Economy
Adesina Tasks Tinubu on Fiscal Stability
By Adedapo Adesanya
The president of the African Development Bank (AfDB), Mr Akinwumi Adesina, has tasked President Bola Tinubu to reduce the high cost of governance and ensure fiscal stability.
He made the disclosure during his speech at the Inauguration Lecture for the New President of Nigeria on May 27, 2023, in Abuja, noting that, “The starting point must be macroeconomic and fiscal stability. Unless the economy is revived and fiscal challenges addressed boldly, resources to develop will not be there.”
He noted that Nigeria currently faces huge fiscal deficits, estimated at 6 per cent of the Gross Domestic Product (GDP).
“This has been due to huge federal and state government expenditures, lower receipts due to dwindling revenues from crude oil export, vandalism of pipelines, and illegal bunkering of crude oil.
“According to Nigeria’s Debt Management Office, Nigeria now spends 96 per cent of its revenue servicing debt, with the debt-to-revenue ratio rising from 83.2 per cent in 2021 to 96.3 per cent by 2022.
“Some will argue that the debt to GDP ratio at 34 per cent is still low compared to other countries in Africa, which is correct, but no one pays their debt using GDP.
“Debt is paid using revenue, and Nigeria’s revenues have been declining,” he warned.
He lamented that Nigeria now earns revenue to service debt—not to grow, and advised the government to remove the inefficient fuel subsidies, a decision he adhered to on Monday.
In his words, “Nigeria’s fuel subsidies benefit the rich, not the poor, fuelling their and government’s endless fleets of cars at the expense of the poor. Estimates show that the poorest 40 per cent of the population consume just 3 per cent of petrol.
“Fuel subsidies are killing the Nigerian economy, costing Nigeria $10 billion alone in 2022. That means Nigeria is borrowing what it does not have to if it simply eliminates the subsidies and uses the resources well for its national development.”
He advised that rather support should be given to private sector refineries and modular refineries to allow for efficiency and competitiveness to drive down fuel pump prices.
“The newly commissioned Dangote Refinery by President Buhari—the largest single train petroleum refinery in the world, as well as its Petrochemical Complex—will revolutionize Nigeria’s economy,” he announced.
The former Nigerian minister of agriculture also said the country must urgently look at the cost of governance.
“The cost of governance in Nigeria is way too high and should be drastically reduced to free up more resources for development. Nigeria is spending very little on development.
“Nigeria is ranked among countries with the lowest human development index in the world, with a rank of 167 among 174 countries globally, according to the World Bank 2022 Public Expenditure Review report.
“To meet Nigeria’s massive infrastructure needs, according to the report, will require $3 trillion by 2050. According to the report, at the current rate, it would take Nigeria 300 years to provide its minimum level of infrastructure needed for development.
“All living Nigerians today, and many generations to come, will be long gone by then! We must change this. Nigeria must rely more on the private sector for infrastructure development to reduce fiscal burdens on the government,” he hammered.
He also tasked the Tinubu administration to raise tax revenue, as the tax-to-GDP ratio is still low.
“This must include improving tax collection, tax administration, moving from tax exemption to tax redemption, ensuring that multinational companies pay appropriate royalties and taxes and that leakages in tax collection are closed.”
However, he noted that simply raising taxes is not enough, “as many question the value of paying taxes, hence the high level of tax avoidance. Many citizens provide their own electricity, sink boreholes to get access to water, and repair roads in their towns and neighbourhoods.”
“These are essentially high implicit taxes. Nigerians, therefore, pay the highest ‘implicit tax rates’ in the world.
“Governments need to assure effective social contracts by delivering quality public services. It is not the amount collected, it is how it is spent and what is delivered. Nations that grow better run effective governments that assure social contracts with their citizens,” he added.
By Dipo Olowookere
A 1.08 per cent growth was further printed by the Nigerian Exchange (NGX) Limited on Friday on improved appetite for Nigerian stocks.
Data showed that the insurance sector lost 0.61 per cent yesterday due to profit-taking as the energy space gave up 0.08 per cent, while the commodity counter closed flat.
However, the industrial goods landscape appreciated by 2.06 per cent, the banking index improved by 1.31 per cent, and the consumer goods sector expanded by 0.83 per cent.
At the close of business on Customs Street, the All-Share Index (ASI) increased by 1,563.92 points to 147,040.07 points from 145,476.15 points and the market capitalisation went up by N996 billion to N93.722 trillion from N92.726 trillion.
UAC Nigeria led the advancers’ log yesterday after it grew by 10.00 per cent to N96.80, Transcorp Hotels jumped by 9.71 per cent to N172.80, Royal Exchange appreciated by 8.89 per cent to N1.96, Ikeja Hotel soared by 8.74 per cent to N31.10, and Veritas Kapital leapt by 8.07 per cent to N1.74.
On the flip side, Union Dicon declined by 10.00 per cent to N6.30, ABC Transport slipped by 9.88 per cent to N3.10, AXA Mansard depreciated by 7.19 per cent to N12.90, FTN Cocoa lost 4.62 per cent to trade at N4.75, and Guinea Insurance dropped 3.36 per cent to finish at N1.15.
