Nigeria: Moody’s Predicts 2.5% GDP Growth in 2017, 4% in 2018
**Affirms Country’s B1 Rating With Stable Outlook
By Modupe Gbadeyanka
Moody’s Investors Service on Friday affirmed the B1 long-term issuer rating of the government of Nigeria with a stable outlook just as it forecasts that real GDP growth will rise to 2.5 percent in 2017 and accelerate further in 2018 to 4 percent.
The global rating firm disclosed that the key drivers for these were the medium term growth prospects remain robust despite the current challenging environment, with the rebound in oil production helping to rebalance the economy over the next two years; and the government’s balance sheet, which it said remains strong relative to its peers, resilient to the contractionary environment and temporarily elevated interest payments while the authorities pursue their efforts to grow non-oil taxes.
The long-term local-currency bond and deposit ceilings remain unchanged at Ba1. The long-term foreign-currency bond and deposit ceilings remain unchanged at Ba3 and B2, respectively.
Moody’s said it expects Nigeria’s medium term growth to remain robust, driven by the recovery in oil output and also over the near term, it expects Nigeria’s economic growth and US dollar earnings to improve in 2017, supported by a recovery in oil production.
According to Moody’s, after an estimated -1.5 percent real GDP growth in 2016, it forecasts real GDP growth to rise to 2.5% in 2017 and accelerate further in 2018 to 4%. A rebound in oil production to two million barrels per day (mbpd) will, if sustained, enhance economic growth and support the US dollar supply in the economy.
It noted that Nigeria has made significant gains in terms of governance and transparency in the oil sector. Improved availability of data, progress in restructuring the Nigerian National Petroleum Company (NNPC), rising effectiveness of operations at the refineries and a readiness to tackle difficult issues with partners (such as funding issues at the Joint Ventures) speak to a material improvement in the operating environment. The Petroleum Investment Bill (PIB bill), which had been blocked for 8 years in parliament, has been reactivated with a portion of the law drafted and passed by the Senate. Moreover, militant activity in the Niger Delta is set to wane following the resumption of payments from the government, though it will remain a threat to the recovery of the economy.
Moody’s further said the economy is also likely to benefit from the more timely implementation of the 2017 budget than its predecessor and in particular from the increase in capital spending on infrastructure which that will allow.
It also said the scarcity of Dollars, worsened by the soft capital controls imposed by the Central Bank of Nigeria (CBN), is likely to continue to negatively affect important sectors of the economy especially in services and manufacturing sectors.
“We do not expect the current policy mix to significantly change over the short term but a gradual easing of restrictions is possible as foreign currency receipts improve with rising oil production,” the firm said on Friday in a statement obtained by Business Post.
In 2017 and 2018, we expect Nigeria’s balance of payments to move back into surplus, supported by government external borrowings and a falling current account deficit. The latter is quickly reducing, supported by falling imports and increased oil production.
Depreciation of the naira, soft capital controls and current dollar scarcity have been relatively effective at constraining imports. We expect foreign exchange reserves to grow modestly in 2017. While improved foreign investor sentiment should support the rebalancing of the economy over the medium term, with the return of portfolio investors improving dollar liquidity in the country, the continued existence of a parallel, unofficial foreign exchange market is likely to act as a strong deterrent over the near term.
RESILIENT GOVERNMENT BALANCE SHEET STRONGER THAN PEERS’ DESPITE TURBULENCE
Moody’s says it expects the medium-term impact of the oil price shock on Nigeria’s government balance sheet to be contained, and recent erosion of debt affordability to be reversed.
The effect of the recent downturn on the government’s budget sheet has been contained as the authorities have been able to offset the shortfall in revenue with large cuts in capital expenditure. As a result, Moody’s forecasts a budget deficit of 3 percent of GDP in 2016, comprised of a 2 percent of GDP federal government budget deficit and around 1% of arrears split between federal, state and municipality levels of government, it explained.
Moody’s forecasts the federal government deficit to remain around 2% of GDP in 2017 and 2018, with large capital expenditure outlays resuming as the government’s cash flow situation improves. Based on these underlying projections, Nigeria’s balance sheet will continue to compare favourably with peers’, with government debt remaining well below 20% of GDP over the coming years against 55% median for B1-rated peers.
