” the according to the team from Afrinvest.

In its weekly review, the firm observed that looking at 2017, 2018 and H1:2019 budget performance, total collection from the non-core, non-oil revenue lines was zero “if we exclude independent revenue. We believe these unrealistic assumptions set up the budget for poor implementation.”

On Tax, Chioke and his team said the expected improvement from VAT revenue would be poorer than initially anticipated given the much overdue VAT reforms now proposed.

The FG is planning to raise the VAT registration threshold to N25.0million in annual revenue while the exemption list has been expanded to cover more food items.

Although the FG has once again revealed its plans to collect more revenues, this is likely to take time given that growth remains weak.

“We reiterate that the removal of petrol subsidies is key to boosting government revenues in the immediate term,” Afrinvest insists.

Agreeing with the position of Chioke and his team of economic and finance experts, BudgIT says it is doubtful of the federal government’s (FG) ability to realise its projected total revenue of N8.15 trillion. BudgIT is a civic organisation that holds government to public accountability and applies technology to intersect citizen engagement with institutional improvement, to facilitate societal change. In the 2020 Budget, oil revenue is projected at N2.64 trillion, non-oil tax revenue at N1.81 trillion and other revenues at N3.7 trillion.

“This revenue performance is only 58 percent of the 2019 Budget’s target due to the underperformance of both oil and non-oil revenue sources. Specifically, oil revenues were below target by 49 percent as at June 2019. “This reflects the lower-than-projected oil production, deductions for cost under-recovery on supply of premium motor spirit (PMS), as well as higher expenditures on pipeline security/maintenance and Frontier exploration,” the president stated in his budget speech.

The organisation observed that since total revenue earned by the FG as at June 2019, was N2.04 trillion, the  total revenue projection for 2020 should have reasonably be put at N4.08 trillion because there is nothing extra ordinary that the government can possibly do to geometrically multiply revenue to the tune of N8.15 trillion. Not even the VAT increments. Other analysts are equally concerned that fiscal revenues are likely to be impeded by declining oil prices. Revenue shortfalls have plagued the efficiency of Nigerian budgets as an efficient tool of economic management.

With increasing volatility in the oil markets, oil prices are projected to decline further. Three top oil traders Vitol, Trafigura and Grunvor are projecting a further decline in oil prices below the $57per barrel. Therefore, there is general opinion that Nigeria could fall short of the projected revenue of N8.16 trillion. This creates a quandary as the government seeks to stimulate the economy while hoping to maintain a low debt service payout ratio.

Dissecting planned Expenditure

The planned spending of the FG at N10.3 trillion for 2020 represents a 13.2 per cent increase from the previous year’s N9.1 tillion (without adjusting for inflation).

The team from Afrinvest, a Lagos-based research and investment consultancy firm sees the N10 trillion as too high when considering FG’s recent revenue woes (reliance on borrowing) which is likely to persist.

But in the broader context, and in line with Nevin’s argument of increased spending, the proposed expenditure is neither large enough nor supportive of the country’s growth aspirations at 6.7 per cent of GDP.

Nigeria’s gross expenditure to GDP which is estimated at 12.2 per cent compares poorly with peer economies such as South Africa (33.6 per cent), Egypt (29.9 per cent), Kenya (25.4 per cent) and Ghana (23.6 per cent).

Similarly, instead of capital and labour intensive projects, the non-debt recurrent expenditure according to experts is high at N3.6 trillion or 35.0 per cent of the budget, considering FG’s fiscal consolidation plans. The rise in fiscal spending in Nigeria should be channeled to productive investment projects instead of recurrent expenditure, if the government hopes to realise its aim of a 2.93 per cent GDP, says a team of Economic analysts from Financial Derivatives Company.

The budgetary allocation for capital expenditure (CAPEX) in the 2020 budget is 31.76 per cent lower than the N3.18 trillion CAPEX allocations in the previous budget.

Meanwhile recurrent expenditure recorded a 10.25 per cent boost to N4.84 trillion from N4.39 trillion. About 21 per cent of the budget (N2.14 trillion) was allocated to capital projects, while 46.85 per cent was allotted for recurrent expenditure.

Some experts attribute the increase in recurrent expenditure, partly to the non-discretionary minimum wage increase.

Another worrisome aspect of Nigeria’s financial management is the size of debt servicing cost at N2.45 trillion or 23.8 per cent of the budget. Stakeholders say this would continue to be a drag to human capital and infrastructure spending.

Also, the N2.5trillion capital allocation falls short of the 30.0 per cent target stipulated in the Economic Recovery and Growth Plan (ERGP).

“We also expect debt service to revenues to be elevated at 53.3 per cent compared with the budgeted 29.9 per cent. In addition to borrowing to cover the shortfall in revenues, we expect increased financing of FG’s operations by the CBN,” the experts noted.

Corroborating the above observations, a development Economist Mr Odilim Enwegbara is not happy with the figures thrown up in the budget. According to him, the figures are not what Nigeria should have at this level of economic journey.

He asks, “How can you allow debt to accumulate to N30 trillion and you don’t have ways to reduce or settle it?”

Nigeria’s debt service to revenue ratio is about 80 per cent, and in some countries, when it is 30 per cent, they declare economic crisis. To those who argue that debt to GDP ratio is still low compared to other countries, he not only want them to compare Nigeria’s  revenue to GDP with such countries, but also to check whether such countries borrow to invest or borrow for consumption like Nigeria.

“Why should we be drowning and at the same time celebrating? I think there is something wrong with this country called Nigeria, “Enwegbara lamented.



To achieve the desired growth, the development economist suggested that government should carefully create an enabling environment for foreign direct investment. That way Enwegbara stated, Nigeria will become an investment destination for infrastructure to investors from all over the world.

