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.”
…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.”
…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.
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:
- 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.
- 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;
- 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;
- 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.
- 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 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.
PRESIDENT Muhammadu Buhari on Monday presided over the extraordinary meeting of the Federal Executive Council (FEC) to take a final look at the year 2020 budget estimates to be presented to the National Assembly Tuesday.
Details of the deliberations were not made known to journalists after hours of meeting as the members filed out of the Council Chamber venue of the meeting without speaking to State House correspondents who have been waiting.
There was not also any official communication from the Presidency but the Senate had last week increased the proposed nation’s budget for 2020 from N10.002 trillion to N10.729.4 trillion as contained in the Medium Term Expenditure Framework (MTEF).
This has paved the way for President Buhari to submit the fiscal document by 2 pm today.
Nigerian Tribune gathered that the decision not to address news conference was taken because the briefing would amount to giving away details of what President Buhari would be addressing the National Assembly on.
The Senate chamber of the Parliament had received official communication from President Buhari to present the 2020 Appropriation bill before a joint session of the National Assembly on Tuesday.
The request, which was dated October 2, 2019, and addressed to the President of the Senate, Ahmad Lawan, was read at plenary last Thursday.
Senior Special Assistant on Media and Publicity, Garba Shehu, had last Tuesday explained that President Buhari will return to Abuja on Friday. The President returned in the evening.
However, the Presidency in another statement signed by Special Adviser on Media and Publicity, Femi Adesina announced that the meeting has been shifted to hold at 12 noon Monday.
The last time an extra-ordinary FEC held was in January this year, where the President launched the new enhanced security international e-passport with 10-year validity.
In December last year, a special FEC session was convened on a Friday for the consideration and approval of this year’s budget proposal.
The budget presentation to the Parliament was meant to have taken place in the third week of September but for President Buhari’s participation in the 74th United Nations General Assembly.
The federal government plans to return to the January–December budget calendar.
As a fallout of signing of the 2017 budget into law by Vice President Yemi Osinbajo, while acting as the president, the Executive and the Legislature had agreed to return the Federal Government to a January–December budget calendar, starting from the 2018 budget.
Nigeria currently runs a May-June budget cycle, a development caused by executive-legislature delays since the 8th National Assembly.
The delays have caused what many see as “distortions” in implementation and the inability to meet budget targets.
The clear and present danger of the deleterious effects of Nigeria’s tottering, oil-dependent economy on the quality of life, or call it the Human Development Index(HDI) of the average Nigerian gives cause for serious concern. HDI covers the three dimensions of knowledge, a long and healthy life and a decent standard of living. Stimulating economic growth therefore, requires more proactive actions on the part of government too.
Nigerians having to pay for increase in Value Added Tax(VAT) from 5 per cent, increase in electric power consumption tariff and being asked to gear up to pay fees at toll gates, along decrepit and pothole-riddled federal highways, one fervently prays that we are not on a bumpy ride, on the next level journey to mass misery. Juxtapose this with the saddening scenario of governments prevaricating over the payment the paltry N30,000 minimum wage, especially at a time members of the political class are satiating their epicurean tastes in some lifestyles of obscene luxury and the worry deepens.
According to the National Bureau of Statistics(NBS) the country’s Gross Domestic Product (GDP) for the second quarter, April to June, 2019 slowed to 1.94 percent from 2.1 per cent recorded during the first quarter. In a similar vein, according to the latest report on the misery index, released from the John Hopkins University in Baltimore, United States of America,U.S.A. Nigeria was ranked as the sixth most miserable country to live in anywhere in the world.The parameters considered include the state of inflation, the unemployment rate and bank lending rate.
Add these frightening figures to the claim by the World Poverty Clock(WPC)which revealed that 91.885 million people in Nigeria live in extreme poverty as at June, 2019 and it is patently obvious why the economy can no longer be run the way it is. This means that more than half of Nigeria’s population live on less than a dollar (N360) a day.According to the World Bank, a person can be said to be truly living in extreme poverty if they live below the poverty line of $1.90 which translates to N693.5 per day.The new numbers make up 46.5 percent of Nigeria’s population which is approximated at 197,686,877, sometimes rounded up to 200, 000,000.
