Economy
Petrol, Electricity Subsidies Will Gulp 3% of Nigeria’s GDP—IMF
By Adedapo Adesanya
The International Monetary Fund (IMF) has warned the Nigerian government the payment of subsidies on petrol and electricity could take up to 3 per cent of the country’s gross domestic product (GDP) in 2024.
The IMF stated this in a statement released on Monday on the completion of its 2024 Article IV Mission to Nigeria.
The lender said that the recent improvements in revenue collection and oil production are encouraging, as “low revenue mobilization constrains the government’s ability to respond to shocks and to promote long-term development.”
But it emphasised that, “The capping of fuel pump prices and electricity tariffs below cost recovery could have a fiscal cost of up to 3 per cent of GDP in 2024.”
Recall that during his inaugural speech in May last year, President Bola Tinubu announced that “The fuel subsidy is gone,” adding that the 2023 budget by his predecessor, Mr Muhammadu Buhari, made no provision for fuel subsidy and more so, subsidy payment was no longer justifiable.
The removal has tripled the price of petrol across major cities from less than N200 per litre to about N700 per litre. This has also led to a huge increase in the costs of goods and services, further worsening the economic situation for millions of citizens.
However, current trajectories indicate that prices should be higher but it has not moved based on the removal of the caps. This, according to experts, can only point to continued payment of subsidies of up to N1 trillion per month.
The Bretton Wood institution warned that the continuous payment of subsidies would affect the government, especially at a time when it is struggling to feed its citizens.
It said about 8 per cent (about 18.6 million Nigerians) are food insecure, and urged the federal government to tackle rising food insecurity as its immediate priority.
Despite this, it welcomed the FG’s approval of an “effective and well-targeted social protection system,” the government’s release of grains, seeds, and fertilizers, as well as the introduction of dry-season farming.
“The recently approved targeted social safety net program that will provide cash transfers to vulnerable households needs to be fully implemented before the government can address costly, implicit fuel and electricity subsidies in a manner that will ensure low-income households are protected,” it, however, said.
The IMF said it supports the decision of the Central Bank of Nigeria (CBN) Monetary Policy Committee’s (MPC) decision to further tighten monetary policy by hiking the policy rate by 400 basis points to 22.75 per cent, as it believes, “should help contain inflation, which reached 29.9 per cent year-on-year in January 2024, and put pressures on the Naira.”
On the country’s growth prospects, the IMF said — “Nigeria’s economic outlook is challenging. Economic growth strengthened in the fourth quarter, with GDP growth reaching 2.8 per cent in 2023.
“This falls slightly short of population growth dynamics. Improved oil production and an expected better harvest in the second half of the year are positive for 2024 GDP growth, which is projected to reach 3.2 per cent, although high inflation, Naira weakness, and policy tightening will provide headwinds.”
By Adedapo Adesanya
President Bola Tinubu on Friday presented a budget proposal of N58.47 trillion for the 2026 fiscal year titled Budget of Consolidation, Renewed Resilience and Shared Prosperity to a joint session of the National Assembly, with capital recurrent (non‑debt) expenditure standing at 15.25 trillion, and the capital expenditure at N26.08 trillion, while the crude oil benchmark was pegged at $64.85 per barrel.
Business Post reports that the Brent crude grade currently trades around $60 per barrel. It is also expected to trade at that level or lower next year over worries about oil glut.
At the budget presentation today, Mr Tinubu said the expected total revenue for the year is N34.33 trillion, and the proposal is anchored on a crude oil production of 1.84 million barrels per day, and an exchange rate of N1,400 to the US Dollar.
In terms of sectoral allocation, defence and security took the lion’s share with N5.41 trillion, followed by infrastructure at N3.56 trillion, education received N3.52 trillion, while health received N2.48 trillion.
Addressing the lawmakers, the President described the budget proposal as not “just accounting lines”.
“They are a statement of national priorities,” the president told the gathering. “We remain firmly committed to fiscal sustainability, debt transparency, and value‑for‑money spending.”
The presentation came at a time of heightened insecurity in parts of the country, with mass abductions and other crimes making headlines.