By end-2016, Moody’s estimates the government debt stock will be comprised of 85% domestic borrowing and 15% external debt, resulting in a manageable external debt profile. Government external debt amounts to just 2.9% of GDP, with interest payments set to remain low, at around $330 million dollars per annum. Domestic debt has increased significantly in recent years, reaching its current level of NGN10 trillion. Around 30% of this debt is comprised of costly T-bills, which have increased refinancing risk and interest rate exposure. However, Moody’s expects the ratio of interest payments to government revenues to peak at 20% for general government, and close to 40% of revenues for federal government in 2017.
Although debt service costs are high, Nigeria’s domestic capital market is sufficiently developed to accommodate the yearly public sector borrowing requirements of around NGN5.5 trillion. This is another positive credit feature that distinguishes Nigeria from many similarly rated peers. The country’s banking sector is well-capitalised and liquid and the national pension fund still has additional capacity. Should banking sector liquidity decline, the Central Bank of Nigeria has tools at its disposal to support appetite for government securities, including lowering the cash reserve requirement ratio from its presently high level of 22.5%. However, appetite for government securities remains strong, with all instruments remain oversubscribed.
Moody’s expects the recent increase in debt service costs to prove temporary, as a result of i) the government’ initiatives to expand the non-oil revenue base, and ii) efforts to improve the structure of government debt.
Measures by the Federal Revenue Inland Service are expected to increase non-oil revenue to around NGN4 trillion in 2016 from NGN2.5 trillion in 2015. These include a tax amnesty on penalties and interest on tax liabilities due in 2013, 2014 and 2015. However, not all the initiatives have proven successful: the independent re-appropriation of revenues from the ministries departments and agencies (MDAs) has yielded disappointing results so far. Such outcomes highlight the considerable execution risks inherent in the transition to a less oil-dependent federal budget, and the implications for the government balance sheet should it not meet its objectives.
The government’s medium-term debt strategy should also help to lower the interest burden. The debt strategy is geared towards exchanging costly short-term debt with long-term concessional borrowing. Although a portion of future external borrowings are expected to be raised through the Eurobond markets, this is likely to be complemented with ongoing support from other multilateral institutions including the African Development Bank and the World Bank. The combined effect of these measures should help to bring interest payments/general government revenues down to 16.8% by 2018, from an estimated 19.8% in 2016.
RATIONALE FOR THE OUTLOOK AT STABLE
The stable outlook is driven by Moody’s view that the downside risks posed by the weakening of the country’s fiscal strength, and the external and economic pressures anticipated this year and next, are balanced by Nigeria’s strengths, which exceed those of sovereigns rated below B1. In 2016, Nigeria’s external vulnerability indicator of 31% will remain far below the expected B1 median of 51%, while its debt-to-GDP of 16.6% will remain far below the expected B1 median of 55%. Set against that, its expected debt servicing burden in terms of interest payments to revenue of 19% is more than double the B1 median of 9%. To a large extent, Moody’s believes that this reflects Nigeria’s underdeveloped public sector revenue base, a credit weakness that the administration is attempting to address.
WHAT COULD CHANGE THE RATING UP
Positive pressure on Nigeria’s issuer rating will be exerted upon: 1) successful implementation of structural reforms by the Buhari administration, in particular with respect to public resource management and the broadening of the revenue base; 2) strong improvement in institutional strength with respect to corruption, government effectiveness, and the rule of law; 3) the rebuilding of large financial buffers sufficient to shelter the economy against a prolonged period of oil price and production volatility.
WHAT COULD CHANGE THE RATING DOWN
Nigeria’s B1 issuer rating could be downgraded in the event of 1) a greater-than-anticipated deterioration in the government’s balance sheet or continued erosion of debt affordability, for example resulting from the failure to implement revenue reform; and 2) lower than expected medium term growth, for example as a result of delays in implementing key structural reforms, especially in the oil sector, or continued militancy in the Niger Delta, which undermine the level of oil production over the medium-term.
