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SERAP Urged House of Reps To Reject Buhari’s Fresh $4B, €710M Loan Request

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SERAP- Investors King

Socio-Economic Rights and Accountability Project (SERAP) has urged the Senate President Dr Ahmad Lawan, and Speaker of House of Representatives Mr Femi Gbajabiamila to reject the fresh request by President Muhammadu Buhari to borrow $4 billion and €710 million until the publication of details of spending of all loans obtained since May 29, 2015 by the government.

President Buhari recently sought the approval of the National Assembly to borrow $4,054,476,863 billion and €710 million, on the grounds of “emerging needs.” The request was contained in a letter dated 24 August, 2021.

In an open letter dated 18 September 2021, and signed by SERAP deputy director Kolawole Oluwadare, the organization expressed “concerns about the growing debt crisis, the lack of transparency and accountability in the spending of loans that have been obtained, and the perceived unwillingness or inability of the National Assembly to vigorously exercise its constitutional duties to check the apparently indiscriminate borrowing by the government.”

SERAP said: “The National Assembly should not allow the government to accumulate unsustainable levels of debt, and use the country’s scarce resources for staggering and crippling debt service payments rather than for improved access of poor and vulnerable Nigerians to basic public services and human rights.”

According to SERAP, “Accumulation of excessive debts and unsustainable debt-servicing are inconsistent with the government’s international obligations to use the country’s maximum available resources to achieve progressively the realisation of economic and social rights, and access of Nigerians to basic public services.”

The letter, read in part: “The country’s public debt has mushroomed with no end in sight. The growing national debt is clearly not sustainable. There has been no serious attempt by the government to cut the cost of governance. The leadership of the National Assembly ought to stand up for Nigerians by asserting the body’s constitutional powers to ensure limits on national debt and deficits.”

“SERAP urges you to urgently propose a resolution and push for constitutional amendment on debt limit, with the intent of reducing national debt and deficits. This recommendation is entirely consistent with the constitutional oversight functions and spending powers of the National Assembly, and the country’s international anti-corruption and human rights obligations.”

“Indiscriminate borrowing has an effect on the full enjoyment of Nigerians’ economic and social rights. Spending large portion of the country’s yearly budget to service debts has limited the ability of the government to ensure access of poor and vulnerable Nigerians to minimal health care, education, clean water, and other human needs.”

“Should the National Assembly and its leadership fail to rein in government borrowing, and to ensure transparency and accountability in the spending of public loans, SERAP would consider appropriate legal action to compel the National Assembly to discharge its constitutional duties.

“The National Assembly under your leadership has a constitutional responsibility to urgently address the country’s debt crisis, which is exacerbated by overspending on lavish allowances for high-ranking public officials, lack of transparency and accountability, as well as the absence of political will to recover trillions of naira reported to be missing or mismanaged by the Office of the Auditor-General of the Federation.

“The National Assembly should stop the government from borrowing behind the people’s backs. Lack of information about details of specific projects on which loans are spent, and on loan conditions creates incentives for corruption, and limits citizens’ ability to scrutinise the legality and consistency of loans with the Nigerian Constitution of 1999 (as amended), as well as to hold authorities to account.

“SERAP notes that if approved, the country’s debts will exceed N35 trillion. The government is also reportedly pushing the maturity of currently-secured loans to between 10 and 30 years. N11.679 trillion is reportedly committed into debt servicing, while only N8.31 trillion was expended on capital/development expenditure between 2015 and 2020.

“Ensuring transparency and accountability in the spending of loans by the government and cutting the cost of governance would address the onerous debt servicing, and improve the ability of the government to meet the country’s international obligations to use maximum available resources to ensure the enjoyment of basic economic and social rights, such as quality healthcare and education.”

The letter was copied to chairmen of the Public Accounts Committees of the National Assembly.

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Economy

Nollywood, a Potential Growth Driver – Coronation Merchant Bank

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Drawing on data provided by the National Film and Video Censors Board (NFVCB), the National Bureau of Statistics (NBS) has released its report on Nollywood Movies Production for Q2 ‘21. Given that the sector’s performance is strongly linked to consumer confidence, trends within the industry can be regarded as a sound indicator of private consumption.

The Nigerian film industry is the largest in Africa in terms of value, number of annual films, revenue and popularity. It is also globally recognised as the second largest film producer in the world in terms of output. Based on the NBS report, Nollywood produced 635 movies in Q2 ’21 compared with 416 in Q1 ’21. This points towards growth of 53.9% q/q and 1.4% y/y. We note that during the period under review, Lagos had the highest number of movies produced with 234 movies, followed by Abuja (196 movies). However, Benin and Port-Harcourt recorded the least movies produced in Q2 ’21 with 7 movies each.

The national accounts from the NBS show that the entertainment industry grew by 1.2% y/y in Q2 ’21. This is compared with a contraction of -1.1% y/y recorded in the previous quarter. However, the sector’s contribution to total GDP declined from 0.3% in Q1 ’21 to 0.2% in Q2 ’21.

