Economy
Experts Task Incoming Administration on Inflation, Debt
By Adedapo Adesanya
On Monday, May 29, Nigeria will get a new president as President Muhammadu Buhari will vacate office after eight years for his successor, President-elect Bola Ahmed Tinubu, a transition that comes with a lot of burdens.
Mr Tinubu, a member of Mr Buhari’s All Progressives Congress (APC), was announced by the Independent National Electoral Commission (INEC) as the winner of the February 25 election, defeating Mr Atiku Abubakar of the People’s Democratic Party (PDP) and Labour Party’s Mr Peter Obi.
However, the country faces massive headwinds of problems, including surging inflation and piling debt, which analysts who spoke to Business Post said are the top priority for Mr Tinubu’s administration.
In April, Nigeria’s headline inflation rate increased to 22.22 per cent as it increased by 0.18 per cent compared to the March 2023 headline inflation rate of 22.04 per cent. The NBS said on a year-on-year basis; the headline inflation rate was 5.40 per cent points higher compared to the rate recorded in April 2022, which was 16.82 per cent.
Plans by the country to control inflation and strengthen the Naira have seen interest rates raised for an unprecedented seventh consecutive time.
However, there are yet no signals that inflation will slow anytime soon, meaning the country will likely hike the rate further after research showed the increase in borrowing costs is yielding results.
The monetary policy committee on Wednesday lifted the benchmark rate by half a percentage point to 18.50 per cent, Governor Godwin Emefiele said in Abuja.
With the end in sight, Mr Buhari pleaded with lawmakers to hurriedly approve an $800 million loan from the World Bank, a move that could see Nigeria’s public debt pass $150 billion this year from over $60 billion when he took over.
His borrowing spree has drawn warnings from the World Bank that Africa’s largest economy was using 96 per cent of its revenue to service debts.
Earlier this month, the Budget Office of the Federation told the incoming legislature, which approves the country’s borrowing needs, that Nigeria’s debt-to-revenue ratio was worsening and could spell doom if the country exceeds its limit.
“We now have very limited borrowing space, not because our debt to GDP is high but because our revenue is too small to sustain the size of our debt. That explains our high debt service ratio. Once a country’s debt service ratio exceeds 30 per cent, that country is in trouble, and we are pushing towards 100 per cent, and that tells you how much trouble we are in,” the Director-General of the Budget Office, Mr Ben Akabueze, said.
Speaking to Business Post, Mr Akin Fatunke, a chartered accountant and public affairs analyst, said the country needed the incoming administration to take the bull by the horn.
“Economic viability should be hinged on efficient loan and self-sufficiency management geared towards investments at the commanding heights. West Africa has too many nation-states, many of which are simply not economically viable.
“I look at how Giuseppe Garibaldi masterminded the unification of Italy and how Otto Von Bismarck masterminded the unification of Germany, I look forward to a Nigerian hero masterminding the unification of West Africa,” he said in a correspondence to Business Post.
He tasked the incoming president to “Build a global economic giant that will rival the likes of China and India with their populations that are in excess of one billion people.”
On his part, Mr Nelson Ekujumi, a business and public affairs analyst, was optimistic about the capabilities of the incoming administration, noting that, “The incoming administration as headed by President-elect Asiwaju Bola Tinubu (GCFR) and Vice President-elect Senator Kashim Shettima (GCON) are astute accountant and economist technocrats respectively who are well versed in financial matters and I have a strong optimism that Nigeria’s debt will be tackled.”
He expects them to “plug economic loopholes to generate more sources of revenue that will limit our borrowing and put in place measures to ensure greater productivity and make life affordable and accessible such that the cost of living will be on a manageable scale for a vast majority of Nigerians.
“The factors engendering high cost of living is expected to be tackled frontally to arrest and reduce inflation.”
By Adedapo Adesanya
African businessman, Mr Aliko Dangote, has said that due to Tanzania’s current reservations, there is a strong case for the planned East African Dangote refinery to be hosted in Kenya instead.
Last month, it was reported that the billionaire, alongside the presidents of Kenya and Uganda, Mr William Ruto, and Mr Yoweri Museveni, planned to build a new oil refinery in Tanzania. The project will include a pipeline that links the Kenyan port city of Mombasa to the northeastern Tanzanian harbour of Tanga, where the facility will be situated.
However, Tanzanian President Samia Suluhu Hassan last week complained angrily to her Kenyan counterpart that she had not been consulted over the earlier plan to build it on her country’s coastline.
Due to the latest development, the industrialist is now eyeing Kenya as the site of the planned 650,000-barrel-a-day oil refinery, as per the Financial Times. The facility is estimated to cost as much as $17 billion, compared to the $20 billion structure based in Lagos.
“I’m leaning more towards Mombasa because it has a much larger, deeper port,” he was quoted as saying.
“Kenyans consume more. It’s a bigger economy,” he said, adding that crude oil for the refinery could be transported by ship and need not be located near a pipeline that will carry oil nearly 1,500 kilometres from Ugandan oilfields to the Tanzanian coast at Tanga.