He said this is the only way at this moment, to solve the infrastructure deficit which according to him, is so wide that it can’t be bridged by throwing N2 trillion into it every year.

Enwegbara gave example with road infrastructure. According to him, through Tax Credit, Public Private Partnership (PPP), or build-operate-and-transfer model for 30 years roads can be constructed. When every 100 kilometers on such roads are tolled, sufficient revenue will be generated.

Source: tribuneonlineng

‘$582billion Stolen From Nigeria Since 1960’

•The days of brazen looting and laundering have passed


Light-fingered tyrants are looking back wistfully. In past decades they could stash their illicit wealth in the West. Friendly lawyers, banks and middlemen were on hand to park the loot. Sani Abacha, the military dictator who ran Nigeria in the 1990s, deposited billions of dollars in banks across the rich world, no questions asked. Western governments often seemed equally unfussed. Valéry Giscard d’Estaing, a former president of France, attended soirées in chateaux owned by the late Emperor Jean-Bedel Bokassa of Central Africa. Mr Bokassa would slip his guest diamonds to thank him for France’s support.

Such brazenness is becoming a bit harder to get away with. Anti-corruption campaigners and muckraking journalists have busied themselves trying to uncover stolen assets. Western governments, tired of seeing aid money stolen, have toughened up money-laundering and bribery laws.

On September 29th Swiss authorities auctioned a fleet of sports cars seized from Teodorin Obiang, son and heir apparent to the president of Equatorial Guinea. The $27m raised is to be returned to Mr Obiang’s benighted people. Days earlier San Marino confiscated €19m ($21m) from accounts linked to Denis Sassou Nguesso, the president of Congo-Brazzaville.


Yet so much has been pilfered from Africa that tracking it all is tricky. Chatham House, a British think-tank, estimates that $582bn has been stolen from Nigeria alone since it won independence in 1960. Britain’s International Corruption Unit says its investigations have led to the confiscation of £76m ($117m) in laundered loot since 2006. Another £791m has been frozen worldwide thanks to its work. Yet that barely makes a dent in the £100bn of illicit funds which Steve Goodrich at Transparency International, a watchdog, reckons enters Britain every year. “Seizures are still the exception,” says Jason Sharman, an expert in international corruption at Cambridge University. “Dirty money still gets through most of the time.”

he best way to hide and move stolen wealth is to set up a raft of anonymous shell companies and bank accounts. Questionable payments linked to Mr Sassou Nguesso’s son passed through Cyprus, Poland, Portugal, Spain and Switzerland, Global Witness, another watchdog, reported in August. The eu is trying to make this sort of thing harder by forcing member states to publish registers disclosing the beneficial owners of companies.

Britain has introduced another innovation. Unexplained Wealth Orders allow courts to order “politically exposed persons” to explain why their assets are so much larger than their salaries back home. The first was issued last year.

Yet tough laws do not work unless everyone imposes them. “If there is a gap, then the money-launderers will find it,” says Max Heywood, Transparency International’s global advocacy co-ordinator.

Willing and effective implementation is vital. Some surprising places, such as Switzerland and Jersey, have grown more robust in this regard. But America leads the way. The Kleptocracy Asset Recovery Initiative at the Department of Justice has seized stolen loot not just in America, but abroad. “The us is aggressive in enforcement,” says Matthew Axelrod, a former doj official now at Linklaters, a law firm. “Penalties are very high and prosecutors are insulated from political interference.”

Europe lags behind. Its law-enforcement agencies are often under-resourced. Investigators struggle when dirty money is held in several countries. Britain has spearheaded the International Anti-corruption Co-ordination Centre, created in 2017. Its head, Rupert Broad, says pooling intelligence has led to the arrest of five senior officials in four African states.

The most important thing, campaigners say, is to take steps to stop dirty money arriving in the first place. Banks are becoming better at reporting dodgy deposits. Purveyors of luxury goods are less alert. Boat dealers in the Netherlands are supposed to flag suspicious purchases. But of 40,959 suspicious-activity reports to Dutch authorities in 2015, just three came from yacht-dealers, Transparency found.

African states also complain that little of what is recovered is ever sent back. America, Britain and Switzerland have had some success. More than $1bn seized from Mr Abacha’s bank accounts has been returned. But many African states have not helped their cause, often because thieving politicians are still in charge. When Switzerland returned $500m of Mr Abacha’s money, most of it disappeared again. The World Bank has programmes to guard against such things, but some Western states remain wary, and rightly so.

James Ibori, a former governor of Nigeria’s Delta State, served a prison sentence in Britain after admitting to plundering $79m from the public purse. His lawyers have managed to frustrate efforts to repatriate most of the funds frozen in his British bank accounts. Displaying a cheerful shamelessness, Mr Ibori is again active in Nigerian politics. In August Ifeanyi Okowa, the state’s present governor, called Mr Ibori “a true patriot” and praised him for his “uncompromising posture on…good governance”. There are surely better ways of showing that Africa is doing its bit than heaping plaudits on a felon.

Source: tribuneonlineng

Nigeria Lags Peers in Home Ownership Rate at 25% for 200m Population

… housing, construction sector accounts for only 3% of country’s GDP


Despite its large-size population and self-acclaimed biggest economy in Africa, Nigeria is literally crawling behind its peers in terms of homeownership level in the country.

Whereas home ownership level is 84 percent in Indonesia, 75 percent in Kenya and 56 percent in South Africa, it is only 25 percent in Nigeria whose population is estimated at 200 million. Going by United Nations projection, the country’s population will be as high as 400 million in 2050.