Outlining his government’s plan to address the challenge, President Tinubu reminded the gathering that security “remains the foundation of development”.
He said some of the measures in place to tame insecurity include the modernisation of the Armed Forces, intelligence‑driven policing and joint operations, border security, and technology‑enabled surveillance and community‑based peacebuilding and conflict prevention.
“We will invest in security with clear accountability for outcomes—because security spending must deliver security results,” the president said.
“To secure our country, our priority will remain on increasing the fighting capability of our armed forces and other security agencies by boosting personnel and procuring cutting-edge platforms and other hardware,” he added.
By Aduragbemi Omiyale
The deadline for the recapitalisation of the Nigerian pension industry has been extended by six months to June 2027 from December 2026.
This extension was approved by the National Pension Commission (PenCom), the agency, which regulates the sector in the country.
Addressing newsmen on Thursday in Lagos, the Director-General of PenCom, Ms Omolola Oloworaran, explained that the shift in deadline was to give operators more time to boost the capital base, dismissing speculations that the exercise had been suspended.
“The recapitalisation has not been suspended. We have communicated the requirements to the Pension Fund Administrators (PFAs), and we expect every operator to be compliant by June 2027. Anyone who is not compliant by then will lose their licence,” Ms Oloworaran told journalists.
She added that, “From a regulatory standpoint, our major challenge is ensuring compliance. We are working with ICPC, labour and the TUC to ensure employers remit pension contributions for their employees.”
The DG noted that engagements with industry operators indicated broad acceptance of the policy, with many PFAs already taking steps to raise additional capital or explore mergers and acquisitions.
“You may see some mergers and acquisitions in the industry, but what is clear is that the recapitalisation exercise is on track and the industry agrees with us,” she stated.
PenCom wants the PFAs to increase their capital base and has created three categories, with the first consists operators with Assets Under Management of N500 billion and above. They are expected to have a minimum capital of N20 billion and one per cent of AUM above N500 billion.
The second category has PFAs with AUM below N500 billion, which must have at least N20 billion as capital base.
The last segment comprises special-purpose PFAs such as NPF Pensions Limited, whose minimum capital was pegged at N30 billion, and the Nigerian University Pension Management Company Limited, whose minimum capital was fixed at N20 billion.
By Adedapo Adesanya
Three securities weakened the NASD Over-the-Counter (OTC) Securities Exchange by 0.68 per cent on Thursday, December 18.
According to data, Central Securities Clearing System (CSCS) Plc led the losers’ group after it slipped by N2.87 to N36.78 per share from N39.65 per share, Golden Capital Plc depreciated by 77 Kobo to end at N6.98 per unit versus the previous day’s N7.77 per unit, and FrieslandCampina Wamco Nigeria Plc dropped 19 Kobo to sell at N60.00 per share versus Wednesday’s closing price of N60.19 per share.
At the close of business, the market capitalisation lost N16.81 billion to finish at N2.147 billion compared with the preceding session’s N2.164 trillion, and the NASD Unlisted Security Index (NSI) declined by 24.76 points to 3,589.88 points from 3,614.64 points.
Yesterday, the volume of securities bought and sold increased by 49.3 per cent to 30.5 million units from 20.4 million units, the value of securities surged by 211.8 per cent to N225.1 million from N72.2 million, and the number of deals jumped by 33.3 per cent to 28 deals from 21 deals.
Infrastructure Credit Guarantee Company (InfraCredit) Plc remained the most traded stock by value with a year-to-date sale of 5.8 billion units valued at N16.4 billion, followed by Okitipupa Plc with 178.9 million units transacted for N9.5 billion, and MRS Oil Plc with 36.1 million units worth N4.9 billion.
Similarly, InfraCredit Plc ended as the most traded stock by volume on a year-to-date basis with 5.8 billion units traded for N16.4 billion, trailed by Industrial and General Insurance (IGI) Plc with 1.2 billion units sold for N420.7 million, and Impresit Bakolori Plc with 536.9 million units exchanged for N524.9 million.
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