It would be recalled that in June 2018, the same World Poverty Clock had named Nigeria the poverty capital of the world, overtaking India with statistics showing 87 million people live in poverty.Yet, in reminiscences, Nigeria’s GDP grew by about 2.8 percent back in the 1990s and rose to about 6.0percent from the return of democracy until 2015 when the Buhari administration took over. Ever since, the growth rate has drastically dipped into a recession. This lasted for about five quarters up to mid-2017.
Perhaps, all these and more frightening figures may have informed the recent decision by the President Muhammadu Buhari administration to come up with the Economic Advisory Council (EAC).The main aim of the EAC should be to guide the Nigerian economy in the right direction out of the wood, to the path of sustainable economic growth. One believes and strongly too, that the EAC is needed at this critical period of the socio-economic challenges of high rate of unemployment, mass misery, poverty and the attendant escalating wave of crimes. It should therefore, not be seen as displacing the constitutionally recognized Economic Management Team (EMT) of some government ministers and bureaucrats, including the CBN Governor under the chairmanship of the Vice President, Prof. Yemi Osinbajo, who also happens to be the chairman of National Economic Council (NEC).
As one, who had muted a similar idea of an economic think tank back in 2015 and made it public through opinion essays, the roles of both the EMT and EAC could be complementary.While the former is seen as part and parcel of government and not likely to ruffle political feathers, the latter is made of a different stuff. With EAC made up of top technocrats and seasoned professionals such as Prof. Chukwuma Soludo, Prof. Doyin Salami, Bismark Rewane, Muhammed Sagagi, Shehu Yahaya, all drawn from outside the government cycle,they are expected to provide sincere, objective and indeed credible pieces of advice based on their truly rich and robust researches and experiences.
With a globally-respected body such as the International Monetary Fund(IMF)admonishing Nigeria to walk the talk on economic diversification from crude oil sales we cannot but do the needful. Though there was an expansion of 5.15 per cent in the oil sector and 1.64 per cent growth in the non-oil sector over the second quarter of 2019 the drop in oil production from 1.99 mbp to 1.98 mbp calls for a more proactive action. So, what is the way forward?
The answers are as varying as the economists we have on ground.According to a respected analyst, Egie Akpata “you don’t get growth by doing nothing.” The economy cannot grow as long as Nigerians are not engaged in viable industrialization. That should be food for thought. He has gone further to advocate for the removal of the querulous fuel subsidy regime.With a stroke of the pen the executive could say a good bye to it and Nigeria will be smiling to the bank with N2 trillion every blessed year!
On his part, the Lagos Chamber of Commerce Director-General, Muda Yusuf, government should show more commitment towards solid infrastructural development, ensure improvement on monetary and fiscal policies to boost investor confidence. Significant as well is the position of the Manufacturers Association of Nigeria(MAN) on the imperative of stable electric power supply, good access roads, strong rail network, access to the ports that are efficient and waterways that are really functional. According to him the high costs of manufacturing and distribution render the finished products uncompetitive. He is right.
All said, experts on the economy insist that the onus lies with the EAC to call for a review of the 2020-2022 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) which reduced the capital expenditure.Such measure cannot simulate economic growth. As Rewane had reiterated back in 2015 economic development can be measured by looking at the state of human development, institutional structure/evolution, physical development and the state of institutions in a country. Our current economic structure allows a certain group of individuals and organizations tend to capture all the wealth, power and opportunities the country has to offer. We have seen this happen in Nigeria, over the decades.
The way forward therefore, is to return to political restructuring and true fiscal federalism. Let the states control their resources and the expenditure, pay an agreed tax to the federal centre. Only this would free us from the self-inflicted incubus of self-deceit and get Nigeria’s economy growing again.
In a bid to promote a vibrant regional economy through public and private sector collaboration, Hajiya Saratu Iya Aliyu, who is the national president, Nigerian Association of Chamber of Commerce, Industry, Mines, and Agriculture (NACCIMA) and also the president of Federation of West Africa Chambers of Commerce and Industry (FEWACCI) as well as chairman of Nigeria’s Organised Private Sector of Nigeria (OPS), led a delegation of the three bodies on a visit to President Muhammadu Buhari.