GDP per capita (PPP basis, US$): 6,184 (2015 Actual) (also known as Per Capita Income)
Real GDP growth (% change): -1.5% (2016 Estimate) (also known as GDP Growth)
Inflation Rate (CPI, % change Dec/Dec): 19% (2016 Estimate)
Gen. Gov. Financial Balance/GDP: -2.9% (2016 Estimate) (also known as Fiscal Balance)
Current Account Balance/GDP: -0.6% (2016 Estimate) (also known as External Balance)
External debt/GDP: 4.2% (2016 Estimate)
Level of economic development: Low level of economic resilience
Default history: No default events (on bonds or loans) have been recorded since 1983.
On 7 December 2016, a rating committee was called to discuss the ratings of the Government of Nigeria. The main points raised during the discussion were: The issuer’s economic fundamentals, including its economic strength, have not materially changed. The issuer’s fiscal or financial strength, including its debt profile, has not materially changed. The issuer’s susceptibility to event risks has not materially changed. Other views raised included: the issuer’s institutional strength/framework, have not materially changed. The issuer’s governance and/or management, have not materially changed.
The principal methodology used in these ratings was Sovereign Bond Ratings published in December 2015. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
The weighting of all rating factors is described in the methodology used in this credit rating action, if applicable.
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Bitfinex Lists World’s First Mobile-Native Token Wrapped Minima
By Adedapo Adesanya
Bitfinex has listed the wrapped Minima ($WMINIMA) token, an ERC-20 token, aimed at helping build a truly decentralized network that empowers freedom worldwide and increases access to Web3 for any person with a mobile or IoT device.
Bitfinex is one of the first crypto exchanges to list WMINIMA, built on the world’s first mobile-native Layer 1 blockchain.
Minima’s presale for WMINIMA started on February 14, 2023, with 10 million tokens currently acquired out of the total supply of 125 million $WMINIMA tokens.
Traders on Bitfinex are taking this new innovation as a huge opportunity to become early adopters of the $WMINIMA token, by making deposits and purchases during the presale period. Effective 21st of March, 2023, on Bitfinex, trading for WMINIMA against the US Dollar (USD) and Tether tokens (USDt) will be available for all traders.
Wrapped Minima (WMINIMA) is a wrapped version of Native Minima (MINIMA), which has been issued on the Ethereum blockchain. Wrapped Minima (WMINIMA) enables Minima to be tradable on exchanges shortly after its Token Generation Event, without waiting for the technical integration of Native Minima ($MINIMA) onto exchanges, scheduled for Q3/Q4 2023. WMINIMA has an initial circulating supply of 98,100,000 coins and a total supply of 125,000,000 coins, with a listing price of $0.30.
The move is part of Bitfinex’s efforts to bring financial inclusion and financial freedom to less-advantaged and emerging communities around the world, particularly where there is currency volatility.
By becoming an owner of Wrapped Minima on Bitfinex, users will be helping build a truly decentralized network that empowers freedom all around the world.
The Minima protocol and its network have already been built, with Mainnet recently launching after several years in Testnet, yet Minima is still relatively unknown.
As a result, there is still a huge opportunity to become an early adopter of the world’s first mobile-native layer 1 blockchain before it becomes widely adopted.
How to trade WMINIMA on Bitfinex
WMINIMA is available to trade with US Dollar (USD) and Tether tokens (USDt). To sign up now, follow these few easy steps:
- Visit the Bitfinex website or download the Bitfinex mobile app and click on the sign-up button.
- Use the African Bitfinex LEOs community affiliate code “9r9ifKfHx” to get a 6 per cent discount on trading fees for life.
- Create an account by entering the required details: username, email, password, country of residence, and referral (optional).
- Create and confirm a log-in pin code or enable touch ID or face ID, if your phone enables it.
- You will be directed to the setup security page. Here, download the Google Authenticator app. If already downloaded, select the “I’ve installed the app” tab.
- Open the GA app to directly add your new token. Alternatively, you can also select to use the QR or Setup key. Enter your code to enable 2FA setup.
- Check your inbox to confirm your email address via an email sent by Bitfinex.
- After email confirmation, accept the Bitfinex Terms of Service to complete the account setup and proceed to the trading page.
- Once that is done you can now trade the WMINIMA on Bitfinex.
