Economy
Nigeria Rejects Moody’s Rating Downgrade
By Modupe Gbadeyanka
Federal Government has strongly rejected the downgrading of Nigeria from a B1 stable to a B2 stable rating by Moody’s Investors Service Research.
In a statement dated Wednesday, November 8, 2017, the Nigerian authorities said the downgrade was not a true reflection of the current state of the country’s economy, which government said has improved.
“The attention of the Federal Ministry of Finance (FMF), Central Bank of Nigeria (CBN) and the Debt Management Office (DMO) has been drawn to today’s announcement of the decision by Moody’s to downgrade Nigeria from a B1 stable to a B2 stable rating.
“This is equivalent to Nigeria’s existing B/Stable Outlook rating from S&P and slightly lower than Nigeria’s B+/Negative Outlook rating from Fitch.
“While we respect the right of Moody’s to make this decision, we strongly disagree with the premise and must address some of the conclusions upon which the decision rests,” the statement said.
It said further that, Since Nigeria was last rated by Moody’s (as B1 stable) in December 2016, Nigeria has successfully emerged from a protracted recession and recorded important improvements across a broad range of indices, including A return to economic growth of 0.55% in Q2 2017, and returning business confidence, as evidenced by a PMI index of 55.0; a stable foreign exchange window for importers and exporters, with improving liquidity and convergence of the parallel and official rates; significantly improved foreign exchange reserves, now totalling $34 billion; increased oil production, combined with stable and now improving oil prices; a slowly improving revenue profile, with non-oil revenue (principally taxes) up 10%; month on month improvements in inflation levels since January 2017, with inflation continuing to trend downwards; strong year on year improvement on the World Bank Ease of Doing Business Rankings from 169th to 145th place, a 24 place move in one year; and in 2016, the highest capital expenditure deployment since 2013, making investments in critical infrastructure to support further growth.
“At the heart of Moody’s rationale is the need for Nigeria to improve non-oil revenue aggressively. This is absolutely and directly aligned to the government’s priorities. This is critical to our economic development and is the basis for the establishment of a stable and inclusive economy, which can withstand global shocks and has the resources to increase investments in our infrastructure.
“We have put in place a number of measures to improve our collection and FIRS has made good progress in increasing revenues, particularly when considering that the economy is still recovering from the oil price shock.
“Examples include introduction of a Tax Amnesty (the on-going Voluntary Assets and Income Declaration Scheme (VAIDS)), which is showing positive results; plugging leakages and deployment of technology driven revenue management strategies. An example is Health Pay, a pilot cashless revenue project in the health sector, which has recorded material increases in revenue.
“We have seen improvements in revenue in 2017. Fiscal revenues are linked directly to both the performance of the economy and the number of tax payers contributing. As a result of the foundation that has been established in 2017, we expect, similar positive trends in 2018.
“Our revenue initiatives are changing the mix of revenue sources available to government from the traditional oil or debt to a combination of oil, debt and domestic revenue. For example, the 2018 budget includes N710 billion proceeds from the restructuring of the Government’s equity in the JV oil assets. The reform is aimed at increasing private sector equity participation to improve efficiencies in the sector and also provides revenue to the government which will be deployed solely and exclusively for creating new assets in Nigeria.
“Moody’s highlights that while our debt levels remain low, interest is consuming a larger portion of revenue.
“It should be noted we are implementing a very prudent fiscal and debt management strategy to reduce the cost of our debt. Given the relatively higher domestic interest rates, we are focusing on longer term external borrowing with an aim to re-balance our domestic and international debt portfolio to a 60:40 split over the coming years.
“Our existing proposal to refinance $3 billion of treasury bills through external borrowing is expected to reduce Nigeria’s debt servicing costs, further improving our fiscal position.
“We also expect this strategy to help to reduce the ‘crowding out’ effect of government borrowing in the domestic markets.
“The challenges that are highlighted in the Moody’s rating are clear, and are being addressed by the government, with the environment having improved significantly since the last period of assessment.”
By Modupe Gbadeyanka
The federal government has been asked by the Nigerian Bar Association (NBA) to suspend the implementation of the controversial tax laws.
In a reaction to the tax reform acts, the president of the group, Mr Afam Osigwe (SAN), the suspension of the laws would allow for a proper investigation into allegations of alterations in the gazetted and harmonised copies.
A member of the House of Representatives, Mr Abdussamad Dasuki, alleged that some parts of the laws passed by the parliament were different from the gazetted copy.
To address the issues raised, the NBA said it is “imperative that a comprehensive, open, and transparent investigation be conducted to clarify the circumstances surrounding the enactment of the laws and to restore public confidence in the legislative process.”
“Until these issues are fully examined and resolved, all plans for the implementation of the Tax Reform Acts should be immediately suspended,” the association declared.