The National President of the Nigerian Association of Chamber of Commerce, Industry, Mines and Agriculture (NACCIMA), Hajiya Saratu Iya Aliyu, recently led a high powered delegation of economic team to President Muhammadu Buhari for a meeting at the State House, Abuja.
Aliyu, who is also the President of Federation of West Africa Chambers of Commerce and Industry (FEWACCI) and chairman of Nigeria’s Organised Private Sector of Nigeria (OPS) articulated a 16-point programme to President Buhari and his team on how to grow the economy in order to promote a vibrant regional economy through public and private sector collaboration.
Speaking at the meeting, Aliyu disclosed that NACCIMA would engage the federal government on a 16-point agenda for Nigeria’s business growth and socio-economic advancement through public and private sector collaboration.
She said the agenda covers issues around security, adherence to law and ethics, proactive policy engagement, trade capacity building, efficient taxation, government intervention programmes, creative industry, agribusiness, solid minerals and metals, micro and medium scale development, technology and infrastructure, industrial parks, regional integration, multiplicity of private sector organizations, as well as Women and Youth empowerment.
According to her, the challenges faced by businesses in Nigeria such as infrastructure deficit, multiple-taxation, elimination of obstacles to exports cannot be overemphasised, stressing the need for government to patronize local banks and more interventions to support women and youth empowerment.
However, she maintained that even with all these challenges which continues to hinder the nation’s economic growth, the three bodies are committed to bring the much desired change.
“We prefer to look at the brighter side especially when the issues appear seasonal and with the current efforts of the federal government in setting up the Economic Advisory Team, NACCIMA, FEWACCI and indeed the Organised Private Sector in Nigeria are full of hope that a new era is on the horizon.
“The calibre of persons on the economic advisory team reassures the Organised Private Sector that government is ready to turn around the story of Nigeria,” she said.
Aliyu commended the government on maximization of African Continental Free Trade Agreement (AfCFTA) and requested for a property within Abuja for the location of a Headquarters and Secretariat for FEWACCI befitting of Nigeria’s position as the leading economic powerhouse in Africa.
She emphasised her role in three capacities leading the three bodies of NACCIMA, the OPS and FEWACCI to meet the president to solicit support and assistance in the provision of logistics necessary to realize the FEWACCI Headquarters in Nigeria.
She said, “our colleagues from other ECOWAS countries are here and will appreciate your Excellency’s kind magnanimity to our requests especially on Nigeria’s commitment as host country obligations for FEWACCI secretariat and support”
AfCFTA as next frontier for businesses
Responding, President Mohammadu Buhari acknowledged Aliyu’s request, assuring that the request be formally submit in writing to the Minister of Industry, Trade and Investment to enable the government review and act accordingly.
Buhari commended NACCIMA for its role in the AfCFTA, stating that it would encourage the growth of Nigeria businesses.
He said, “I am aware that your association actively participated and made valuable contributions during the consultation process of the African Continental Free Trade Agreement. We valued, accepted and adopted your contributions and want to acknowledge NACCIMA and other government consult key stakeholders are developing policies.
“The implementation of the AfCFTA agreement is the next frontier for Nigerian businesses and it is our collective duty to ensure we get it right, that the interest of the various sectors of the Nigerian economy is safeguarded.”
The President emphasised that trade is central to Nigeria’s economy, while assuring of government commitment to ensuring vibrant job creating sector continues to flourish.
He, however, lamented on how some Nigerians allowed Nigeria to be used as a dumping ground at the detriment of all Nigerians.
“Unfortunately in recent times, many traders simply do not play by the rules. Our markets are flooded with smuggled and counterfeit goods. By these selfish practices we help keep foreign factories working while closing ours.
“From medicines to electronics to food items, our potential to manufacture and create jobs locally is severely hindered by a handful of Nigerians who choose profits over patriotism,” he said.
President Buhari lamented on dangerous and sometimes, fatal impact of fake drugs and foods on our citizens and how fake electrical items have led to fires in homes and markets thereby destroying lives and properties.
