Amidst several projections of challenging economy in the year 2016 by many economists and the International Monetary Fund, IMF, the National Bureau of Statistics, NBS, has outlined its own position on all key economic indicators, not just for 2016 but also in the next four years to 2019.
The projections covers the annual growth rate of real Gross Domestic Products, GDP, annual Inflation rate, and the annual growth rate of the Value of Total Trade, VTT.
Gross Domestic Product, GDP
In a report released last weekend NBS said “growth in 2016 is expected to be tepid at best”. Economic tepidity is one characterised by dull activities in key market segments and performance areas. NBS’ prediction was based on the happenings in the economy recently especially in 2015 marked by huge negative impact of its dependency on oil revenue amidst price shocks.
It noted “years prior to 2015, the Nigerian economy was largely supported by the non-oil sector as supply disruptions hampered oil output. In 2015 however, various factors including political uncertainty prior to and six months after the elections, and intermittent supply shocks of refined petroleum products, and others weighted on both oil and non-oil output. The entire economy took a hit”.
Consequently GDP which is the key indicator of economic health of a country was on the downside, declining in the first and second quarter with marginal recovery in the third quarter 2015.
However, NBS stated that “in 2016, the economy is expected to grow by 3.78 per cent, as output in the oil and non-oil sectors are expected to perform marginally better relative to 2015”. According to the Bureau, Federal Government’s main economic research agency, “the declines in prices of crude oil and related refined products give the Nigerian government the opportunity for some potential savings as subsidies payments on PMS and other refined products may be diverted into more productive aspects of the economy”.
It noted that “the government has taken a step further to repeal subsidies on kerosene products. As it stands there are no subsidies on PMS and this should bode well for government coffers going forward. “In the near term, support to the non-oil sector is expected to come through initiatives by the Central Bank of Nigeria, CBN, and the Government at Federal and State levels.
“One of such initiatives is the N300 billion Naira export stimulation fund by the CBN. Increased efforts by State governments to boost internally-generated revenue, when combined with more prudent and targeted infrastructure spending, is likely to lead to better output performance”.
Going forward NBS said the 2017 to 2019 period is expected to reap the benefits of the extra N1.6 trillion into capital expenditures in the 2016 budget, adding that in particular, plans by the government authorities to increase power supply by developing critical infrastructure to transport gas to the power plants in order to add 2,000 mega watts to the country’s stock of power within the next 12 to 15 months will have multiplier effects on both the manufacturing and services sectors.
NBS stated “other measures expected to spur growth include fiscal measures such as the implementation of the Treasury Single Account, TSA, improvements in tax collection efforts and the creation of an Efficiency Unit in the Federal Ministry of Finance to ensure that scarce resources are adequately deployed. With hopes on the salutary effects of these measures NBS said over the 2017 to 2019 period, growth is expected to average 5.42 per cent.
Another key economic variable examined and projected by NBS is the inflation rate. In this report NBS has projected that inflation may rise to 10.16 by end of 2016.
But it also indicated a gradual decline such that over the 2017 to 2019 period, inflation is expected to average 9.01 per cent. NBS’s outlook for the previous year predicted that curbing inflation would be harder to achieve as a result of the devaluation of the Naira, which occurred in November 2014. Indeed the first half of the year recorded more macroeconomic volatility as the headline rate, year-on-year, recorded a wider range relative to the second half of the year.
In the Second half of the year speculative pressure on the Naira compounded supply shocks exhibited in the first half of the year. Though administrative measures by the CBN helped curb some inflationary pressure, according to NBS, speculative pressure on the Naira is likely to exist in 2016 in light of the current state of foreign reserves.
The Bureau noted, ‘’while administrative measures will help provide some cover, the downside risk of such measures is that by making imported goods more difficult to obtain, they increase the price of such goods, leading to higher inflation. “We expect that the Central Bank’s adjustment of the foreign exchange management framework will be steady in the year and will thus mean a gradual easing in prices beyond 2016”.
Value of Total Trade
2015 saw a decline in both the values of imports and exports. Exports were weighed upon by the decline in the price of crude, while overall sluggish growth as well as foreign exchange restrictions weighted on the value of imports. NBS stated that “going forward the relative lower price of the Naira is expected to result in cheaper prices of non-oil exports, and again curb increases in imports. “Nevertheless, Value of Total Trade is forecast to increase on the margin, increasing by 2.41 per cent as Imports increase by 2.88 per cent and exports increase by 2.16 per cent.
“Beyond 2016, a stabilization in oil prices while not expected to reach 2014 levels in the medium term in combination with a more competitive economy is expected to yield a rebound in both imports and exports.
“Total Trade is projected to increase by 2.41 per cent in 2016, and grow by an average 15.62 per cent yearly over the forecast period 2017 to 2019”.
Nigeria Borrows $4 Billion Through Eurobonds as Order Book Peaked at $12.2 Billion
The Federal Government of Nigeria has raised a fresh $4 billion through Eurobonds, according to the latest statement from the Debt Management Office (DMO).
