- Uncertain Fiscal Policies: FDI Inflow To Remain Low
Since Nigeria ordered International Oil Companies (IOC) to pay US$20 billion in back taxes last month, analysts home and abroad have questioned the Federal Government approach to boosting its fiscal revenue.
To some, the move will scare Foreign Direct Investors interested in the Nigerian economy after what happened to MTN Nigeria in 2018 when the Federal Government ordered the telecoms company to pay $2 billion in taxes and two weeks later, the Central Bank of Nigeria directed the same company to refund $8.1 billion in ‘illegal repatriation.’
The company on Thursday announced its expected earnings per share for 2018, surprising it was below experts’ projections by almost 50 per cent. This didn’t go well with investors that subsequently reduced their holdings ahead of March 7, the scheduled date for the audited financial report. MTN shares dipped by 4.9 per cent on Friday.
Rob Shuter, MTN Group President and CEO, attributed the development to the challenges faced in Nigeria in 2018, its largest market.
While experts agreed that the Federal Government must increase tax revenue through increased participation of foreign and local investors in the country, “eliminating fiscal uncertainties and generally improving the ease of doing business in Nigeria is key,” expert at Anderson Tax said.
“It is essential that the government does not place undue reliance on the imposition of multiple taxes and levies on companies engaged in oil and gas activities, as the principal way of boosting its internally generated revenues,” Tolulope Adebowale of Anderson Tax said in its publication.
In recent years, Foreign Direct Investment has been falling year after year, when compared with the performance from previous years. In 2014, Nigeria earned $4.7 billion from FDI, that number quickly dropped to $3.1 billion in 2015. In 2016, the number surged to $4.4 billion but later declined by $900 million to $3.5 billion in 2017. The number has since dropped to $2.2 billion in 2018, the lowest in 13 years.
According to the CBN, Foreign Portfolio Investment accounted for over 70 per cent of the total foreign inflow in 2018, while Foreign Direct Investment accounted for less than 30 per cent.
Experts believed the uncertainties surrounding fiscal policies may further scare the few foreign investors interested in the economy in 2019 going by what is happening since the current administration decided to up tax revenue.
Analysts at Investors King Ltd said fixed income market will continue to attract investment since Federal Reserve won’t be raising interest rates any time soon and the Euro-area is experiencing economic slowdown even at zero interest rates. The focus would be on emerging economies.
The analysts expect FDI to remain weak as they do not anticipate a significant change in policies but agreed the CBN would have to maintain current monetary policy rate to sustain inflow.
“The economy was and is not really viable to encourage foreign investors to invest for a long term,” says Paul Aluko, a Research Analyst at MBC Securities Limited, Lagos.
Experts advised the Federal Government to create a business-friendly environment where foreign investors are not scared of sudden change in fiscal policies or business climate.
CBN Pays N14.35 Billion for 263,860 Meters to End Estimated Billings
The Central Bank of Nigeria (CBN) said it has disbursed a total sum of N14.35 billion to the Distribution Companies of Nigeria (DisCOs) for the payment of 263,860 meters under the National Mass Metering Programme (NMMP).
In November 2020, the Federal Government announced that it would make funds available for 1 million meters in the first phase of President Buhari Mass Metering Initiative at no cost to consumers.
Between November 2020 and January 2021, the Federal Government through the CBN has disbursed N14.35 billion.
However, according to the apex bank DisCOs must pay back the amount disbursed based on the previously agreed amortisation schedule.
“The facility disbursed is a loan that must be repaid by the DisCos on the basis of the previously agreed amortisation schedule. The repayment is to be deducted from payments made by consumers into the DisCos accounts with Deposit Money Banks (DMBs),” the CBN stated.
“The maximum tenor of the facility is 10 years but not exceeding 2030, while the moratorium on the principal amount is for a period not exceeding 24 months from the date of loan disbursement.”
A week ago, the Ibadan Electricity Distribution Company (IBEDC) announced it has commenced the distribution of 104,0000 free meters in Ibadan, Oyo State.
This, the IBEDC said was under the ongoing National Metering Scheme of president Muhammadu Buhari.
FG Borrows N2.36 Trillion from Capital Market in 2020
Mr. Oscar Onyema, the Chief Executive Officer, Nigerian Stock Exchange, said the Federal Government borrowed N2.36 trillion from the nation’s capital market in 2020.
The CEO disclosed this at the 2020 market recap/2021 outlook held on Tuesday.
He said the Federal Government issuances account for 92 percent of the total bond issued in the market in the year.
Onyema further explained that corporate organisations leveraged on low yield environment to expand and embark on debt refinancing, raising a total of N192 billion,
“Capital-raising activities in the fixed income market increased significantly in 2020. The NSE’s bond market capitalisation rose by 35.52 per cent from N12.92tn in 2019 to N17.50tn,” he said.
Onyema noted that “The year 2020 was indeed a historic one for global capital markets. Facing buffeting headwinds, world markets saw sharp swings and steep losses, but largely remained resilient and orderly amid rising uncertainty.
“For The Exchange, renewed investor optimism coupled with improved economic conditions and low fixed income yields, propelled a year end bull run. Of 93 global equity indices tracked by Bloomberg, the NSE All Share Index emerged the best-performing index in the world, surpassing the S&P 500 (+16.26 per cent), Dow Jones Industrial Index (+7.25 per cent) and other global and African market indexes, to post a one-year return of +50.03 per cent.”
Speaking on product results for the year, the CEO said, “The Nigerian equities market got off to a strong start in 2020, returning 10.4 per cent by the eighth trading session. By October, the equities market entered a much-awaited bull run.
“Buoyed by the formal declaration of the US president-elect, unattractive fixed income yields and better-than-expected corporate earnings, the NSE ASI recovered from Q1’20, to close the year at 40,270.72 (+50.03 per cent) and erase losses of -14.90 per cent recorded in 2019.
“During its remarkable year end run, the ASI gained 6.23 per cent in a single trading session which triggered a 30-minute halt of trading on all stocks for the first time since the NSE Circuit Breaker was introduced in 2016 to safeguard market integrity in periods of extraordinary volatility.
“At the close of the year, the NSE’s equity market capitalisation was up by 62.42 per cent, from N12.97tn in 2019 to N21.06tn in 2020 while market turnover saw an uptick of 7.25 per cent, from N0.96tn in 2019 to N1.03Tn in 2020.
“Although Initial Public Offering activity was mute, the value of supplementary issues increased dramatically from 2019, rising by 851.37 per cent to N1.42tn, from N148.77bn.
“Also noteworthy is that for the second consecutive year, equity market transactions were dominated by domestic investors who accounted for 65.28 per cent of market turnover by value (retail: 44.98 per cent; institutional: 55.02 per cent) while foreign portfolio investors accounted for 34.72 per cent.”
Airtel to Announce Financial Results for Nine Months Ended December 31, 2020 on 29 January 2021
Airtel Africa, one of the leading telecommunications companies in Africa, on Wednesday announced it will report its financial statements for the nine months ended December 31, 2020 on January 29, 2021.
The telecom giant disclosed in a statement signed by Simon O’Hara, Group Company Secretary.
The statement reads “Airtel Africa, a leading provider of telecommunications and mobile money services, with a presence in 14 countries across Africa, will announce its results for the nine months to 31 December 2020 on 29 January 2021.
“Management will host a conference call on the day of results for analysts and investors at 2:00pm GMT.
“Participants are requested to pre-register for the call by navigating to:
“Once registered, participants will receive a calendar invitation with the dial in details for the call.”
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