Economy
Fitch Returns Nigeria’s Outlook to Stable, Forecasts 2% GDP Growth
**Says Inflation to Remain at Double Digits through 2019
**Debt to Hits 292% of Revenue
**Buhari Expected to Continue Economic Programme if Re-elected
By Dipo Olowookere
The outlook on Nigeria’s Long-Term Foreign-Currency Issuer Default Rating (IDR) has been reviewed upward to stable nearly six months after it was dropped to negative by Fitch Ratings.
In a statement dated November 2, 2018, the global rating agency said it also affirmed its rating on Nigeria at ‘B+’.
According to Fitch, the revision of the outlook on Nigeria’s Long-Term IDRs reflects the ongoing economic recovery and decreasing external vulnerabilities, both supported by increased oil production and higher global oil prices.
It noted that despite setbacks, the Nigerian economy is continuing its slow recovery from the recession that ended in early 2017.
Fitch pointed out that non-oil growth has been supported by an increase in the supply of foreign exchange and will receive an additional boost as the government begins its delayed implementation of the 2018 capital budget.
“Political uncertainty ahead of the general election scheduled for February 2019 may lead to some weakening in growth, but we expect any disruption to be short-lived,” the statement obtained by Business Post said.
It added that the contribution of the oil sector has been positive in the first half of 2018 as oil production, including condensates, has averaged just below 2.1 million barrels per day (mbpd), compared with 1.9 mbpd in 2017.
Fitch said it expects average production of crude oil in Nigeria to remain around 2.1 mbpd through 2018 and 1H19.
Fitch is forecasting a GDP growth of 2 percent overall in 2018, increasing to 2.5 percent in 2019 and 3.3 percent in 2020, and the agency expects that Nigeria’s medium-term growth will average around 4 percent.
It noted that oil production will increase as new exploration and oil infrastructure projects begin to come online, but emphasised that Nigeria will struggle to raise production to the levels envisaged in the 2019-2021 Medium Term Expenditure Framework (MTEF).
Fitch said high inflation has been a rating weakness, but CPI growth slowed to 11.3 percent year-on-year in September 2018, down from a recent peak of 18.7 percent in January 2017.
Inflation fell rapidly in 1Q18, but disinflation has slowed since, as base effects fade and conflicts between herders and farmers affect food supplies.
Fitch said it expects that annual average inflation will fall, but remain in the double digits through 2019.
“Despite falling inflation, Fitch expects that the Central Bank of Nigeria (CBN) will move towards tighter monetary policy to support FX rate stability,” the firm said.
The CBN has kept the monetary policy rate at 14 percent since May 2016, but has conducted monetary policy through its sales of Open Market Operation bills and by managing the reserve ratio.
Foreign currency availability has improved although Fitch believes that it remains a constraint on economic growth. The CBN continues to operate an FX regime with multiple windows and exchange rates, which will not change before the general elections. However, the wholesale interbank FX rate has depreciated, bringing it closer to the rate at the Investors and Exporters window.
Nigeria has increased its stock of international reserves to $44.6 billion (7.2 months of current external payments) as of September 2018, from $37.9 billion at end-2017.
The accumulation of reserves has been a function of both an increase in oil export receipts and an increase in inflow of foreign investments.
The rating agency said Nigeria’s external flows are exposed to global risk sentiments as well as to investor’s views on the country’s political and fiscal developments. However, the build-up of reserves provides a substantial external buffer.
“Nigeria’s ‘B+’ IDRs also reflect the country’s position as Africa’s largest economy and its well-developed domestic debt markets, balanced against low levels of domestic revenue mobilisation and of GDP per capita, a high level of hydrocarbon dependence, and low rankings on governance and business environment indicators.
“Nigeria continues to run persistent fiscal deficits at both the central and general government levels. Fitch forecasts a general government deficit of 4.3 percent of GDP in 2018, approximately the same as 2017.
“The government’s 2019-2022 Medium Term Expenditure Framework envisages a decrease in expenditure following three straight years of increasing capital expenditure. Lower expenditure, as a percentage of GDP, will help the general government fiscal deficit to narrow to 4 percent of GDP in 2019, but the government will continue to experience difficulty in raising non-oil domestic revenue.
“Oil revenue has increased since hitting bottom in 2016, but volatile production levels and inefficiencies within the petroleum sector have limited the transmission of higher oil prices to higher government revenue,” the statement said.