CBN Releases N12.65bn for Three Agricultural Projects in Two Months
By Adedapo Adesanya
The Central Bank of Nigeria (CBN) has disbursed N12.65 billion to the Anchor Borrowers Programme (ABP), its flagship agriculture intervention scheme, in the first two months of 2023.
The Governor of the apex bank, Mr Godwin Emefiele, said this on Tuesday in Abuja when he read the communique issued at the end of the 290th meeting of the apex bank’s Monetary Policy Committee (MPC).
According to Mr Emefiele, the total disbursement under the ABP since its inception by President Muhammadu Buhari’s administration in 2015 is N1.09 trillion.
“Between January and February 2023, the bank disbursed N12.65 billion to three agricultural projects under the ABP,” he said.
“It brings the cumulative disbursement under the programme to N1.09 trillion to more than 4.6 million smallholder farmers cultivating or rearing 21 agricultural commodities on an approved 6.02 million hectares of farmland,” Mr Emefiele added.
According to Mr Emefiele, the improved performance of the economy has been driven largely by sustained growth in the services and agricultural sectors.
He also cited a rebound in economic activities associated with economic recovery and continued intervention in growth-enhancing sectors by the CBN as responsible for the growth.
He said that the CBN had also disbursed huge sums as an intervention to various other sectors of the economy.
“The CBN also released the sum of N23.70 billion under the N1.0 trillion Real Sector Facility to eight new real sector projects in agriculture, manufacturing, and services.
“Cumulative disbursements under the Real Sector Facility currently stands at N2.43 trillion disbursed to 462 projects across the country, comprising 257 manufacturing, 95 agriculture, 97 services, and 13 mining sector projects,” he said.
He said that the apex bank also released N3.01 billion under the Nigerian Electricity Market Stabilisation Facility (NEMSF-2) for capital and operational expenditure of electricity distribution companies (Discos).
He said that the facility was aimed at improving the liquidity status of the Discos, there aiding their recovery of legacy debt.
“This brings the cumulative disbursement under the facility to N254.39 billion,” he said.
UK Firm Unveils Portal to Aggregate Property Prices in Africa
By Adedapo Adesanya
Baron and Cabot, a UK-based international real estate firm, has launched a portal that will use artificial intelligence technology to predict property prices in Africa to allow real estate agents to sell properties and earn in pounds, providing an unprecedented opportunity for growth and financial success.
The novel approach will allow real estate firms to de-risk their investments in international markets and gain access to a wide range of fully compliant properties.
Baron & Cabot has been particularly successful in Africa due to inflation driving clients to move their money into GBP and Dollar to purchase assets. It is one of the top fastest-growing property companies in the world and transacts around £100 million per annum ($120 million) of UK property while having access to some of the best property developments in the UK.
Speaking on this, Mr Mark Pearson, Managing Director of Baron & Cabot, said, “We are thrilled to be launching this innovative concept that will not only provide a platform for real estate agents in Africa to sell UK properties but will also create job opportunities and drive economic growth.
“We believe that by leveraging AI technology to predict property prices, we can provide our partners with a unique advantage and help them to achieve financial success. Our joint venture expansion plans are aimed at creating mutually beneficial partnerships that will bring value to all parties involved.”
In addition to providing agents with access to new revenue streams, Baron and Cabot’s property portal is also expected to create new job opportunities in the African market.
The company also revealed that it would provide its agents with comprehensive 2 to 4-week training and support to help them succeed in their new roles. This training will ensure that agents are equipped with the skills and knowledge they need to navigate the real estate market and take advantage of the opportunities that Baron and Cabot’s concept provides.
As part of its offering, Baron and Cabot will provide clients with mortgages anywhere in the world (excluding war zones), with mortgage rates lower than 6 per cent and deposits below 35 per cent, making it easier for clients to invest in UK properties.
“Our management company boasts an impressive occupancy rate of over 99 per cent, with properties awaiting new tenants for an average of only 10 days. This sets us apart from other cities around the world, where the average occupancy rate is only 70 per cent.
“In addition, our Airbnb or short-term rental products have an average occupancy rate of over 70 per cent, resulting in substantial rental returns and secure investment. Our secret to success lies in our ability to identify high-demand areas with low supply, combined with exceptional management that keeps both our tenants and landlords satisfied,” Mr Pearson added.
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