Nigeria had set out to raise $3 billion but investors oversubscription peaked at $12.2 billion, enabling the Federal Government to raise $1 billion more than the $3 billion it announced.
DMO said “This exceptional performance has been described as, “one of the biggest financial trades to come out of Africa in 2021” and “an excellent outcome”.
Bids were received from investors in Europe, America, Asia and several local investors. The statement noted that the quality of investors and the size of the Order Book demonstrated confidence in Nigeria.
The Eurobonds were issued in three tranches, details, namely seven years–,$1.25 billion at 6.125 per cent per annum; 12 years -$1.5 billion at 7.375 per cent per annum as well as 30 years -$1.25 billion at 8.25 per annum.
The DMO explained that the long tenors of the Eurobonds and the spread across different maturities are well aligned with Nigeria’s Debt Management Strategy, 2020 –2023.
The Eurobonds were issued as part of the New External Borrowing stipulated in the 2021 Appropriation Act. DMO noted that the $4 billion will help finance projects state in the 2021 budget.
Nigeria’s total debt stood at $87.239 billion as at March 31, 2021. However, with the $4 billion new borrowing, the nation’s debt is now $91.239 billion. A serious concern for most Nigerians given the nation’s weak foreign revenue generation and rising cost of servicing the debt.
CIBN Banking and Finance Conference 2021: Structural Transformation and Growth
Today we highlight one of the sessions, ‘Economic Recovery’, at the recently concluded CIBN Banking and Finance conference. This was a hybrid event in Abuja, Lagos and partially virtual last week. The Covid-19 disruptions have created demand and supply shocks in the global system while unlocking new opportunities for growth.
Given the pre-existing financing challenges and growing spending needs, many developing countries are in dire need of financial support. As a result of the pandemic, the financing gap for the sustainable development goals increased by 70% (over USD4.2bn). The speaker on this session, Amina J. Mohammed, Deputy SecretaryGeneral of the United Nations and Chair of the United Nations Sustainable Development Group focused on structural transformation, technology, finance and sustainability.
Recent developments such as the allocation of the USD650bn in Special Drawing Rights (SDR) were highlighted during the session. Although the SDR offers improved liquidity into the system, Africa is set to receive only USD32.2bn (or 6.4% of the total amount). Therefore, it is important that the funds are channeled towards well-targeted sectors that can contribute to sustainable development.
The banking and finance sector plays a crucial role. The Africa Continental Free Trade Area (AFCFTA) agreement offers an opportunity for the financial sector to work within a continental market of 1.2 billion people. According to Amina J. Mohammed, three main actions areas will reshape the financial sector and support stronger recovery.
The first, better customer engagement with a dynamic range of relevant products and services that go beyond bank-based financing mechanisms and offer innovative financial products tailored to specific needs of business ecosystems. Second, the adoption of new operating models to drive efficiency and inclusion. Third, a deliberate focus on enabling sustainable development investing.
Furthermore, Nigeria’s banking and finance industry is well positioned to drive specific UN sustainable development goals such as inclusive and affordable credit, especially for micro, small and medium-sized enterprises. The industry can also provide support towards climate change.
Technology also featured in the discussion points. Undoubtedly, technology is a catalyst for growth across economies and the pandemic has further exposed the deficit within the sector across developing countries. Investments in digital infrastructure need to be rapidly expanded and scaled up to boost socio-economic development.
The speaker commended the FGN’s efforts on its push towards sustainable economic recovery. Some policy and regulatory reforms highlighted include, regulation of fintechs and related services to strengthen payment systems and regulate data protection; the green bonds which Nigeria first issued in 2017 in support of green projects, including solar energy and the modernisation of the Nigerian stock exchange that has given rise to a new operational structure and leadership.
These are laudable steps. However, we note that there is still room for improvement. To achieve double-digit GDP growth and sustainable development, structural transformation should remain on the FGN’s priority list.
FG Plans To Deliver 15 Projects Across The Country With $4B Foreign Loans
Nigeria’s Presidency has explained that a total of 15 projects, spread across the six geo-political zones of the country, are to be financed with more than $4 billion from multilateral institutions.
Malam Garba Shehu, Senior Special Assistant to the President on Media and Publicity stated on Saturday in Abuja that the loan is under the 2018-2021 medium-term (rolling) external borrowing plan.
He revealed that President Muhammadu Buhari had already requested the Senate to approve sovereign loans of $4.054billion and €710million as well as grant components of $125million for the proposed projects.
He quoted the letter by the president as saying that the sovereign loans will be sourced from the World Bank, French Development Agency (AFD), China-Exim Bank, International Fund for Agricultural Development (IFAD), Credit Suisse Group and Standard Chartered/China Export and Credit (SINOSURE).