This implies that the country’s current housing deficit estimated officially at 17 million units will be worse unless there are concerted efforts by all housing sector stakeholders to address identified obstacles to development and delivery.

“The major issues that continue to affect housing delivery in Nigeria, which also account for the wide demand-supply gap, include constraints related to high cost of securing and registering secure land title,” said Nasir El Rufai, Kaduna State governor.

El Rufai who was keynote speaker at a one-day conference organized in Lagos by the Royal Institution of Chartered Surveyors (RICS) Nigeria Group, also listed inadequate access to finance, slow administrative procedures and high cost of land as other major issues affecting housing in Nigeria.

Kola Ashiru-Balogun, managing director, Mixta Nigeria, had in an earlier interview, told BusinessDay that several intervention attempts have been made by private sector operators and agencies of government to improve housing in the country, but such efforts were not succeeding because they are not harmonized.

This, he said, explained why the contribution of the housing sector to GDP is so small and the impact so minimal when it is supposed to be more. El Rufai agreed, saying that in economies like the USA, Britain and Canada, the housing sector contributes between 30-70 percent of their GDP.

“Investment in housing accounts for 15-35 percent of aggregate investment worldwide and the sector employs approximately 10 percent of the labour force worldwide,” he said.

The governor said that the real estate sector could play a much bigger role in the Nigerian economy. He explained that, carefully done, investments in the housing sector could drive economic vitality and create jobs.

“In many developed nations, the property sector in general, and the housing segment in particular, is a bedrock of the economy and an important tool for stimulating growth. Housing construction indices are some of the most common measures used by analysts to gauge economic trends in Organisation for Economic Co-operation and Development (OECD) countries,“ he said.

In addition to growing mortgage finance where much of the economic opportunity in housing can be unleashed, El Rufai also canvassed the development of social housing that must be led by government.

According to him, the federal housing budget was declining as only N30 billion was budgeted in 2019, from N35.4 billion and N141 billion in 2018, and 2017 respectively. “The World Bank estimated in 2016 that Nigeria will need over N59 trillion to close the housing deficit of over 23million.

“The Centre for Affordable Housing Finance in Africa reports that housing production in Nigeria is at approximately 100,000 units per year, while what is needed to bridge the deficit is a minimum of 1,000,000 units per annum,” he said.

Panel discussants at the conference with the theme, ‘Unravelling the Real Estate Sector Challenges in Nigeria’ said regulation as it relates to titling and documentation was also part of the major problems of housing as it places too much burden on developers.

“To acquire land for development, an investor is faced with two critical issues which include the certainty of land title and the process of obtaining the title,” said Hakeem Oguniran, CEO, Eximia Realty.

Oguniran advised that state governments should do something around governor’s consent. He stated further that the states should also reduce their charges on land titles to make it business-friendly and also attract more people who are presently scared by high charges.

Source: Businessdayng

Singapore Overtakes US As World’s Most Competitive Economy

Singapore has knocked the United States out of the top spot in the World Economic Forum’s annual competitiveness report.

The index, published on Wednesday, takes stock of an economy’s competitive landscape, measuring factors such as macroeconomic stability, infrastructure, the labor market and innovation capability.
Singapore pushed the world’s largest economy down to second place this year, with the Asian city state scoring top marks for its infrastructure, health, labor market and financial system.
And while the United States lost out to Singapore overall, “it remains an innovation powerhouse,” the report said.
Singapore and Vietnam put up strong performances this year partly thanks to the US-China trade war.
The report noted that the two Asian economies “appear to be benefiting from global trade tensions through trade diversion.” Vietnam jumped 10 spots from last year to rank 67th out of 137 countries.
US imports from Vietnam rose by 36% in the first five months of this year, as companies have been shifting manufacturing from China to Vietnam and other Southeast Asian countries to avoid steep tariffs.
The trade war hasn’t been a clean win for Singapore, which is heavily reliant on exports and counts China as its biggest trading partner.
Singapore slashed its forecast for GDP growth in August, after reporting a big drop in economic activity in the second quarter of this year. It’s heading for its weakest annual growth since the 2009 global financial crisis.
Hong Kong, the Netherlands and Switzerland rounded out the top five. Hong Kong climbed four spots from last year’s report, despite the political crisis taking a toll on its economy. The financial hub received high marks for its macroeconomic stability and financial system, but fell short on its capability to innovate.
Escalating trade and geopolitical tensions “are fueling uncertainty” around the world, the WEF report warned.
“This holds back investment and increases the risk of supply shocks: disruptions to global supply chains, sudden price spikes or interruptions in the availability of key resources,” the report said.
Source: edition.cnn

How 9% Communication Tax on Calls, SMS, Data Puts More Pressure on Financial Inclusion

When the proposed communication tax bill becomes law, consumers of telecommunication services will need to pay an additional N9 for every N100 recharge card or an extra N90 for every N1,000 data plan.

Importantly, the push to include more than 40 million Nigerians that are financially excluded is likely to lose steam as many poor people will willfully deny themselves access because of the added cost of communication.

The communication tax bill, a brainchild of former senate leader, Ali Ndume, Chairman Senate Committee on Army, is being proposed as a substitute for the planned 7.5 percent increase in Value Added Tax (VAT) by the federal government of Nigeria. President Buhari during his 2020 budget presentation clarified that the VAT increase affects only businesses with N20 million turnover and not small businesses.

The Central Bank of Nigeria (CBN) and its partnering institutions which include commercial banks, fintech companies, and nonprofit organizations, are betting on the country’s very impressive mobile penetration number at about 173 million mobile lines to widen financial inclusion net. The CBN has a deadline of 2020 to reach 80 million people, but with the tax bill becoming law the apex bank could miss its target.

