Finance
Nigeria’s economic reform agenda loses steam as elections loom
LAGOS-As Nigeria’s President Goodluck Jonathan moves to seek re-election in five months, his reform agenda pursued for the past four years is gradually losing steam.
While Jonathan who was recently named as sole candidate for the People’s Democratic Party (PDP) in next year’s presidential election has already attained some goals since launching the transformation agenda in 2010, achievements have fallen short of expectation in most other areas.
There has been some movement on infrastructure (roads, rail), and investments have poured in, as multinationals expand operations in the country.
The major cities of Lagos and Abuja are booming and agriculture output is up, on new government policies that discourage imports.
However, the country ranks poorly on global indices. Red tape and corruption slow businesses down, especially at the ports. The power reforms have yet to improve lives, while only 31 percent of students passed Math and English in a recent high school final year exam, showing the rot in the education system.
Nigeria, now Africa’s largest economy, fell by seven places to 127th this year, on the World Economic Forum (WEF) Global Competitiveness report, as its institutions remain weak, with insufficiently protected property rights, high corruption, and undue influence, according to WEF.
The NSE-ASI is down year to date, even as other frontier markets soar, while the CBN struggles to defend the naira.
There is too much dependence on oil revenues for the Federal and States budget, as reforms to build counter-cyclical rainy day fiscal buffers slow.
“The weaker oil price, expected normalisation in US monetary policy in 2015 and uncertain pre-electoral political outlook, are likely to weigh negatively on the fortunes of the naira in coming months,” said Samir Gadio, “Head of Africa Strategy” at Standard Chartered Bank’s FICC research team.
“The drop in the oil price in recent weeks (to sub-USD 100 pbl levels in Sept) is certainly a concern, given the lack of fiscal buffer in Nigeria.”
Jonathan’s economic plan involves diversifying Africa’s largest economy beyond oil and gas.
In the second quarter of 2014, gross domestic product (GDP) increased 6.54 percent, surpassing the 5.4 percent recorded a year earlier, according to National Bureau of Statistics (NBS) data.
The non-oil sector drove most of that growth. Per capita gross national income rose to $3,001 last year, post rebasing pushing the country into middle income status.
Blackouts have however continued to be the norm, even after a privatisation exercise was concluded last year, in which companies including Transcorp, Sahara Power and Forte Oil Plc paid more than $3 billion for controlling interests in 15 power generators (Gencos) and distributors (Discos).
The country’s peak power generation averaged 2,206.4 megawatts on Friday, down from a peak of 4,000 megawatts reached in 2012, as gas shortages hit output.
Demand may be close to 20,000 megawatts, even as the transmission lines can only move 5,500 megawatts, less than a third of what the country needs to end the blackouts, according to the Power Ministry.
The seeming failure of the power privatisation exercise is a symptom of slowing reforms.
“The country can end these blackouts by simply liberalising gas prices and going to a willing buyer – willing seller model, based on market prices,” said a former head of the state owned oil company, the Nigerian National Petroleum Corporation (NNPC) speaking to BusinessDay anonymously.
Nigeria moved down nine spots to No. 147 in the World Bank’s “Doing Business 2014” report and was ranked 144 out of 177 countries on Transparency International’s Corruption Perception Index last year.
Nigeria’s declining perceptions are based on models and collection methodology that do not meet face validity, according to Anietie Effiong, an associate of the National Competitiveness Council of Nigeria (NCCN), set up by Jonathan to improve the economy’s efficiency and productivity.
“The reality is that as it is, the latest GCI does not tell Nigeria how competitive it really is, but how 106 respondents , sometimes personal assistants of CEOs , view Nigeria, and to a lesser extent, empirical (if sometimes antiquated) data,” said Effiong.
The country will run a post rebasing current account (C/A) surplus this year, estimated at five percent of GDP, compared to South Africa’s estimated current account deficit of 4.5 percent.
The budget deficit to GDP and public debt to GDP is estimated at 1 percent and 11 percent respectively.
Jonathan wants to improve home ownership, increase small business loans through a developmental Finance Institution, cut food imports by creating jobs in agriculture and spend $3.05 trillion over 30 years on a national infrastructure master plan.
However, he has to win an election first ,and analysts say his chances of re-election hinge on the ability to convince the population that touted reforms are not empty promises.
BUSINESSDAY-
Business
Nigeria pays US$4.9 billion on petrol subsidy in 2024- NNPCL
It was however noted by Biztellers.com.ng, that although subsidy is back in effect, the main reason for that is the increasingly weak state of the Naira and the country’s extreme dependence on products importation. Also unlike the previous subsidy era, where several oil marketers were getting free subsidy refunds for unverified product importation, this subsidy era is witnessing only one importer, the NNPCL, which in effect is the sole receiver of government subsidies.