It added that Nigeria’s general government debt will rise to 292 percent of revenue, well above the historical ‘B’ median of 205 percent of revenue, reflecting the accumulation of new debt and the lack of progress on raising government revenue.
At 20 percent of general government revenue, interest payments are already more than twice the ‘B’ median. Federal government interest expenditure to federal government revenue stands much higher at just below 60 percent, the company stated.
“Fitch forecasts Nigeria’s current account (CA) surplus to widen to 3.6 percent of GDP in 2018 as oil export receipts have grown thanks to high oil prices. The CA surplus will narrow in subsequent years as import growth increases following several years of import compression related to tight foreign exchange supply. Nigeria is a net external creditor equivalent to 12 percent of GDP in 2018.
Fitch considers that the easing of foreign-currency liquidity has reduced risks regarding Nigerian banks’ ability to meet dollar liabilities and external debt repayments. However, economic headwinds have continued to affect asset quality.
“Average industry NPLs (according to CBN data) increased to 15 percent at end-2017, reflecting the lag affect from 2015. NPLs are concentrated in the oil and gas sector. The ongoing economic recovery, higher oil prices and widespread loan restructuring is likely to moderately help asset quality, but high NPLs will weigh on private sector credit provision.
“Credit to the private sector returned to modest positive growth in 2018 after tight domestic liquidity and crowding out from government borrowing led to a contraction of 5 percent through November 2017,” the firm said.
It was stressed that the outcome of the upcoming general elections remains uncertain. President Buhari will face a strong challenge from former Vice President Atiku Abubakar, who won the October 2018 primary to be the People’s Democratic Party candidate. Abubakar has made limited statements regarding his economic policy platform, but has criticised the current FX regime and has also signalled his support for devolving more control over public finances to the state governments.
“If Buhari is re-elected, we expect his government to continue implementing the economic programme outlined in the Economic Recovery and Growth Plan released in March 2017.
“Fitch does not expect widespread disruption or instability around the election. However, a flare-up of violence in the Niger Delta around the elections presents downside risk to the fiscal, external and GDP growth forecasts,” the rating agency stated.
By Modupe Gbadeyanka
Owners of companies operating in Lagos State have been reminded of the statutory filing of their annual tax returns for the 2024 financial year on or before Friday, January 31, 2025.
This reminder was issued by the Lagos State Internal Revenue Service (LIRS) through its Deputy Director for Corporate Communications, Mrs Monsurat Amasa-Oyelude.
The agency emphasized that employers are required to adhere to this in line with the Personal Income Tax Act (PITA) Cap P8 LFN 2004 (as amended).
The statement quoted the Chairman of LIRS, Mr Ayodele Subair, as stressing that the filing of the tax returns is a legal obligation, warning that failure to comply will result in statutory sanctions, including penalties, as prescribed by law.
Section 81 of PITA mandates employers to submit comprehensive annual returns detailing all emoluments paid to employees, including taxes deducted and remitted to relevant tax authorities. These returns must be filed no later than January 31 each year and cover the income and taxes paid during the preceding year (2024).
“Employers must prioritize the timely filing of their annual income tax returns to avoid penalties.
“Submitting returns on or before the deadline ensures compliance with the law and supports accurate revenue tracking, which is essential for Lagos State’s fiscal planning and sustainability,” the LIRS chief stated.
To simplify the process, the agency has transitioned to a fully digital filing system, allowing employers to file their annual tax returns exclusively through the LIRS e-Tax portal, as manual submissions are no longer accepted.
Mr Subair described the e-Tax platform as secure, user-friendly, and designed to provide employers with a convenient way to manage their tax obligations.
Employers are reminded to include the Payer ID of all employees in their returns, advising employees without a Taxpayer ID to generate one immediately on the e-Tax platform to prevent disruptions during the filing process.
To assist employers, LIRS has deployed staff across its offices to provide guidance on using the e-Tax portal and addressing related concerns.
By Adedapo Adesanya
For almost a month, the National Bureau of Statistics (NBS) website has been down, blocking access to crucial information about the Nigerian economy.
The nation’s statistics agency shut down its website after it claims it had been hacked on December 18, 2024.
Since then, important information such as capital flows into the Nigerian economy in the third quarter of 2024, as well as an update on outstanding local and foreign debt for the same period, have become inaccessible.
The website blackout occurred a day after the NBS published its Crime Experience and Security Perception Survey on December 17. According to the report, Nigerians paid a total of N2.23 trillion in ransom within one year, from May 2023 to April 2024.
