Worried by shortage of affordable homes in the country , concerned stakeholders have called on the Federal Government to inject N500 billion into building 100,000 housing units across Nigeria.
According to them, government should apply the money to build 50,000 units in Lagos, 25,000 units in Port Harcourt, 15,000 units in Abuja and 10,000 housing units in Kano to revamp the economy.
This was coming as a response to the recent United Nations’ (UN) report, which rubbished the acclaimed Federal Government’s progress in the housing sector.
Canvassing big bang injection of N500 billion into the sector, Managing Director, Rock of Ages Investment, Mr. Francis Onwuemele, said the housing units should be completed in 15 months, while mortgage should be created for each.
Apart from the fact that the initiative would yield a minimum of 500,000 new jobs, Onwuemele proposed a mortgage payment of N600,000 per year or N50,000 per month, saying this would yield an inflow of N50 billion monthly.
He said: “This inflow (unlike the error in FESTAC) will be ploughed back monthly and immediately into another tranche of 100,000 housing units.
“In a year, you would have injected same N500 billion into achieving another 100,000 units of homes. By the third year, you would have created 200,000 mortgages and 200,000 mortgagors and easily rake in a monthly inflow of N100 billion or N1.2 trillion yearly with one million jobs created.”
If government adopted the strategy, he said that the multiplier effect by workers would be incredible, adding that the Gross Domestic Products (GDP) would move up rapidly and that crime rates would drop, while kidnapping would disappear.
Co-Founder, A-ZSME, Mr. John-Bede Anthonio, maintained that government must use Bonds with long-term tenure of 30-50 years from both local and international markets for affordable housing production.
He, however, warned that there must be transparency.
“Jakande, in 1980, took World Bank finance to execute all the low cost housing estates in Lagos and now the state government is about to finish the repayment. Prudent spending, not used for buying cars of 5.5 billion,” he said.
Anthonio, a former Managing Director of Lagos State Development and Property Corporation, urged government to put its house in order, decrying closure of border instead of removing subsidy of fuel.
Another housing professional, Okupe Adewunmi, said that if prices of houses were right, there would be effective demand, urging government on the need to help with infrastructure so that people could have better accessibility and productivity.
A report presented in Abuja by UN Special Rapporteur, Ms. Leilani Farha, revealed that the country’s housing sector was in a precarious condition to the extent that government needed to immediately declare a national emergency in the sector.
The report said that the huge government budget for the sector had no commensurate impact on the lives of the population that needed shelter in the country.
Farha, who stated that she completed her 10-day long fact-finding visit to three Nigerian urban cities of Abuja, Lagos and Port Harcourt with utmost shock seeing the realities on ground, also noted that the prevalent inhumane conditions of poor informal settlement amounted to gross human rights violations.
She said: “Nigeria’s housing sector is in a complete crisis. There is no current national housing action plan or strategy. Coordination and communication between federal and state governments seem lacking. Private market housing is unaffordable for most, rental housing is scarce, requires tenant to have one to two year’s rent in advance and there is no rent control or caps.
Poor remuneration, high interest rate, collateral’s bottleneck, unfavourable conditions of loan’s repayment, short-term nature of money and high cost of housing units have been adduced among other factors low-income earners are not benefiting from mortgage.
Lagos’ Chairman of the Nigerian Institute of Town Planners (NITP), Mr. Bisi Adedire, stated that apart from low-income nature of many Nigerians, stringent conditions attached to mortgage loans and collateral’s requirement were hard to comeby by low-come people.
“People cannot meet up with collateral requirement to guarantee their payment. Also the condition of payment is not favorable, couple with interest rate.”
Adedire explained further that high cost of houses was another obstacle, adding that workers in the informal sector were not captured by most mortgage institutions.
According to report from Festus Adebayo-led Abuja Housing Show, a major requirement for getting mortgage loan facility that would enable borrower to own a home was by having a good job with regular income, but that has become a challenge when people’s earning is low.
He said: “At N18,000 per month minimum wage, public sector workers cannot afford mortgage loan. Even with the yet to be implemented new minimum wage of N30,000, this class of people will not still be able to afford mortgage loan.
“Therefore, for many years to come, unless a drastic change occurs, homeownership through mortgage loan, will continue to elude workers who earn the national minimum wage.”
Sustaining the argument, Adebayo said it was based on the term of mortgage’s structure, which required not less than one third or 33.3 per cent of N30,000 per month.
Total Currency-in-Circulation (CIC) rose by 0.8 percent to N2.3 trillion as at the end of December 2018 according to the 2018 Annual Report released by the Central Bank of Nigeria (CBN) through the Currency Operations Department (COD).
This rise in circulation according to the report reflected the high dominance of cash in the economy and increase in economic activities.
In terms of volume, the proportion of higher denomination banknotes – N100, N200, N500 and N1000 in total rose from 41.9 percent to 44.3 percent while in terms of value, it rose from 96.9 percent to 97.6 percent.
On the other hand, the lower denomination currency notes – N5, N10, N20 and N50 continued to be dominant in terms of volume compared to higher notes as it constituted 55.7 percent of the total, while in value terms, it constituted only 2.4 percent of the total banknotes.
The ratio of CIC to nominal GDP, which measures the moneyness of the economy recorded slight falls by 0.1 percentage point to 1.8 percent in the period under review and according to the report, this decline occurred as a result of increase in e-payment products such as electronic payment cards
The report also indicated that the COD during the period under review recorded significant progress in the accomplishment of its strategic objectives, which included: development of a Clean Notes Policy and Banknote Fitness Guidelines; the tiered pricing for the processing of lower denomination banknotes, increased volume of issuable banknotes and effective distribution of banknotes.
It also registered more Cash-In-Transit (CIT) and Cash Processing Companies (CPC), which encouraged private sector participation; commissioning of the temporary exhibition “Naira Our National Pride” for public enlightenment on banknote basic security features.
Other noteworthy achievements made in 2018 include the development of the Cash Activity Reporting Portal (CARP) for transmission of financial industry currency management data to Nigeria Inter-Bank Settlement System (NIBSS); approval granted by management for the establishment of mobile courts, in collaboration with Legal Services Department (LSD), for the speedy prosecution of suspects apprehended for currency-related offences; and a pilot run on recycling of banknotes waste into re-usable materials to reduce its carbon footprints and comply with environmental sustainability practices.
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.
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.
•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.
… 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.
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.
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.