Yemie ADEOYE
INSPITE of the official position of the Nigerian government that the controversial petrol subsidy is gone for good as announced by the President on assumption of office, the state owned Nigerian National Petroleum Corporation Limited, NNPCL has disclosed that petrol subsidy is still fully operational in Nigeria, although, under a different identity.
Umar Ajiya, Chief Financial Officer at the NNPCL, disclosed that it cost the company a staggering N7.8 trillion (US$4.9) to cover this price gap in the first seven months of 2024.
Rather than simply referring to these claims as subsidies, he stated that the company is merely managing the price difference in petrol imports on behalf of the federation, stressing that this should not be misconstrued as a return to subsidy payments.
This revelation has reignited discussions on whether the NNPC is indirectly offering subsidies, a concept typically defined as selling a product below its cost price.
Documents reviewed by Biztellers.com.ng showed that the term “subsidy” was used extensively in official correspondence between the NNPCL and the presidency, particularly in reference to the “shortfall.”
Recall that President Bola Tinubu reportedly approved NNPC’s request to utilize the 2023 final dividends due to the federation to offset these costs.
However, during a media briefing on Monday about the company’s 2023 audited financial statements, Ajiya refuted claims that the NNPC is involved in any subsidy scheme.
Ajiya further disclosed that the Nigerian government owes the NNPC N7.8 trillion ($4.9 billion) in subsidy-related debts for the period from January to July 2024.
In furtherance of his clarification to the News Agency of Nigeria (NAN), Ajiya insisted that no subsidy payments have been made to any marketer in the last nine years, citing the NNPC’s role as the sole importer of petrol under supply contracts.
He said, “In the last eight to nine years, NNPC Ltd. has not paid anyone a dime as a subsidy; no kobo has been disbursed by NNPC Ltd. in the name of subsidy. No marketer has received any payment from us for subsidy.”
“What has been happening is that we have been importing PMS, which has been landing at a specific cost price, and the government tells us to sell it at half price. So the difference between the landing price and that half price is a shortfall.
“And the deal is between the Federation and NNPC Ltd., to reconcile, sometimes they give us money, so there is no money exchanging hands with any marketer in the name of subsidy.”
Ajiya remained silent on how much of the $4.9 billion could have been remitted to the federation account if the NNPC had not been covering the “shortfall.”
It was however noted by Biztellers.com.ng, that although subsidy is back in effect, the main reason for that is the increasingly weak state of the Naira and the country’s extreme dependence on products importation. Also unlike the previous subsidy era, where several oil marketers were getting free subsidy refunds for unverified product importation, this subsidy era is witnessing only one importer, the NNPCL, which in effect is the sole receiver of government subsidies.
The Central Bank of Nigeria (CBN) has refuted claims of devaluing the.
Earlier reports suggested that the CBN had devalued the Naira, lowering its exchange rate from N631 to the dollar, compared to the previous day’s rate of N461.60 at the Importers and Exporters (I&E) window.
However, the Central Bank of Nigeria (CBN) released a statement on Thursday through its Acting Head of Corporate Communications, Dr. Isa Abdulmumin, categorizing the report as false information.
In the statement titled ‘CBN Has Not Devalued The Naira’, he said the attention of the apex bank was drawn to the news report by an Abuja based newspaper edition of June 1, 2023, titled “CB Devalues Naira To 630/51”.
However, the CBN stated categorically that the news report was replete with outright FALSEHOODS and destabilizing innuendos, ‘reflecting potentially willful ignorance of the said medium as to the workings of the Nigerian Foreign Exchange Market.’
“For the avoidance of doubt, the exchange rate at the Investors’ & Exporters (I&E) window traded this morning (June 1, 2023) at N465/USS1 and has been stable around this rate for a while.
“The public is hereby advised to ignore the news report by Daily Trust in its entirety, as it is speculative and calculated at causing panic in the market,” the CBN spokesman added.
He, therefore, advised media practitioners to verify their facts from the Central Bank of Nigeria before publishing in order not to misinform the public.
The interest rate in Nigeria has been raised to 18.5 percent, up by 0.5 percent, from 18 percent where it was pegged in March 2023.
The Central Banks of Nigeria’s (CBN) Monetary Policy Committee (MPC) resolved to this effect at its third meeting of 2023 in Abuja, on Wednesday.
Governor, CBN, Godwin Emefiele, made the disclosure in the communiqué of the MPC’s meeting, thereafter.
While engaging the media at the end of the two-day meeting, Emefiele, said the committee voted to keep the asymmetric corridor at +100 and -700 basis points around the MPR.
In the view of the MPC, rising inflation rate is traceable to the high energy cost and challenges around the supply chain, among others, which lie outside the corridors of the CBN.
Emefiele said, “The current trend in price development would continue to be monitored by the bank with greater collaboration with fiscal authority to address the drivers of inflation.”
Biztellers reports that the CBN had effected six consecutive interest rate increases, which has seen the rate move from 11.5 percent in March 2022 to 18.5 percent in May 2023.
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