“Another ill-timed and poorly conceived tax just like the new Police Fund Levy,” said Taiwo Oyedele, partner and West Africa Tax Leader at PricewaterhouseCoopers (PwC).” Hopefully, these events will be a wake-up call for Nigerians to start asking questions about tax during elections as is the case in other climes.”

The communication tax bill plans to impose and collect communication services tax (CST or levy) on charges payable by consumers of electronic communication services in Nigeria (excluding private electronic communication services) at the rate of 9 percent.

Electronic communication services that fall under the levy include voice calls, SMS, MMS, data usage (both from telecommunication services providers and internet service providers), pay per view TV stations, etc.

For instance, an SMS which previously cost N4 comes at an extra charge N4.90. A DSTV compact option previously sold at N6900 will then cost N7,521 with N621 being the extra 9 percent charge going to the government.

In 2018, Nigerians spent 114 billion minutes on calls valued at N2.7 trillion. The total value of text messages in the same year was at N39 billion while N68 billion went to data plan purchase according to data from the Nigerian Communications Commission (NCC). Using the 2018 sector numbers, the federal government is likely to rake in N260 billion from the proposed communication tax.

The tax is to be paid together with the electronic communication service charge payable to the service provider by the user of the service. The FIRS is the agency responsible for collecting the tax from service providers and remitting it to the federation account.

It is also payable whether or not the person making the supply is permitted or authorised to provide electronic communications services.

Penalty for failure to file returns on or before the due date to FIRS is N50,000 and an additional N10,000 for each day the returns are not submitted.

“The 9 percent tax will reduce the number of subscribers. Add SARS, multiple taxes, lack of infrastructure, etc, and you kill one of the few sectors that offer an alternative path to oil,” said Gbenga Sesan, executive director of Paradigm Initiative. “Why not grow the sector to earn from corporate taxes, and income taxes that come with new jobs?”

When passed by a two-thirds majority of the National Assembly and assented to by the President, the communication tax will be adding to the already existing transaction charges that consumers have to pay. One of them is the N50 Stamp Duty imposed on every Point of Sale (POS) transaction above N1,000.

Currently, all electronic fund transfer cost N50 whereas USSD also comes with different charges. When initiating a transaction via USSD, every process is charged by the network provider. Depending on how many steps required to complete the transaction, users can pay as much as N50. Banks like Access Bank charge N84 for fund transfer to other banks and the user must have airtime to initiate a USSD transaction.

The bill titled ‘Communication Tax Bill 2019 (SB.12) has passed the first reading at Senate plenary last week on Wednesday. It is expected to go for a second reading.

However, the Association of Telecommunications Companies of Nigeria (ATCON) and the Association of Licensed Telecommunications Operators of Nigeria (ALTON) have both condemned the bill.

“If the passage of this bill goes through, it would negatively impact Nigerians and foreigners that use these services,” Olusola Teniola, president of ATCON said in a statement. “The implementation of this CST bill would take the affordability of data services out of the reach of the citizenry.”

Source: Businessdayng

Updated: IMF Asks FG’s Economic Team, Advisory Council To Provide Growth Plan

…says CBN financing of govt muddling monetary policy

Nigeria must turn to its economic team and the new advisory council to design and monitor a comprehensive package that would spur growth and reduce the effects of external shocks, a visiting International Monetary Fund team has said.

The team called for action on a coherent and coordinated set of policies in the face of slow economic recovery, increasing external vulnerabilities, and elevated fiscal deficits that have seen the Federal Government rely on the central bank for bailouts, thereby complicating monetary policy.

“A comprehensive package of measures – whose design and implementation will require close coordination within the economic team and newly-appointed Economic Advisory Council – is urgently needed to reduce vulnerabilities and raise growth,” said Amine Mati, the team lead, after a two-week visit which ended Monday.

Reacting to the IMF report, spokesman for the Honorable Minister of Finance, Budget and Planning Yunusa Tanko Abdullahi said overall the report was good because it acknowledged the effort of government in improving the economy through transparency and inclusiveness.
“Particularly also the IMF team acknowledged the decreasing inflation rate which has continued to fall for nine consecutive quarters and emphasized that growth is expected to pick up to 2.3% this year” Abdullahi told BusinessDay on phone.

Buhari in September scrapped the former economic management team headed by Vice President Yemi Osinbajo and set up an economic advisory council led by Adedoyin Salami, a central bank board member until 2017 and associate professor of economics at the Lagos Business School.

The council has Chukwuma Soludo, a former central bank governor, and Bismarck Rewane, a leading economist, as members of the eight-person team.

Recommendations of the Washington-based fund follows observation that constrained purchasing power of Nigerians coupled with heightened cautiousness of foreign investors in committing to Nigeria’s economy continues to drag growth below population expansion, dampening outlook under current policies.

The team noted that deficit in Nigeria’s current account, triggered by a one-off import surge, would likely persist while the pace of capital outflows would still weigh on Nigeria’s foreign reserves which have fallen below $42 billion as at the end of August as foreign holdings of short-term securities and equity decline.

The continued dependence of the Federal Government on the CBN to plug deficits of its “over-optimistic revenue projections” is seeing more than half of government earnings go to interest repayment and requires an ambitious revenue-based fiscal consolidation, the IMF team noted.

In their assessment, plans to generate more revenue through a VAT reform which increases rate, exempts basic food products and businesses with a turnover of N25m and below will help to partially offset declining oil revenue and support implementation of the minimum wage, helping the government achieve greater fiscal consolidation.

The IMF team, however, warned that inflation would likely increase despite a tight monetary policy.