According to the President, most of these substandard and illegal items are smuggled through the land borders, noting that after many years of diplomacy and aggressive regulatory oversight which yielded few results, Nigeria decided to close the land borders for a limited time to assess the impact of this measure.
“I am happy to say that within a few short weeks, Nigeria is already seeing a decline in the volumes of counterfeit smuggled goods in some of our major markets across the country.
President Buhari told the 3-fold delegation that the implementation validates Nigeria’s action as a Government in insisting that the African Continental Free Trade Agreement must not only promote free trade, but legal trade of quality made in Africa goods and services.
He solicited support of NACCIMA, OPS and FEWACCI in Nigeria and across West Africa “to ensure an end to the dumping of substandard items in Nigeria’s region and on the continent.”
He further charged NACCIMA in achieving a free trade area that employs Africans to produce quality made in Africa products.
“We will soon finalise the National Action Committee on the implementation of the African Continental Free Trade Area. Your Association is a member of this committee. I expect you to continue your positive and patriotic contribution to support us in achieving a free trade area that employs Africans to produce quality made in Africa products,” he said.
FG achievements lauded
NACCIMA President applauded President Buhari’s administration for some significant accomplishments recorded in all sectors of the economy including the reduction of corruption, foreign exchange stability, bottom of the pyramid programmes, increased ease of doing business, increased capital expenditure; focus on agro value chains and support of local industries through intervention funds.
Aliyu made a formal presentation of a 16-point Agenda to engage the federal government in Unleashing the Giant for Nigeria and requested his directives to the appropriate Bodies of Government to engage with NACCIMA towards ensuring that government policy formulation, implementation and most importantly, policy monitoring have broad the private sector input.
Nigeria at 59
Similarly, NACCIMA President in a press statement to commemorate Nigeria’s 59th anniversary celebrations maintained that over the years Nigeria has evolved to become an economic and diplomatic powerhouse on the African continent.
Aliyu noted that Nigeria’s problems have remained the same, she called on government and all other stakeholders to join hands in finding lasting solutions.
“The Nigeria Association of Chambers of Commerce, industry, Mines and Agriculture joins the rest of the nation in celebrating the 59th Independence Anniversary of our country.
“Despite the challenges faced, Nigeria has emerged as the leading economy on the African continent, and as a people, we have displayed resilience, in our tireless efforts to attain the Nigeria of our dreams. We therefore have cause to celebrate some of our achievements as a nation.
“Since the last Independence Anniversary, our country has experienced a peaceful transition of government as we work to consolidate our democracy. There has also been improved relationship between the Public and Private Sector, and greater engagement by the citizenry in governance,” the statement said.
“However, the issues and public discuss have remained largely the same; namely, internal security, corruption, infrastructure, diversification of the economy, ease of doing businesses, macroeconomic stability, youth empowerment, social welfare, environmental degradation, climate change and regional economic integration; just as they have been in the past few years. We need determined action to deal with these issues,” it added.
The statement further explained that the Nigeria’s economy was slowing down; adding that inflation on the other hand is on the increase just as unemployment is also on the rise.
“On the economic front, Economic growth appears to be slowing down (down to 1.94 per cent as at the second quarter of 2019). Inflation remains in double-digits, at 11.02 per cent as at August 2019, fuelled by high food prices at 13.17 per cent, also as at August 2019.
“The unemployment rate has been rising, standing at 23.1per cent as at the third quarter of 2018, signifying that 20.9million people are unemployed.
“Industrialization also appears to be progressing at a slow rate, with industries contributing about 23% to Gross Domestic Product. We should, and can of course, do better, and should work towards that goal.
“While Our Association applauds the gains made by the Federal Government in its fight against corruption, foreign exchange stability, focus on improving ease of doing business, increased capital expenditure, and a focus on Agro value chains. There is still more work to be done, to achieve inclusive economic growth, co-prosperity, and sustainable development with the potentials to “unleash the Giant” Nigeria truly is,” the statement stressed.
“As we celebrate the 59th Anniversary of our Independence and for the realization of the Nigeria of our economic and developmental goals, NACCIMA stresses the need for us as a Nation to consolidate on the gains of this administration,” it added.
