Economy
What Awaits Nigeria’s Economy in Buhari’s 2nd Term
By Modupe Gbadeyanka
The presidential election in Nigeria may have come and gone, but the effect will be with the Africa’s largest economy for the next four years.
Last Saturday, Nigerians went to the polls to re-elect President Muhammadu Buhari for another four years.
In his first four years in office, which will officially end on May 29, 2019, the nation suffered its first recession in many years.
During the period, a lot of investors rushed to pull out their funds from the country and the stock market suffered for it.
Also, the President had to spend a chunk of his time in office treating himself at a hospital in London, creating the impression that he was not fully fit to govern the country.
As the country prepare for another four years of President Buhari, analysts at United Capital Research have given their views on the economic outlook in his second term in office.
“The outlook for the economy over the next four years is positive but modest as President Buhari’s victory signals policy stability,” the firm said.
It was stated that the administration will clearly continue to invest in infrastructure, sustain its welfare scheme, reinforce the drive to substitute imports for local production, and retain its intervention programs across the Agric, Power and the SMEs space, by building on its Economic Recovery and Growth Plan (ERGP).
“We expect the budget to remain large, broadly financed by borrowings. However, the role of the private sector may be limited by the absence of far-reaching liberal policies.
“This may keep investment low and output growth soft. Accordingly, we expect GDP growth to sustain a gradual uptick over the next four years, rising from 2.0% to 3.5% or more over the period.
“Inflation rate is likely to ease 10%/9%, though minimum wage implementation and power tariff adjustment may weigh on prices.
“Thus, interest rate may to revert to its long term 12% over the period. In the rest of the report, we highlight our views of the medium term economic outlook for Nigeria,” it said.
The firm further said beyond elections, the medium to long term outlook for the Nigerian economy depends on the position of government on the implementation of far-reaching economic reforms to fix the structural challenges in the economy.
“If not urgently addressed, structural constraints such as; the enormous infrastructural deficit, poor electricity supply, sharp rising population growth, dependence on oil export and oil revenue for budget funding, and the problem of the viability of sub-national governments, are bound to mar economic progress.
“Notably, system inefficiencies continue to undermine the ability of the federal government to diversify its revenue base, enhance social justice, allocate resources efficiently and drive economic diversification. If the stance of the current administration over the last four years is anything to go by, we do not envisage a significant drive for bold reforms.
“However, we expect investment in infrastructures such as rail project, road, and similar social amenities to continue in a bid to bridge the infrastructural gap.
“Again, the drive to diversify government revenue via improving the efficiency of tax authorities such as the FIRS, Customs and Ports Authorities, and support the SMEs boost job creation through intervention in the Agric sector will continue.
“Finally, efforts to ease doing business in Nigeria, via the initiatives of the Presidential Enabling Business Environment Council (PEBEC), by reviewing the bureaucracies and red tapes within the civil service and other government agencies, should be more obvious going forward,” the report said.
In its report, United Capital Research further during the period, it expects the present Governor of the Central Bank of Nigeria (CBN), Mr Godwin Emefiele, if retained by the President for another term in office, to sustain its current fixed/multiple forex regime.
On monetary policy, it said aggressive liquidity mop-up via persistent OMO issuances may be retained considering that FX rate will broadly drive policy actions.
On the government’s anti-corruption war, the company said efforts to stamp-out corruption will be sustained and the EFCC will continue to clamp down on looters and individuals with allegations of misappropriation of public funds.
Over the last three to four years, the implementation of TSA, whistleblower’s policy and the efficiency unit of the Ministry of Finance, by the administration has supported significant improvement in independent revenue and recoveries.
“While this will remain appealing to the poor masses, it may rein in discretionary spending by the elite, ultimately limiting the growth rate of aggregate spending in the economy, especially on activities in the services sector,” it said.
On security and social political environment, it said a major aspect of the socio-political environment that seems to have benefited a lot from President Buhari’s first 4-year is the war against insurgency.
If the voting pattern from the region is anything to go by, the massive re-election of the President by voters in Borno and Yobe (the most affected States) suggests that the perceived containment of Boko Haram activities by the Buhari government is paying off.
“Hence, we imagine that another four years in office is positive for relative peace and security in the North Eastern region of the country,” it stated.
By Adedapo Adesanya
Nigeria has received the first tranche of its $5 billion derivatives financing arrangement with the First Abu Dhabi Bank (FAB), the United Arab Emirates’ largest lender.
According to a Bloomberg report published on Friday, the federal government drew about $1.5 billion over the past two weeks through a Total Return Swap (TRS) transaction with the lender.