There was a widespread report (excluding Business Post) that the Department of State Services (DSS) summoned the Statistician-General of the Federation, Mr Adeniran Adeyemi, based on the report.
This was later denied by the secret police.
The agency then closed the site on December 18, further warning against using any information posted on it until it was fully restored.
In its last update on X, formerly Twitter, the stats office said, “This is to inform the public that the NBS Website has been hacked and we are working to recover it. Please disregard any message or report posted until the website is fully restored. Thank you.”
This lack of information has raised worry about inflation report for December, which is usually due on January 15 as per recent trends.
The inflation numbers set the tone for decisions of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria, which should hold its first policy meeting for 2025 on January 27-28.
Analysts told this newspaper that the continued blackout on the NBS website raises concerns about credibility and trust on data that will be provided in the future.
By Adedapo Adesanya
The Society of Energy Editors (SEE) expects the Nigerian energy sector to witness significant developments in the first quarter of 2025.
This, according to the society, would be driven by President Bola Tinubu’s proposed N49.7 trillion budget for the year.
The budget is anchored on an increase in base crude oil production to 2.06 million barrels per day, expected to drive down inflation from 34.6 per cent to 15 per cent in 2025.
In its Nigeria Energy Outlook Q1 2025, the group said key areas to watch in the energy sector in the first quarter of the year include oil oil exploration and production; domestic crude refining; gas production and liquefied natural gas (LNG) export; power generation and transmission as well as labour relations.
“The government’s target to increase crude oil production is ambitious, but its feasibility hinges on addressing security challenges, particularly in the Niger Delta region.
“Nigeria plans to hold a fresh oil licensing round in 2025 focused primarily on handing out blocks that remained undeveloped, as the country battles to raise crude reserves and production,” it said in the outlook.
It added that “the federal government would have to show the necessary political will and apply a lot of push for this fresh oil licensing round to happen during the year as planned”.
On domestic refining, the organisation noted that the commencement of petroleum refining at the Dangote Refinery is expected to reduce fuel imports and ease the burden of petroleum subsidies.
However, it added that the steady supply of crude oil feedstock from the Nigerian National Petroleum Company (NNPC) Limited to the Dangote Refinery would be crucial in determining the refinery’s impact on the economy in 2025.
Nigeria spent N9.176 trillion on the importation of the Premium Motor Spirit (PMS), also known as petrol, in nine months, from January to September 2024, rising by 60.87 percent, compared with N5.704 trillion worth of the commodity imported in the same period in 2023.
Focusing on gas production and LNG exports, the SEE projected that Nigeria’s gas sector will grow during the first quarter, driven by the government’s “Decade of Gas” initiative and the country’s ambitions to increase its gas reserves to 210 trillion cubic feet, Tcf, in 2025 and 220 Tcf by 2030.
“Gas production and supply will also increase in response to the Federal Government initiative on gas for automobiles and the need to meet the current shortfalls being experienced by power generating stations and industries,” it also projected.
According to the SEE, gas export through the Nigeria LNG Limited will be steady during the first quarter.
In the area of power generation and transmission, the Society of Energy Editors, said efforts to expand power generation and improve transmission infrastructure will continue, with a focus on increasing the share of renewable energy sources in the energy mix.
It maintained that power transmission and distribution infrastructure remained very weak with the national grid recording 12 incidents of collapse in 2024. Adding that 2025 would witness a repeat owing to poor mitigation measures aimed at tackling inherent weaknesses.
On labour relations, the society stated that the government would need to address labour concerns in the downstream and upstream petroleum sectors, as well as in the electricity sector, to maintain stability and avoid disruptions.
Listing challenges and opportunities, it noted that the government’s expectations for reducing inflation and improving the exchange rate may be challenging to achieve, given the current market realities.
It asserted that the development of the Niger Delta region, through the activities of the Niger Delta Development Commission, would be crucial in addressing the root causes of insecurity and instability in the region.
“The solid minerals sector offers significant opportunities for revenue growth and job creation, but the government will need to address the challenges of artisanal mining and ensure that the sector is developed in a sustainable and responsible manner.
“Overall, the first quarter of 2025 will be critical in setting the tone for Nigeria’s energy sector in the year ahead. The government’s policies and initiatives will need to be carefully implemented to address the challenges facing the sector and to unlock its full potential,” the report stated.
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