The statement also urged the federal government to and all stakeholders to focus on ensuring an adherence to the Rule of Law; the promotion of an efficient tax system geared towards expanding the tax net; and focus on sustainable energy.
It further stressed the need for harnessing the creative industry, agribusiness, solid minerals and metals, and manufacturing; the promotion of women and youth through micro and medium scale development; and a coordinated approached towards regional economic integration.
“As we approach the last year of implementation of the Economic Recovery and Growth Plan (ERGP 2017-2020), we are also presented with an opportunity for introspection, to assess our policy stance as a country for the benefit of the generations unborn.
“The federal government will always find in NACCIMA a veritable partner in ensuring an enabling environment, conducive for the pursuit of commerce, industry and all other forms of economic activity of interest to the private sector, in the endeavour to fully unleash the economic giant we truly have the potential to be.
The Central Bank of Nigeria has deducted N500 billion from the accounts of 12 banks for failing to meet the target to provide credit to their customers.
Among the banks affected are Zenith Bank, UBA, GTB, Standard Chartered Bank and Citigroup Inc.
Citigroup and Zenith Bank Plc got the stiffest penalties, according to the circular sent to the banks by CBN.
The amounts have already been debited, Ahmad Abdullahi, the head of banking supervision, told reporters in Abuja on Thursday. The efforts are aimed at supporting the real economy by extending loans mainly to farmers, small- and medium-sized businesses and consumers, he said.
The sanctions come three months after the CBN gave lenders until Sept. 30 to use 60% of their deposits for loans, or hand half of the shortfall over to it without earning any interest.
The measures are among a raft of rules aimed at forcing banks to extend more credit to help spur economic growth in Nigeria.
Of the six biggest domestic banks, only Access Bank Plc met the minimum threshold by the end of June.
In a circular to banks on 30 September, the Central Bank of Nigeria (CBN) announced it has further increased loan to deposit ratio from 60 per cent to 65 per cent and warned that it shall enforce the rule.
The circular noted the appreciable growth in the level of the industry gross credit, which increased by N829.40 billion or 5.33% from N15,567.66 billion at end-May 2019, to N16,397.06 billion as at September 26, 2019 following its pronouncements on the above initiative.
“In order to sustain the momentum and in line with the provisions of our earlier letter, the minimum Loan to Deposit Ratio (LDR) target for all Deposit Money Banks (DMBs) is hereby reviewed upwards from 60% to 65%.
” Consequently, all DMBs are required to attain a minimum LDR of 65% by December 31, 2019 and this ratio shall be subject to quarterly review. To encourage SMEs, Retail, Mortgage and Consumer Lending, these sectors shall be assigned a weight of 150% in computing the LDR for this purpose.
“Failure to meet the above minimum LDR by the specified date shall result in a levy of additional Cash Reserve Requirement equal to 50% of the lending shortfall implied by the target LDR.
“DMBs are required to continue to strengthen their risk management practices particularly with regards to their lending operations.
“The CBN shall continue to review developments in the market with a view to facilitating greater investment in the real sector of the Nigerian economy whilst promoting a safe, sound and resilient financial system:, the circular said.
“This is a negative signal to the market because it compels banks to risk assets in an economy where you rarely find viable businesses given the macroeconomic conditions,” said Christian Orajekwe, head of securities trading at Cordros Securities in Lagos.
“This could lead to some credit creation and new jobs in the short term, but in the long term there will be concerns about the performance of those loans. It may not be sustainable.”
“The steps should not be seen as a fine because the funds moving from the cash-reserve requirements will fluctuate depending on how far a lender falls short of the loan-to-deposit thresholds, and refunded once the target is hit, Zenith Bank Chief Executive Officer Ebenezer Onyeagwu said at the CBN briefing on Thursday.
“We estimate a potential income loss of 90 billion naira for these 12 banks,” FirstRand Ltd.’s RMB Nigeria Stockbrokers said in a note. The ratios will be reviewed quarterly and comes after the regulator on Monday upped the ante, giving banks until the end of the year to get their loan-to-deposit ratios up to 65%.
Banks will continue to work on meeting the ratio after doing everything they could to increase lending, Akinsowon Dawodu, the CEO of Citigroup’s Nigerian unit, said.