Nigeria’s central bank was advised to employ more conventional tools in maintaining a tight monetary policy. The CBN would have to cease direct intervention, introduce longer-term instruments, and move towards a uniformed market-determined exchange rate to manage vulnerabilities arising from large amounts of maturing CBN bills and mop up excess liquidity, the team said.

Structural reforms on governance and corruption, especially implementation of the long-due power sector recovery plan, were catalysts identified for higher and more inclusive growth.

The team also said the reliance of the Federal Government on CBN financing should be addressed by an ambitious fiscal consolidation plan built on plans outlined in the Strategic Revenue Growth Initiative. It called for more conventional tools for tightening monetary policy.

The fund also asked the CBN to carefully assess the policy that demands banks to have minimum Loan-to-Deposit Ratio (LDR) of 65 percent to avoid unintended consequences.

“Banking sector prudential ratios are improving. However, new regulations to spur lending-which has recently increased-should be carefully assessed and may need to be revisited in view of the potential unintended consequences on the bank,” the IMF staff team said.

The team said unintended consequences of the CBNs new minimum loan to deposit directive could affect the “banks’ asset quality, maturity structure, prudential buffers and the inflation target.”

Source: Businessdayng

Finance Ministry Moves to Rejig Sluggish Economy

…to reduce VAT, corporate tax filing requirement for MSMEs …incentivise investment in infrastructure to spur capital market

The Ministry of Finance, Budget and National Planning has announced five areas of priority focus based on the Federal Government’s strategic plans to revamp Nigeria’s ailing economy and achieve inclusive growth.

The fiscal authority said it would focus on enhancing revenue generation, collection and monitoring, accelerating fiscal consolidation by optimising priority capital and recurrent expenditure, and optimising management of both domestic and global fiscal risks.

Other focus areas, the ministry said, are increased coordination of fiscal, macro monetary and trade policies, and integrating annual budgets and medium-term fiscal strategies into medium and long-term national plans.

In a document seen by BusinessDay, the ministry hinged its plans on the 11 priority areas by the Federal Government (FG) which were captured under three broad themes, including accelerating economic and governance reforms, enhanced investment in physical infrastructure, human capital, and optimising investment in physical security and food security.

To enhance revenue generation, the ministry has launched a Steering Committee to identify new sources and enhance existing revenue streams, while improving the coordination and cohesion among agencies in the revenue ecosystem using relevant tools.

It also announced that the reconstituted National Tax Policy Implementation Committee (NTPIC) – under the chairmanship of executive chairman, Federal Inland Revenue Service (FIRS), and the comptroller- general of Nigeria Customs Service – has been directed to produce a single draft Finance Bill 2019 to support the fiscal priorities of Nigeria’s 2020 budget.

Other reforms in the pipeline include enhancing the ease of doing business, particularly for Medium Small and Micro Enterprises (MSMEs), through a reduction in corporate rate for businesses with N25m turnover from 30 percent to 20 percent, reduction of Value Added Tax and corporate tax filing requirement for MSMEs, and a one percent tax rebate for early-bird taxpayers.

To bridge the huge infrastructural deficit, the ministry plans to incentivise investment in infrastructure and revive capital markets growth through targeted tax incentives, encourage multi-million private sector investment in real estate through Real Estate Trusts (REITs), and introduce tax rules to complement existing SEC regulations for securities lending transactions on the Nigerian Stock Exchange.

According to the ministry, the Presidential Infrastructure Development Fund (PIDF) has expended over N17bn out of N2.5trn targeted for major roads across the country. These include Lagos-Ibadan Expressway, Second-Niger Bridge project, Abuja-Kano Expressway, and Mambilla Hydropower project.

The ministry also said it would through N500bn continue to prioritise the social intervention programme.

On debt management reforms, the finance ministry noted that government is committed to achieving optimal debt balance, noting that the government is on track to shift domestic debt portfolio to long-term maturities while proceeds from the borrowing are being targeted at capital spending priorities.

On the controversial P&ID judgment, the ministry is considering various available options – setting aside an earlier judgment based on proof of fraud by filing fresh actions against the claimant, negotiations and out-of-court settlement.

As part of its priority, the focus would be on increased coordination of Nigeria’s fiscal, macroeconomic, monetary and trade policies, the ministry said.
The ministry would also be integrating annual budgets and Medium-Term Fiscal Strategies into rolling Medium and Long-term National Plans.

It said Nigeria’s 2017-2020 Economic Recovery and Growth Plans (ERGP) targets investments in critical infrastructure and human capital development as well as enhancing food security, fostering industrialisation, creating jobs and facilitating the ease of doing business.

Key policies include macroeconomic stability and economic diversification, social inclusion and job creation, youth empowerment, and improved human capital development.

The Federal Ministry of Finance, Budget, and National Planning noted it is working with minister of state for budget and national planning to undertake the visioning exercise for long-term vision 2040 plan and prepare Medium-Term Economic Growth Acceleration plan for 2021-2024 as a successor to ERGP.

The ministry said it had learned from recent oil price boom and bust and Nigeria’s failure to plan for external shocks which led to the 2016 recession.

It said the government remains committed to executing the ERGP’s priorities and programmes, mindful of economic headwinds and committed to accelerating the ERGP to deliver on its socio-economic and development agenda.

The ministry also highlighted the 2020 budget preparation, the document which last week the Senate adjusted to N10.729 trillion on expectations of a higher oil price than the Ministry of Finance, Budget and National Planning had designed the budget on.

The lawmakers also passed the 2020-2022 Medium Term Expenditure Framework and Fiscal Strategy Paper, approving 16 recommendations made by the National Assembly Joint Committees on Finance and National Planning.