“The ball is in the hands of President Ruto,” he said. “Whatever President Ruto says is what I’ll do.”
Mr Dangote said he would need a lot of government protection from President Ruto, noting that it would mean land, financing, and most importantly, protection from what he called the dumping of cheap fuel from the likes of Russia or India.
“There is no refinery in the world that can survive without that protection,” he said. “If we have an agreement, we can start this year.”
Mr Dangote, who has faced multiple accusations of monopoly, built his empire in industries such as salt, sugar, flour, cement, and, more recently, petroleum, largely through a business model that benefited from government incentives, preferential foreign exchange access, and policies that limited foreign competition.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange extended rallied by 1.18 per cent on Friday, May 8, its fifth in a row for this week.
During the session, the market capitalisation increased by N28.96 billion to N2.488 trillion from N2.459 trillion, and the NASD Unlisted Security Index (NSI) jumped by 48.39 points to 4,158.77 points from the 4,110.38 points recorded a day earlier.
The growth witnessed yesterday was spurred by the gains recorded by six securities, led by 11 Plc, which chalked up N11.00 to sell at 221.10 per unit versus Thursday’s closing price of N210.10 per unit. FrislandCampina Wamco Nigeria Plc added N10.26 to close at N132.98 per share compared with the previous day’s N127.06 per share, and Central Securities Clearing System (CSCS) Plc rose by N2.82 to N75.90 per unit from N73.08 per unit.
In addition, Lighthouse Financial Services Plc appreciated by 7 Kobo to 86 Kobo per share from 81 Kobo per share, UBN Property Plc climbed higher by 5 Kobo to N2.25 per unit from N2.20 per unit, and First Trust Mortgage Bank Plc gained 2 Kobo to close at N2.32 per share, in contrast to the previous session’s N2.30 per share.
Conversely, Geo-Fluids Plc went down by 20 Kobo to N2.90 per unit from N3.10 per unit, and Afriland Properties Plc lost 5 Kobo to end at N16.95 per share versus N17.00 per share.
The volume of transactions for the session surged by 41.8 per cent to 528,891 units from 372,916 units, and the value grew by 11.4 per cent to N34.0 million from N30.4 million, while the number of deals slid by 7.4 per cent to 25 deals from 27 deals.
The most traded stock by volume on a year-to-date basis was Great Nigeria Insurance (GNI) Plc, with 3.4 billion units worth N8.4 billion. Resourcery Plc occupied the second spot after trading 1.1 billion units valued at N415.7 million, and the third position was occupied by Infrastructure Guarantee Credit Plc with 400 million units sold for N1.2 billion.
The most traded stock by value on a year-to-date basis was GNI Plc with 3.4 billion units transacted for N8.4 billion, followed by CSCS Plc with 60.5 million units exchanged for N4.1 billion, and Okitipupa Plc with 27.8 million units traded for N1.9 billion.
By Dipo Olowookere
The local stock exchange reversed the previous day’s loss, with a 2.10 per cent surge on Friday as a result of demand for large-cap equities like Dangote Cement, First Holdco and others.
It was observed that apart from the insurance counter, which shed 0.37 per cent, every other sector closed higher yesterday.
The industrial goods index expanded by 7.26 per cent, the banking segment increased by 3.35 per cent, the consumer goods industry rose by 0.21 per cent, and the energy sector soared by 0.14 per cent.
Consequently, the All-Share Index (ASI) of the Nigerian Exchange (NGX) Limited improved by 5,041.22 points to 244,775.83 points from 239,734.61 points, and the market capitalisation added N3.235 trillion to settle at N157.094 trillion compared with the preceding session’s N153.859 trillion.
The quintet of Neimeth, Cadbury Nigeria, LivingTrust Mortgage Bank, Mecure, and Dangote Cement led the advancers’ table on Friday, with 10.00 per cent growth each to quote at N9.90, N72.60, N3.52, N72.60, and N1,088.00, respectively.
On the flip side, the duo of UAC Nigeria and Industrial and Medical Gases lost 10.00 per cent each to sell for N171.00 and N42.30, respectively, as Eterna declined by 9.93 per cent to N33.55, Learn Africa slipped by 9.89 per cent to N8.20, and Deap Capital tripped by 9.69 per cent to N5.50.
The most active stock for the day was VFD Group, with a turnover of 102.9 million units valued at N1.1 billion. FCMB transacted 99.4 million units worth N1.1 billion, UBA traded 94.5 million units for N3.8 billion, Access Holdings exchanged 85.4 million units worth N2.0 billion, and Zenith Bank sold 46.5 million units valued at N5.8 billion.
At the close of trades, market participants traded 1.1 billion units worth N55.0 billion in 69,996 deals, in contrast to the 1.8 billion units valued at N72.2 billion transacted in 81,131 deals a day earlier, showing a crash in the trading volume, value, and number of deals by 38.89 per cent, 23.82 per cent, and 13.73 per cent, respectively.
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