He said: “The President’s request to the Senate listed 15 proposed pipeline projects, the objectives, the implementation period, benefiting states, as well as the implementing Ministries, Departments and Agencies (MDAs).
“A breakdown of the Addendum to the Proposed Pipeline Projects for the 2018-2021 Medium Term (rolling) External Borrowing Plan shows that the World Bank is expected to finance seven projects including the $125million grant for ‘Better Education Services for All’.’’
According to him, the Global Partnership for Education grant is expected to increase equitable access for out-of-school children and improve literacy in focus states.
He expressed the hope that the grant, which would be implemented by the Federal Ministry of Education and the Universal Basic Education Commission (UBEC), would strengthen accountability for results in basic Education in Katsina, Oyo and Adamawa States.
Other projects to be financed by the World Bank, according to Shehu, are the State Fiscal, Transparency, Accountability and Sustainability Programme for Results as well as the Agro-Processing, Productivity, Enhancement and Livelihood Improvement Support Project.
He said the benefiting states for the agro-processing project included, Kogi, Kaduna, Kano, Cross River, Enugu and Lagos with the Federal Ministry of Agriculture and Rural Development as the implementing ministry.
The presidential aide stated that the objective of the project was to enhance the agricultural productivity of small and medium-scale farmers and improve value addition along priority value chains in the participating states.
Shehu added that the World Bank would also be financing the Nigeria Sustainable Water Supply, Sanitation and Hygiene (WASH) project in Delta, Ekiti, Gombe, Kaduna, Katsina, Imo and Plateau States, for the next five years.
According to him, the project, when completed, is expected to improve rural water supply, sanitation and hygiene nationwide towards achieving Sustainable Development Goals (SDGs) for water supply and sanitation by 2030.
“Under the external borrowing plan, the World Bank-supported projects also include Nigeria’s COVID-19 Preparedness and Response Project (COPREP), under the supervision of the Federal Ministry of Health and Nigeria Centre for Disease Control (NCDC).
“The project, which has an implementation period of five years, will respond to threats posed by COVID-19 through the procurement of vaccines.
“Furthermore, no fewer than 29 states are listed as beneficiaries of the Agro-Climatic Resilience in Arid Zone Landscape project, which is expected to reduce natural resource management conflicts in dry and semi-arid ecosystems in Nigeria,’’ he said.
He gave the names of the benefiting states for the project to be co-financed by the World Bank and European Investment Bank (EIB) to include: Akwa Ibom, Borno, Oyo, Sokoto, Kano, Katsina, Edo, Plateau, Abia and Nasarawa.
Others are; Delta, Niger, Gombe, Imo, Enugu, Kogi, Anambra, Niger, Ebonyi, Cross River, Ondo, Kaduna, Kebbi, Jigawa, Bauchi, Ekiti, Ogun, Benue, Yobe and Kwara.
He said the World Bank would also be funding the Livestock Productivity and Resilience project in no fewer than 19 states and the Federal Capital Territory (FCT) while the China EXIM Bank is expected to finance the construction of the branch line of Apapa-TinCan Island Port, under the Lagos-Ibadan Railway modernisation project.
Shehu said: “The French Development Agency will finance two projects, which include the National Digital Identity Management project and the Kaduna Bus Rapid Transport Project.
“The digital identity project will be co-financed with World Bank and EIB.
“The Value Chain Development Programme to be financed by IFAD and implemented in Anambra, Benue, Ebonyi, Niger, Ogun, Taraba, Nasarawa, Enugu and the Kogi States will empower 100,000 farmers, including over 6,000 and 3,000 processors and traders, respectively.
“The loan facility to be provided by European ECA/KfW/IPEX/APC will be spent on the construction of the Standard Gauge Rail (SGR) linking Nigeria with Niger Republic from Kano-Katsina-Daura-Jibiya-Maradi with branch to Dutse.
“The specific project title, Kano-Maradi SGR with a branch to Dutse, has an implementation period of 30 months and will be implemented by the Federal Ministry of Transport.
“The Chinese African Development Fund through the Bank of China is expected to provide a loan facility of $325 million for the establishment of three power and renewable energy projects including solar cells production facility Phase 1 & II, electric power transformer production, Plants 1, II, III and high voltage testing laboratory.
“The National Agency for Science and Engineering Infrastructure (NASENI) will implement the project aimed at increasing local capacity and capability in the development of power and renewable energy technologies and infrastructure,’’ he further disclosed.
Shehu revealed that Credit Suisse would finance major industrialization projects as well as micro, small and medium enterprises schemes to be executed by the Bank of Industry.
He said the SINOSURE and Standard Chartered Bank would also provide funds for the provision of 17MW Hybrid Solar Power infrastructure for the National Assembly (NASS) complex. “The project, with an implementation period of five years, is expected to address NASS power supply deficit and reduce the higher overhead burdensome cost of running and maintaining fossil fuel generators (25MW installed capacity) to power the assembly complex,’’ he added.
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