Source: Businessdayng

Shared Responsibility: Building And Sustaining Strong Economic Future For Nigeria~ Atedo N A Peterside

I consider it a great honour and privilege to have been invited as the Keynote Speaker on the occasion of the Dinner to celebrate the 25th Nigerian Economic Summit here today in Abuja. The organisers told me they wanted a speaker who was an active participant at the first Summit held a little over 25 years ago and who is still active today.  When I went back to read the Report of the 1st Nigerian Economic Summit which kicked off on 18 February 1993, my first reaction was one of humility and thanksgiving to God that I am still here 25 years later; I never realised that so many out of that very first batch of Summiteers had since passed on. May their gentle souls rest in perfect peace.

My second reaction, however, was one of disappointment that some of the exact same economic issues and problems that plagued Nigeria then are still being debated here 25 years later. I am not claiming that we have not achieved phenomenal progress in certain areas such as telecommunications, commercial and investment banking, Pension reform and other service sector pursuits such as Information Technology, Music, Film, Art and Fashion.

GDP Growth: Triumph of Sustainable Government Policies The harsh reality is that whatever gains Nigeria achieved in income per capita over the course of the last two decades are slowly being wiped out, as falling annual per capita incomes have become the norm in every single year since 2015.

Macroeconomists measure broad aggregates and the numbers do not lie. The investment and GDP statistics used here were obtained with the assistance of Dr Yemi Kale, who heads the National Bureau of Statistics. In a nutshell, falling living standards appear to have come to stay in Nigeria and so hordes of Nigerians continue to join the ranks of the extremely poor year after year, at a time when several African countries are successfully lifting more and more of their own people out of poverty. World Bank data confirms that the African countries who have been most successful (Top ten) at reducing extreme poverty over the course of a 15-year period spanning the Year 2000 to 2015 are Tanzania, Chad, Republic of Congo, Burkina Faso, Congo DRC, Ethiopia, Namibia, Mozambique, Rwanda & Uganda. When the earlier Summits were being held in the 1990s, some of the most popular comparisons by presenters were those between Nigeria and Malaysia, Indonesia and various other Asian tigers. Today, we can clearly benefit from case studies on poverty reduction emanating from Africa’s top ten. The same can be said for education, healthcare and infrastructure where Nigeria does not feature in Africa’s top ten in terms of rapid positive change. Indeed, Nigeria now leads the world in two appalling statistics:

1) the largest number of school-age children out of primary school (10.5m), and

2) the total number of persons living in extreme poverty (90m approx.). It was not so in 1993.

Nigeria must invest in innovative technology to survive — Soludo There is a frightening and ominous link between these two sets of statistics because children who are ill-equipped in terms of basic primary education are likely to be the most difficult to integrate into a 21st Century economy. Many of them were born into poverty and will remain in poverty unless we do something urgently to rescue them. Even more worrying are the regional disparities that show up when socioeconomic data is disaggregated. For instance, the WAEC May/June 2019 WASSCE results show that 9 out of the top 10 states with the best results are from the South East and South-South zones – Lagos State is the only top 10 entrant from outside these two zones.

Conversely, of the bottom 8 States on this same Exam results chart, five are from the North West, whilst three are from the North-East zone. In the 1990s, rapid economic growth eluded many Sub-Saharan African economies. In 2018, the average GDP growth rate for Sub-Saharan African economies was 2.4 per cent, but if you exclude the two largest economies (Nigeria and South Africa), who are both laggards, then the GDP growth rate for the rest of Sub-Saharan Africa immediately leaps up to five per cent. We therefore no longer need to go to Asia to learn lessons about rapid growth. We only need to look to Ivory Coast and Senegal in West Africa which grew at 7.40 per cent and 7.0 per cent respectively or to Ethiopia and Rwanda in East Africa, which grew by 8.50 per cent and 7.20 per cent respectively in 2018. The fore-runner of GDP growth is the Investment/GDP ratio. If there are little or no investments today, then there will be little or no growth in a couple of year’s time. The double-digit growth of 2002 came on the back of the very high Investment/GDP ratio of 35% recorded in the year 2000, which was the first full year following the restoration of democracy.

Thereafter, the long term trend for Nigeria’s Investment/GDP ratio has been a near-continuous downward slide. By 2012, the Investment to GDP ratio had slid all the way to below 15% and so GDP growth rates were bound to fall sharply after 2013. ALSO READ: We Must Struggle to Match UAE in Technological Advancement – Pantami As GDP growth rates fizzled out in 2015 and 2016, the Central Bank of Nigeria (CBN) compounded the situation by embarking on forex policies which caused investors to both take fright and take flight at the same time. The inevitable outcome was an economic recession. It was only after CBN succumbed to pressure in early 2017 to allow a Nafex exchange rate, where all business units and individuals could buy and sell forex freely at a market-determined exchange rate of N360/$1 approx., that supply bottlenecks slowly disappeared and the economy limped out of a recession. The Nigerian economy is however still largely stagnant and so anaemic GDP growth rates which fall below the approximate three per cent population growth rate are not cause for celebration. With high inflation rates in the 11% range, which CBN appears to have accepted as being the norm, investors now fear stagflation. Compare and contrast this with Ivory Coast and Senegal which held inflation below two per cent and grew GDP in excess of seven per cent in 2018.

