Economy
Addressing Problem of Weak Revenue Generation in Nigeria
The 2018-2020 Medium-Term Expenditure Framework (MTEF) and the Fiscal Strategy Paper (FSP) that the Federal Government of Nigeria (FGN) released on 20 October, 2017 will focus on some areas which we think are critical in raising the revenue generating capacity of the Nigerian economy.
The MTEF/FSP forms the basis on which the FGN’s yearly budget is developed. The focus of the 2018-2020 MTEF/FSP is to achieve the following: broaden revenue receipts by identifying and plugging revenue leakages; improve the efficiency and quality of capital spending; place greater emphasis on critical infrastructure; rationalise recurrent expenditure; and fiscal consolidation to maintain the fiscal deficit below 3% of the Gross Domestic Product (GDP).
FSDH Research’s analysis of the data that the International Monetary Fund (IMF) released shows that Nigeria recorded the lowest revenue to GDP ratio (at 11%) between 2010 and 2016 among some selected countries.
Some of the reasons for the low performance are: revenue leakages; weak infrastructure and institutions; inadequate structures to unlock revenue from agriculture, which is the largest contributor to the country’s GDP; and overreliance on one product (oil) as the source of revenue.
Some of the effects of this situation are widespread poverty and income inequality; and unsustainably high debt service to revenue.
Thus, concerted polices and efforts are required to address these challenges in order to develop the Nigerian economy.
The MTEF projects a benchmark crude oil price of US$45 per barrel for 2018 (US$44.5 in 2017 budget); oil production estimate of 2.3mbd (2.2mbd in 2017); and an average exchange rate of N305/US$ same as in 2017.
It projects a GDP growth rate at 3.5% in 2018 in line with the projection of FSDH Research but higher than the projection of IMF at 1.9%.
The MTEF expects inflation rate to end the year 2018 at 12.42% lower than 15.74% for 2017. Based on these assumptions, estimated aggregate revenue for the FGN for 2018 is N5.65trn, 11% higher than N5.08trn approved in the 2017 budget.
The oil revenue is projected to contribute N2.44trn. Non-oil revenues (Companies Income Tax, Value Added Tax, Customs and Excise duties, and Federation Account Levies) are estimated at N1.39trn; Independent Revenue: N847.95bn; Recoveries: N512.44bn; and Others (including mining): N459.66bn.
The proposed expenditure for 2018 is N8.60trn, 15.59% increase over 2017 of N7.44trn. Adjusting the proposed expenditure by the projected inflation rate to end the year, it represents a marginal growth in real term.
The aggregate expenditure comprises: Statutory Transfers: N451.46bn; Debt Service: N2.03trn; Sinking Fund: N220bn; Recurrent Expenditure: N3.17trn; Special Intervention Programme: N350bn and Capital Expenditure of N2.28trn.
This fiscal plan will result in a deficit of N2.95trn for 2018, which is about 2.61% of GDP.
FSDH Research notes that the expected average oil production is aggressive, while the expected average exchange rate is conservative.
In addition, the expected capital expenditure of about N7.22trn between 2018 and 2020 is not sufficient to lift the economy from the current infrastructure deficiency.
FSDH Research reiterates that a well functional infrastructure is critical for the economy to generate revenue and since government is constrained by funds to address this, it is imperative to develop other constructive and innovative ways to fund the infrastructure. The rough estimate of the infrastructure expenditure gap in Nigeria at the moment is about N30trn.
By Adedapo Adesanya
Five securities pulled down the NASD Over-the-Counter (OTC) Securities Exchange by 1.72 per cent on Friday, August 14, cutting the market capitalisation by N47.04 billion to N2.689 trillion from N2.727 trillion, and slicing the NASD Security Index (NSI) by 78.37 points to 4,465.83 from 4,532.03 points.
11 Plc led the price decliners yesterday after its price went down by N15.03 to N230.00 per share from N245.03 per share. MRS Oil Plc weakened by N13.20 to N118.80 per unit from N132.00 per unit, Central Securities Clearing System (CSCS) Plc slid by N10.30 to N99.46 per share from N109.76 per share, Okitipupa Plc fell by N6.99 to N270.01 per unit from N277.00 per unit, and Afriland Properties Plc dipped by N2.00 to N20.00 per share from N22.00 per share.
Business Post reports that the OTC securities exchange recorded four gainers during the session, led by FrieslandCampina Wamco Nigeria Plc, which appreciated by N9.85 to N169.85 per unit from N160.00 per unit. IPWA Plc gained 70 Kobo to close at N10.41 per share versus N9.71 per share, Industrial and General Insurance (IGI) Plc rose by 4 Kobo to 54 Kobo per unit from 50 Kobo per unit, and Geo-Fluids Plc improved by 1 Kobo to N2.06 per share from N2.05 per share.
The volume of trades soared by 64.8 per cent to 3.2 million units from the previous session’s 1.9 million units, the value of transactions jumped by 78.2 per cent to N375.7 million from N210.8 million, and the number of deals surged by 35.3 per cent to 46 deals from 34 deals.