The report stated that Nigeria will provide naira-denominated securities valued at 133.3 per cent of the loan amount as collateral for the transaction, while international financial institutions continue to express concerns about the risks associated with such derivative-based financing structures.
The financing is expected to support the government’s debt management strategy by replacing more expensive borrowings while helping finance the country’s fiscal deficit.
The first tranche is priced at 395 basis points above the Secured Overnight Financing Rate (SOFR), rising to SOFR plus 400 basis points thereafter.
The transaction further expands Nigeria’s financial relationship with First Abu Dhabi Bank, which had earlier provided about $1.2 billion to support the construction of a section of the ongoing Lagos-Calabar Coastal Highway.
The swap deal has come with much scrutiny from critics and international organisations. Recall that the International Monetary Fund (IMF), after a consultation visit, warned Nigeria against the deal, noting that such transactions are often opaque and complex.
“Our view is that the transactions in these types of structures carry risks. Usually they are opaque, so the terms are not always very transparent when we reviewed these instruments across countries,” according to the IMF’s mission chief in Nigeria, Mr Christian Ebeke.
Mr Ebeke said Nigeria could instead issue eurobonds to finance its deficits or other means to raise funding, including on concessional terms.
The Senate in April gave its approval to the agreement put forward by President Bola Tinubu, who said his administration intends to use proceeds from the total return swap to refinance expensive debt and pay for infrastructure.
By Adedapo Adesanya
The Minister of Finance and Coordinating Minister of the Economy, Mr Taiwo Oyedele, yesterday clarified that the federal government is not increasing taxes but making efforts to raise the tax net.
Mr Oyedele made this remark on Thursday while receiving a delegation from the Chartered Institute of Taxation of Nigeria (CITN) at his office in Abuja.
He hailed the institute for introducing a National Tax Awareness Day and for supporting the current tax reforms of the federal government.
The minister charged the institute to double its effort in public enlightenment, stressing that many Nigerians still view taxation as a means for the government to take money from citizens.
He reiterated that the priority of the government is not to increase tax rates but to broaden the tax base by ensuring that all eligible taxpayers meet their obligations.
“We are still not getting enough revenue from taxes.
“It is not about increasing taxes but making sure that those who are supposed to pay taxes. We want to promote fairness in tax administration,” he said.
Nigeria is challenged by the inability to generate adequate revenue from taxation despite ongoing reforms, stressing that a significant number of eligible taxpayers have yet to fulfil their civic obligations.
He said the challenge facing the country was not necessarily about raising tax rates but ensuring that individuals and businesses that ought to pay taxes do so in a fair and transparent system.
The minister also commended the institute for supporting the federal government’s tax reform agenda and promoting public understanding of taxation, but urged it to intensify its advocacy efforts, noting that many Nigerians still harbour misconceptions about taxation.
According to him, many citizens continue to view taxation merely as a tool for the government to take money from the people rather than as a critical instrument for national development.
“We are still not getting enough revenue from taxes. It is not about increasing taxes, but making sure that those who are supposed to pay taxes. We want to promote fairness in tax administration,” he added.
Mr Oyedele stressed that if Nigeria succeeds in building an efficient and equitable tax system, the impact on infrastructure, public services and economic development would be transformative, challenging the institute to introduce annual awards for the country’s most tax-compliant individuals and organisations as a means of encouraging voluntary compliance and recognising responsible taxpayers.
By Modupe Gbadeyanka
Nigeria’s First Lady, Mrs Oluremi Tinubu, has given Nigerians business advice that may not involve a lot of money to start.
Speaking with newsmen recently, the wife of President Bola Tinubu said businesses like akara (fried bean cake), kulikuli (a crunchy snack from roasted peanuts or groundnuts) and roasted corn can be set up without breaking the bank.
She disclosed that to support her husband’s Renewed Hope agenda, she has provided funding packages to traders and others to the tune of N3.5 billion.
“To start akara business doesn’t take a lot of money. To start roasting corn and kuli-kuli doesn’t take much. We didn’t give them a loan; we gave it to them as a grant,” she stated.
She further said, “We’ve encouraged Nigerians as best as we could, what is within our hands, I have given, and I keep giving. Those are the things we’ve done.”
“I remember giving for TB (tuberculosis) when I heard of many TB cases; I gave N2 billion, to breast cancer, I gave N1 billion, and to [tackle] malnutrition, I gave N500 million.
“These are the things we’ve been doing to assist the government. So, we’ve had impact in agriculture, social investment, education (as scholarship and ICT training) and others. We are still open to doing more,” she disclosed.
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