It noted that the controversies “raise grave concerns about the integrity, transparency, and credibility of Nigeria’s legislative process.”
“These developments strike at the very heart of constitutional governance and call into question the procedural sanctity that must attend lawmaking in a democratic society,” it noted.
“Legal and policy uncertainty of this magnitude has far-reaching consequences. It unsettles the business environment, erodes investor confidence, and creates unpredictability for individuals, businesses, and institutions required to comply with the law. Such uncertainty is inimical to economic stability and should have no place in a system governed by the rule of law.
“Nigeria’s constitutional democracy demands that laws, especially those with profound economic and social implications, emerge from processes that are transparent, accountable, and beyond reproach. Anything short of this undermines public trust and weakens the foundation upon which lawful governance rests.
“We therefore call on all relevant authorities to act swiftly and responsibly in addressing this controversy, in the overriding interest of constitutional order, economic stability, and the preservation of the rule of law,” the organisation stated.
By Adedapo Adesanya
Demand for hot stocks, including MRS Oil Plc, buoyed the NASD Over-the-Counter (OTC) Securities Exchange by 0.52 per cent on Tuesday, December 23.
The energy company was one of the three price gainers for the session as it chalked up N19.69 to sell at N216.59 per share versus the previous day’s value of N196.90 per share.
Further, FrieslandCampina Wamco Nigeria Plc gained N2.95 to close at N56.75 per unit versus N53.80 per unit and Golden Capital Plc appreciated by 84 Kobo to N9.29 per share from Monday’s N8.45 per share.
Consequently, the market capitalisation went up by N10.95 billion to N2.125 trillion from N2.125 trillion and the NASD Unlisted Security Index (NSI) rose by 18.31 points to 3,570.37 points from 3,552.06 points.
Yesterday, the NASD bourse recorded a price loser, the Central Securities Clearing System Plc (CSCS), which gave up 17 Kobo to close at N33.70 per unit against the previous trading value of N33.87 per unit.
The volume of securities traded at the session went down by 97.6 per cent to 297,902 units from the previous day’s 12.6 million units, the value of securities decreased by 98.5 per cent to N10.5 million from N713.6 million, and the number of deals remained flat at 32 deals.
By value, Infrastructure Credit Guarantee Company (InfraCredit) Plc ended as the most actively traded stock on a year-to-date basis with 5.8 billion units exchanged for N16.4 billion. This was followed by Okitipupa Plc, which traded 178.9 million units valued at N9.5 billion, and MRS Oil Plc with 36.1 million units worth N4.9 billion.
In terms of volume, also on a year-to-date basis, InfraCredit Plc led the chart with a turnover of 5.8 billion units traded for N16.4 billion. Industrial and General Insurance (IGI) Plc ranked second with 1.2 billion units sold for N420.7 million, while Impresit Bakolori Plc followed with the sale of 536.9 million units valued at N524.9 million.
By Dipo Olowookere
It was another bullish trading session for the Nigerian Exchange (NGX) Limited as it closed higher by 0.59 per cent on Tuesday.
The market further rallied due to continued interest in large and mid-cap stocks on the exchange by investors rebalancing their portfolios for the year-end.
Yesterday, Aluminium Extrusion sustained its upward trajectory after it further appreciated by 9.96 per cent to N14.90, as Austin Laz gained 9.81 per cent to close at N2.91, Custodian Investment improved by 9.69 per cent to N38.50, and First Holdco soared by 9.35 per cent to N50.30.
Conversely, Royal Exchange declined by 7.22 per cent to N1.80, Champion Breweries shrank by 6.57 per cent to N15.65, NASCON lost 5.36 per cent to trade at N105.05, Sovereign Trust Insurance depreciated by 5.28 per cent to N3.77, and Japaul went down by 4.51 per cent to N2.33.
At the close of business, 29 shares ended on the gainers’ table and 27 shares finished on the losers’ log, representing a positive market breadth index and bullish investor sentiment.
This raised the All-Share Index (ASI) by 895.06 points to 153,354.13 points from 152,459.07 points and lifted the market capitalisation by N579 billion to N97.772 trillion from the previous day’s N97.193 trillion.
VFD Group finished the day as the busiest stock after it recorded a turnover of 192.0 million units worth N2.1 billion, GTCO exchanged 63.5 million units valued at N5.6 billion, Access Holdings traded 49.8 million units for N1.0 billion, First Holdco sold 45.8 million units valued at N2.3 billion, and Secure Electronic Technology transacted 38.3 million units worth N28.4 million.
In all, market participants bought and sold 677.4 million units valued at N20.8 billion in 27,589 deals compared with the 451.5 million units worth N13.0 billion traded in 33,327 deals on Monday, showing an improvement in the trading volume and value by 50.03 per cent and 60.00 per cent apiece, and a shortfall in the number of deals by 17.22 per cent.
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