Great Nigeria Insurance (GNI) Plc was the most traded stock by value on a year-to-date basis, with 3.4 billion units valued at N8.4 billion, followed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units sold for N6.5 billion, and CSCS Plc with 79.0 million units exchanged for N5.7 billion.
GNI Plc also closed the day as the most traded stock by volume on a year-to-date basis, with 3.4 billion units worth N8.4 billion, followed by Infracredit Plc with 2.3 billion units transacted for N6.5 billion, and Resourcery Plc with 1.1 billion units traded for N415.7 million.
By Dipo Olowookere
The dominance of the bears on the Nigerian Exchange (NGX) Limited was consolidated on Friday, after further inflicting an 0.12 per cent loss at the close of trading activity.
All the key sectors of the local stock market turned red yesterday as a result of sustained profit-taking, though the industrial goods space was flat.
The insurance counter lost 1.49 per cent, the energy index shed 0.63 per cent, the consumer goods segment declined by 0.46 per cent, and the banking sector tumbled by 0.23 per cent.
Consequently, the All-Share Index (ASI) retreated by 398.18 points to 242,619.20 points from 243,017.38 points, and the market capitalisation receded by N257 billion to N156.624 trillion from N156.881 trillion.
Fortis Global Insurance lost 9.31 per cent to trade at N2.63, Omatek depreciated by 9.04 per cent to N1.51, John Holt slipped by 9.00 per cent to N9.10, RT Briscoe slumped by 7.94 per cent to N11.60, and Dangote Sugar went down by 7.79 per cent to N64.55.
But International Energy Insurance gained 9.92 per cent to sell for N5.32, Trans-Nationwide Express appreciated by 9.65 per cent to N2.84, Guinea Insurance improved by 6.67 per cent to 80 Kobo, Regency Alliance grew by 6.25 per cent to 85 Kobo, and Japaul jumped by 5.36 per cent to N2.95.
The market breadth index remained negative, with 30 price losers and 21 price gainers, indicating weak investor sentiment.
The level of activity contracted yesterday, with the trading volume, value, and number of deals down by 66.67 per cent, 10.65 per cent, and 5.60 per cent, respectively.
This was because market participants transacted 1.4 billion shares worth N45.3 billion in 39,134 deals during the session compared with the 4.2 billion shares valued at n50.7 billion traded in 41,454 deals on Thursday.
Fortis Global Insurance was the most active equity for the day, with a turnover of 874.1 million units valued at N2.4 billion, Cornerstone Insurance sold 100.3 million units worth N506.5 million, Universal Insurance traded 56.7 million units for N44.5 million, Sterling Holdings exchanged 53.3 million units worth N402.9 million, and MTN Nigeria transacted 44.6 million units valued at N31.4 billion.
By Adedapo Adesanya
The Naira maintained stability against the United States Dollar in the different segments of the foreign exchange (FX) market on Friday, August 14, according to data obtained by Business Post.
At the Nigerian Autonomous Foreign Exchange Market (NAFEM), the local currency remained unchanged at N1,357.65/$1, but lost N6.05 against the Pound Sterling to trade at N1,840.10 versus the previous session’s N1,834.05/£1, and depreciated against the Euro by N4.70 to sell for N1,571.70/€1 compared with the preceding day’s N1,567.00/€1.
At the black market, the Nigerian currency traded flat against the Dollar at N1,395/$1, but gained N3 at the GTBank forex desk to quote at N1,364/$1 versus Thursday’s exchange rate of N1,367/$1.
Data from the Central Bank of Nigeria (CBN) showed that interbank FX transactions surged by 51.2 per cent to $119.594 million from $79.097 million. These transactions were executed in 137 deals, higher than the 98 deals recorded a day earlier.
FX inflows from exporters, remittances and other sources, alongside demand from importers and individuals requiring Dollars, continue to shape market conditions.
Meanwhile, the cryptocurrency market recovered yesterday after experiencing a downturn in the previous sessions following reports that index provider MSCI has proposed new “non-operating company” screens for its Global Investable Market Indexes. Although the framework does not explicitly target cryptocurrency, it evaluates whether a company’s core operating assets constitute more than 50 per cent of its total holdings.
Heavy digital asset treasury adopters, including Strategy and Metaplanet, fail the proposed criteria and face potential removal during upcoming index rebalancings. While inclusion in major equity benchmarks previously allowed passive index funds and ETFs to automatically acquire these stocks, their removal could trigger forced institutional selling.
Dogecoin (DOGE) grew by 0.7 per cent to $0.07, Binance Coin (BNB) expanded by 0.6 per cent to $611.34, Ethereum (ETH) added 0.4 per cent to trade at $1,879.65, and Bitcoin (BTC) increased by 0.2 per cent to $63,045.87, with Ripple (XRP), the US Dollar Tether (USDT), and the US Dollar Coin (USDC) flat at $1.00, respectively.
But Cardano (ADA) lost 1.2 per cent to trade at $0.1795, TRON (TRX) shed 0.4 per cent to finish at $0.3323, and Solana (SOL) declined by 0.2 per cent to $75.60.