Before going into prescriptions it is important to update this audience about the current structure of the Nigerian economy, which is significantly different from what prevailed in 1993 in 5 important areas:

  1.  Over 50 per cent of our GDP now comes from the Service Sector. CBN appeared to have forgotten this in 2016 when directing banks to allocate 60 per cent of forex to the manufacturing sector that accounted for less than 10 per cent of GDP. CBN also held out the false hope that denial of forex to specific sectors of the economy would somehow incentivise investors in other sectors. The reality is that draconian actions directed at one group of investors simply make other investors think “so who is next and/or what is next”? A corollary of this proposition is to point out that actions and pronouncements that increase overall Uncertainty and Risk are likely to be counter-productive if the goal is to boost investment activity generally.
  2. Inward diaspora remittances now eclipse the oil and gas sector as the number one source of forex for Nigeria. Again, CBN overlooked this while trying to force these inflows to come in at a stipulated official rate of N200/$1 at a time when the parallel market had galloped beyond N400/$1 in 2016;
  3. Our ICT sector’s GDP contribution has since outgrown the oil and gas sector share of GDP and so it should be heralded and nurtured instead of being attacked by rogue regulators as has become fashionable;
  4.  The split of aggregate demand between the Private Sector and the Government Sector (all 3 tiers) is now 91.5%/8.5%. Some Nigerians still dream about FG stimulating national aggregate demand through its own expenditure activity alone. Meanwhile, FG’s total 2020 budget expenditures will translate into a paltry sum of $130 or less per Nigerian. How can that possibly transform Nigeria’s economy in a meaningful way? One of the first areas of consensus in that first economic summit in 1993 was that FG expenditures alone could never transform the Nigerian economy and so by far, the most impactful activity that FG could engage in was to create an enabling environment and a level playing field that would stimulate phenomenal private sector investment activity. 25 years later some of our policymakers still sound as if they missed this most basic lesson.
  5. In 2018, Nigeria’ Foreign Direct Investment inflows slipped behind Ghana’s for the first time. In terms of FDI flows into Africa, Nigeria slipped into the second tier in 2018.

The first tier is now comprised of Egypt, South Africa, Congo, Morocco, Ethiopia, Ghana and Mozambique. Indeed, Mozambique may head this chart in a few years time. They have provided the type of clarity which Nigeria has refused to provide to the Oil and Gas sector from the moment the Oil Minister in the previous administration produced the first draft of a myopic Petroleum Industry Bill.

The Way Forward It is not too late for President Buhari’s Government and our national assembly to borrow a cue from Mozambique and learn how to enact laws that provide clarity and reduce uncertainty for investors in the oil and gas sector and other sectors too. So, why is Nigeria unable to achieve GDP growth rates of 6% and above which are currently the norm in several Sub-Saharan Africa economies?

The obvious answer is that we appear to have frightened most investors away (local and foreign) and they will not be coming back any time soon until we correct the structural dysfunction that frightened them away in the first place. Investors appear to have concluded that the Nigerian economy is rigged against all except the very well-connected and they are right. By definition, the well-connected investors are few and so our Investment/GDP ratio is likely to remain low until we make it possible for all other investors (Nigerian and foreign) to come back and partake in the task of baking a bigger cake on the basis of a level playing field.

  • In Nigeria of 2019, only the well-connected can expect the following:
  •  Security of life and property;
  •  Prompt dispensation of Justice;
  • Sanctity of contracts;
  • No harassment from multiple rogue regulators;
  •  Access to land via the Land Use Act;
  •  Freedom from multiple illegal State and Local Government levies;
  • Provision of good roads and pipe-borne water to their door-step;
  • Access to subsidised financing; and
  •  Public sector employment opportunities.

For the youths, the less privileged and others who are not well connected, they dare not expect these 9 things.


Instead, they should concentrate on avoiding being the victims of extra-judicial killings and other forms of Police (notably SARS) or Army brutality and if they go into a legitimate business activity, they should get ready to grapple with endless threats and harassment by FIRS, Customs, State Government Tax authorities, SARS, NAFDAC etc. The bulk of this harassment typically comes from corrupt government officials seeking to line their own pockets through extortion. Sadly, there appears to be no oversight function and so the excesses of these rogue regulators are largely unchecked, thereby leaving no respite nor protection for their poor victims. There is no justice for the underprivileged in Nigeria and so this exacerbates Income inequality which is already very high, as demonstrated by our Gini Coefficient of 0.4 approx. A new generation of Nigerians (largely youths) have been dealt a terrible hand. A Nigerian Passport gives them few options for taking flight. It is not so with investors. Many can take flight and have done so. Sadly, most utterances by important public figures give the remaining investors, even more, cause to worry. We need a paradigm shift away from harassing investors to one of welcoming them sincerely as well as taking actions that boost business confidence, as Morocco and Rwanda do all the time. A global race is on to win the hearts and minds of investors. Nigeria is currently losing that race badly even within Africa. Reversing this terrible trend is a shared responsibility.

A society gets the leaders that it deserves and so I do not blame this Government or past Governments. I blame the elite in general because we shy away from backing truly competent political leaders as if we fear that we will not succeed in manipulating them or getting them to rig economic outcomes in our favour. In the meantime, FG has lost fiscal viability because it lacks the courage to trim personnel overheads on account of a bloated headcount in the public sector. Will 98% of the population continue to suffer so that less than 2% who make up the bloated public sector can maintain their lifestyles? The same FG endorsed a largely unaffordable minimum wage and presses on with “populist” subsidies which are largely cornered by the rich. Government revenues as a percentage of GDP are exceedingly low at 6% approx and yet all that the private sector does is resist any attempts to increase indirect taxes or price products such as petrol and electricity on the basis of full cost recovery.

Even the recent inevitable decision to introduce toll gates on our roads has been met by private sector resistance. Following the launch of a new payments-enabled National ID Card, it is certainly possible to quantify the annual petrol subsidy, apportion it and pay each Nigerian adult that falls below a minimum income threshold his or her share. This can be executed transparently by the same office for National Social Investment Programmes that currently pays monthly handouts to a lucky few out of the 90 million extremely poor Nigerians.