A total of 38 stocks ended on the gainers’ table and 17 stocks finished on the losers’ table, representing a positive market breadth index and strong investor sentiment.
Traders transacted 361.6 million equities for N14.8 billion in 21,051 deals yesterday versus the 1.9 billion equities worth N19.2 billion traded in 23,369 deals a day earlier, showing a decline in the trading volume, value, and number of deals by 80.97 per cent, 22.92 per cent, and 14.20 per cent, respectively.
The busiest stock for the session was Zenith Bank with 59.5 million units worth N3.6 billion, Access Holdings traded 46.1 million units valued at N973.0 million, Fidelity Bank exchanged 29.4 million units for N560.4 million, FCMB transacted 27.9 million units worth N293.9 million, and Tantalizers sold 13.0 million units valued at N29.8 million.
By Adedapo Adesanya
Energy stocks influenced the 4.76 per cent loss recorded by the NASD Over-the-Counter (OTC) Securities Exchange on Friday, December 5.
The culprits were the duo of 11 Plc and Nipco Plc,with the former shedding N32.17 to end at N291.83 per share compared with the previous day’s N324.00 per share, and the latter down by N21.00 to sell at N195.00 per unit versus the previous session’s N216.00 per unit.
Consequently, the NASD Unlisted Security Index (NSI) slumped by 170.16 points to 3,401.37 points from 3,571.53 points and the market capitalisation lost N101.81 billion to close at N2.035 billion from the N2.136 trillion quoted in the preceding session.
The OTC securities exchange suffered the decline yesterday despite the share prices of three companies closing green.
Central Securities Clearing System (CSCS) Plc was up by N1.80 to close at N39.80 per share compared with Thursday’s price of N38.00 per share, Air Liquide Plc appreciated by N1.09 to N11.99 per unit from N10.90 per unit, and FrieslandCampina Wamco Nigeria Plc grew by 78 Kobo to N56.57 per share from N55.79 per share.
During the session, the volume of transactions rose by 6,885.3 per cent to 18.2 million units from 4.3 million units, the value of transactions ballooned by 10,301.7 per cent to N389.7 million from N347.2 million, but the number of deals declined by 29.7 per cent to 26 deals from 37 deals.
Infrastructure Credit Guarantee Company (InfraCredit) Plc ended the day as the most traded stock by value on a year-to-date basis with 5.8 billion units worth N16.4 billion, followed by Okitipupa Plc with 170.4 million units valued at N8.0 billion, and Air Liquide Plc with 507.5 million units worth N4.2 billion.
InfraCredit Plc also finished the day as the most traded stock by volume on a year-to-date basis with 5.8 billion units transacted for N16.4 billion, followed by Industrial and General Insurance (IGI) Plc with 1.2 billion units sold for N420.2 million, and Impresit Bakolori Plc with 536.9 million units worth N524.9 million.
By Adedapo Adesanya
The Naira depreciated further against the US Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Friday, December 5, as FX demand pressure mounts.
The Nigerian currency lost N2.60 or 0.18 per cent against the greenback to close at N1,450.43/$1 compared with the previous day’s N1,447.83/$1.
Equally, the domestic currency declined against the Pound Sterling in the official forex market during the session by N4.48 to trade at N1,935.45/£1, in contrast to Thursday’s closing price of N1,930.97/£1 and shrank against the Euro by 43 Kobo to end at N1,689.17/€1 versus the preceding session’s rate of N1,688.74/€1.
Similarly, the local currency performed badly against the US Dollar at the GTBank FX counter by N2 to close at N1,455/$1 versus Thursday’s N1,453/$1 but traded flat at the parallel market at N14.65/$1.
As the country gets into the festive period, pressure mounted on the local currency reflecting higher foreign payments and lower FX inflows.
However, there are expectations that the Nigerian currency will be stable, supported by interventions by to the Central Bank of Nigeria (CBN) in the face of steady dollar Demand and inflows from Detty December festivities that will give the Naira a boost after it depreciated mildly last month.
Traders cited by Reuters expect that the Naira will trade within a band of N1,443-N1,450/$1 next week, buoyed by improved FX interventions by the apex bank.
As for the crypto market, it was down yesterday due to profit-taking associated with year-end trading. However, the December 1-Year Consumer Inflation Expectation by the University of Michigan fell to 4.1 per cent from 4.5 per cent previously and 4.5 per cent expected. The 5-Year Consumer Inflation Expectation fell to 3.2 per cent from 3.4 per cent previously and 3.4 per cent expected.
With the dearth of official economic data of late, these private surveys have taken on a new level of significance and the market banks of them to make decisions.
Cardano (ADA) depreciated by 5.7 per cent to $0.4142, Dogecoin (DOGE) slid by 5.1 per cent to $0.1394, Ethereum (ETH) dropped by 3.9 per cent to $3,039.75, Solana (SOL) declined by 3.8 per cent to $133.24, and Litecoin (LTC) fell by 3.7 per cent to $80.59.
Further, Bitcoin (BTC) went down by 2.6 per cent to sell at $89,683.72, Binance Coin (BNB) slumped by 2.2 per cent to $883.59, and Ripple (XRP) shrank by 2.1 per cent to $2.04, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 each.
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