Economy
Why the Nigerian Economy Requires Immediate Reforms
Not too long ago, Bola Ahmed Tinubu won the presidential election. He will take over the presidency of Nigeria in May 2023 and will have the difficult challenge of reviving the weak Nigerian economy by implementing many crucial changes.
GDP Growth Rate
The National Bureau of Statistics’ latest data on Nigeria’s Gross Domestic Product (GDP) shows a decrease in the annual GDP growth rate to 3.10% in 2022, compared to 3.40% in 2021. However, in the 4th quarter of 2022, the economy grew by 3.52%, in contrast to the 2.25% in the previous quarter.
Non-oil sectors were responsible for most of the growth. More precisely, 95.66%, while Nigeria’s oil sector contributed 4.34%. Daily oil production increased to 1.34 million barrels per day in Q4, up from the previous quarter’s 1.20 million barrels. However, it is still lower than the 1.50 million barrels per day recorded in the same quarter of 2021.
The services sector was also one of the main reasons for growth, contributing 56.27% to the GDP in the 4th quarter of the year.
Furthermore, the information and communication sector also played a significant role. It caused a 16.22% growth in the 4th quarter, compared to 15.35% in the 3rd quarter and 15.21% in the 4th quarter of 2021.
Another sector that helped with the GDP growth was the trade sector. It added 13.20% to the GDP in Q4, higher than the 12.45% in Q3. Although the sectors mentioned above had a positive effect on the GDP, there are still some sectors that lowered it.
Agriculture’s contribution to the GDP in the 4th quarter was 24.90%, a bit lower than the previous quarter’s 27.55%. Severe flooding across the country significantly set back agriculture, causing the sector to record a 0.94% decrease.
Manufacturing’s contribution to real GDP in 2022 was 8.40%, lower than 15% in 2021. So, the new president can work on expanding labour productivity through education to improve the country’s GDP.
Socio-Economic Issues
Mrs Zainab Ahmed, the Minister of Finance, Budget, and National Planning, mainly worries about the government’s ability to fund important programs due to low tax compliance among Nigerians. In the past, citizens paid taxes, but this changed since Nigeria became an oil-based economy. But, perhaps quite surprisingly, Nigeria’s gambling industry could provide a good source of revenue as it is relatively advanced compared to other African countries.
In general, governments tax the gambling industry to generate revenue, which also applies to Nigeria. However, with the online gambling world remaining largely unregulated in Nigeria (as well as in the vast majority of African countries), Nigeria is missing out on a significant potential source of income, not to mention that Nigerian citizens gambling online remain primarily unprotected due to the lack of regulation in the country.
With no deposit bonuses and other enticing offers brought about by the rise of online gambling attracting more and more players each year, it’s crucial to address the problem of the lack of legislation in this sector – for both players’ and the country’s sake.
And although tax collection has increased significantly from N6 trillion in 2021 to N10 trillion in 2022, the government still needs to address the growing expenditure that outpaces revenue growth by almost double annually.
Improving the Transmission Infrastructure
Power transmission is a huge issue for Nigerian citizens. Despite installing almost 13 GW of grid power-producing capacity, only an average of 3.4 GW reaches customers.
According to Prof. Kingsley Moghalu, the next government must increase revenue and address waste and corruption in governance by bringing in competent professionals to manage the economy. In addition, the new president must take direct ownership and leadership of the power sector, and mandate key players, to enhance transmission infrastructure.
The CEO of Proton Energy, Mr Oti Ikomi, emphasizes the need for a single individual who is accountable and takes instructions from the president, who must take ownership and not just hold a titular position. This individual must have technical, administrative, and supervisory responsibilities and meet regularly with the president.
He cited the example of Egypt, where the President had weekly meetings, which improved the transmission infrastructure. He added that Siemens Energy, a giant global energy corporation, is willing to work with Nigeria, but the country must also be ready to expedite things.
Domestic Debts
Dr Baba Musa, the Director-General of the West African Institute for Financial and Economic Management, finds Nigeria’s large debt a major challenge. He highlights the need to remove fuel subsidies and increase revenue through innovative means, such as cancelling tax relief.
Dr Musa also emphasizes the importance of spending only on essential items until revenue improves. He calls for coordination between the fiscal and monetary authorities and suggests evaluating the quality of fiscal spending.
In contrast, Mrs Zainab Ahmed states that the main issue with the Nigerian economy is the lack of ability to generate sufficient revenue rather than the current debt situation. Therefore, domestic revenue needs to be increased to reduce reliance on borrowing.
All in all, the new Nigerian president, Bola Ahmed Tinubu, must tackle the various economic challenges by implementing critical reforms that will ensure sustainable recovery.
The president must prioritize fiscal management, establish a unified and stable market-based exchange rate, and put an end to fuel subsidies. These measures are necessary to navigate the country toward economic prosperity.
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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