If FG is in the habit of being seen to grant subsidies then we should focus less on getting stubborn people to shed a bad habit. It is far better to get them to replace a bad habit of wasted subsidies with a much better habit of direct payments to the poor via an instrument that the rich cannot corner or access. There will be no strong economic future for Nigeria that can be built and sustained if the deal is to starve the Government of revenues, whilst blaming the 3 tiers of Government for failing to deliver on their respective mandates.

The responsibility that we must share is to encourage FG to get its finances in order and attain both fiscal viability and macroeconomic stability. We must also encourage FG to level the playing field for investors and quit dangling rent-seeking and/or arbitrage opportunities such as multiple exchange rates, which remain open to abuse. In 1993, Summiteers and CBN agreed that CBN should pursue a 5% inflation target. At that time US inflation was 3% and so the gap was only 2% p.a. Today, US inflation is 2% and yet CBN appears to be content with keeping inflation high at 10 or 11% p.a., the 9% per annum differential is much too high and is inconsistent with the declared goal of maintaining exchange rate stability. Nobody should get carried away by our short term reliance on “hot” money inflows to bolster forex reserves on the basis of distorted “carry trades”. CBN should quit expanding its mandate into other questionable areas, if it cannot meet its most basic mandate of containing inflation.

We cannot afford to approach the next 25 years by repeating the errors of the last 25 years. The shared responsibility includes getting the elite to become less insular or less sycophantic and to learn to speak truth to power. The recently appointed Economic Policy Advisory team is a step in the right direction by FG. Their job will be made a lot easier if this Summit can help establish an elite consensus on the unfinished business that is still holding us back from building and sustaining a strong economic future for Nigeria. I thank you for your attention.

Atedo N A Peterside* CON, is the Founder of Stanbic IBTC Bank Plc and the Chairman of Anap Business Jets Limited, ART X Collective Limited, Cadbury Nigeria Plc and Endeavor High Impact Entrepreneurship Ltd/Gte.


Nigeria’s Debt Hits N24.39tn, Rises by N2.66tn in One Year

Nigeria’s total debt profile as of December 31, 2018, now stands at N24.387tn. The figure swelled by 12.25 per cent from N21.725tn in 2017 to N24.39tn in 2018.

The debt rose by N2.66tn from December 31, 2017, to December 31, 2018, the Debt Management Office said.

Statistics provided by DMO in Abuja on Thursday showed that the country’s public debt rose from N21.73tn in 2017 to N24.39tn within the one year period.

According to the DMO, the year-on-year growth of public debt show a 12.25 per cent within the one year period.

Speaking at a press briefing in Abuja on Thursday, Director General of DMO, Patience Oniha, said the funds were borrowed to fund projects, to finance budget deficit and to refinance maturing obligations.

Particularly, she said, some foreign debt was used to refinance treasury bills because of the short tenor of the bills, adding that borrowing from abroad had also helped to stabilise the local currency in the last two years.

The DMO boss said that the Federal Government’s domestic debt stock included N331.12bn Promissory Notes issued to oil marketing companies and state governments in December 2018.

According to her, some targets that had been set in the country’s Debt Management Strategy had been achieved or nearly achieved. These include the plan to achieve a tenor of 75:25 ratio in favour of long tenor debts.


Oniha said the target had been surpassed as the country now had a 78:22 ratio in favour of long term debts.

She said, “The share of domestic debt dropped to 68.18 per cent from 73.36 per cent as of December 31, 2017, thereby achieving a mix of 68.18 per cent and 31.82 per cent in the debt stock.”

According to the DMO, the strategy of using relatively cheaper and longer tenured external funds is achieving the expected objectives.

Some of the objectives were to create more space for other borrowers in the domestic market, extend the average tenor of the debt stock in order to reduce refinancing risk and increase external reserves.

“The implementation of the strategy led to an injection of N855bn through the redemption of Nigerian Treasury Bills in 2018 and a general drop in the FGN’s borrowing rate in the domestic market from over 18 per cent per annum in 2017 to 14 to15 per cent per annum in 2018,” Oniha said.

Oniha said that borrowing for 2019 would be 50-50 split between domestic and external in striving to be consistent with the Debt Management Strategy 2013-2019 aimed at achieving a 60:40 ratio between domestic debt and external debt.

She said, “Relatively low-interest rates mean the government can issue longer-dated bonds to continue to fund infrastructure projects.

“Revenue generating initiatives are expected to improve revenues and reduce the debt service to revenue ratio.”


The DMO boss said that some of its major plans in 2019 included to undertake more of project-tied borrowing and to access more external borrowing from concessional sources.

It also announced plans to issue 30-year FGN Bonds for the first time. The issuance of the bond is expected to meet the needs of annuity funds and other long term investors while also developing the domestic capital market and reducing the re-financing risk of the Federal Government.

It added that another area of focus would be the management of risks associated with the debt stock and to mitigate debt service costs.

Speaking on the issuance of promissory notes, Oniha said, “Federal Executive Council approved the establishment of a Promissory Note Programme.

“The purpose is to use it to settle inherited local debts and contractual obligations of the Federal Government. The programme is estimated at N3.4tn.

“It will provide stimulus to the economy and unlock investment across a number of sectors currently having liquidity issues.”

She said that the programme would also have a positive impact on the non-performing loan ratios of banks, which would, in turn, increase the banks’ capacity to lend.

Oniha said that it would also enable the Federal Government to formally recognise and account for its true liabilities in line with the International Public Sector Accounting Standards.


Areas to be covered in the promissory note programme include contractors, exporters, judgement debts, state governments and oil marketing companies.

Source: punchng

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