The global film industry suffered setbacks during the pandemic, leading to the halt of film production and the closure of cinemas. In Nigeria, several film shoots were placed on hold or scrapped and professionals across the industry struggled to earn wages. Industry sources suggest that the estimated losses for the sector have reached c. USD9m and that at least 50,000 jobs have been lost.

However, there has been a considerable pickup in activity following the easing of lockdown restrictions across the country. Another challenge faced by the film industry in Nigeria is the significant loss of revenue that arises from the illegal exploitation of intellectual property. A World Bank report estimates that for every legitimate copy (of a Nigerian film) sold, nine others are pirated.

Furthermore, a United Nations Educational, Scientific and Cultural Organization (UNESCO) report estimated that the country lost USD3bn in revenue from creative works in 2019 due to digital piracy.

Funding is another challenge in the Nigerian film industry. However, over the past ten years, Nigerian filmmakers and entrepreneurs have started to gain access to new types of funding from different sources such as the federal government, international organisations, as well as private investors. We recall that in 2019, the Federal Government introduced the Creative Industry Finance Initiative (CIFI), where players within the film industry such as production and distribution companies can potentially access as high as N500m, at a maximum interest
rate of 9%, with an allowance of up to ten years for loan repayment.

As a purely economic process, gentrification in the film industry requires that the industry be formalised. In Bollywood, the establishment of film academies and corporatisation of the industry are steps that transformed the Indian film industry.

The recognition of filmmaking as an approved industrial activity in India led to structural changes that have helped to reshape the industry. However, we note that the presence of investors prompted the transformation of the industry. For Nollywood, there is the need for more government support through its regulatory agencies.
The role of the government as an enabler is important, as its proactive stance on some of the challenges that have hindered growth within the industry should boost investors’ confidence.

The Nigerian film industry is a low-hanging fruit for Nigeria with regards to the African Continental Free Trade Area (AfCFTA) agreement. The agreement is likely to boost Nigeria’s film industry market, as the agreement is expected to expand consumer market on the back of the combined population of 1.3 billion Africans.

Based on a recently released UNESCO report, it is estimated that Africa’s film industry contributes at least USD5bn to Africa’s total revenue annually. Furthermore, the second phase of AfCFTA implementation which focuses on intellectual property rights should have a positive impact on the film industry, as one of the objectives is to create a single, unified jurisdiction for the administration of intellectual property rights in Africa.

The expectation is that increased certainty, stability and confidence in intellectual property rights would encourage creativity and innovation across the continent. For Nigeria’s film industry to maximise the opportunities within the AfCFTA, structural issues need to be addressed. In addition, investments in broadband (internet) infrastructure and creative content could further bolster the growth of the film industry in Nigeria. Furthermore, strengthening the creative industry (Nollywood inclusive) will assist with easing pressure on Nigeria’s unemployment rate as the industry is capable of providing jobs for skilled job seekers. In addition, the industry is well-positioned to boost fx earnings via exports.

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IMF Staff Completes Virtual Mission to Lesotho

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IMF

Lesotho has been struggling with the fallout from the pandemic and a sharp decline in revenues from the Southern African Customs Union (SACU); The authorities and the mission team made significant progress in their discussions on policies that could be supported by the IMF under a financial arrangement.

A team from the International Monetary Fund (IMF), led by Mr. Aqib Aslam, conducted a series of virtual missions, most recently from September 7 to October 15, 2021, to discuss the authorities’ economic and financial program and their request for IMF financial support.

The authorities and the mission team had productive discussions on policies that could be supported by the IMF under a financial arrangement. The program under discussion would aim to support a durable post-pandemic recovery, restore fiscal sustainability, strengthen public financial management, and ensure the protection of the most vulnerable. Other key structural reforms to be implemented include strengthening governance and fostering private sector investment to spur inclusive growth and employment over the medium term.

At the end of the visit, Mr. Aslam issued the following statement:

“Lesotho has been experiencing twin economic shocks resulting from the pandemic and a decline in revenues from the Southern African Customs Union (SACU) that have proved to be highly volatile. Public expenditures have been increasing while SACU revenues were buoyant but have not adapted to their decline and the limited growth in other revenue sources. At the same time, the economy has been in recession since 2017. The resulting fiscal and external imbalances, if left unaddressed, would continue to put pressure on international reserves and lead to government payment arrears.

“Discussions emphasized the need to support a robust and inclusive post-pandemic recovery. To this end, the mission discussed with the authorities a number of options for containing the fiscal deficit to a level that is sustainable and can be fully financed. The team noted that the adjustment should be focused on expenditure measures while boosting poverty-reducing social spending to protect the most vulnerable. Complementary actions include efforts to broaden financial access and inclusion; strengthen financial supervision; modernize the legal frameworks for bank lending, business rescue, and restructuring, and digitalize payment systems.

“On the fiscal front, efforts should focus on addressing the public sector wage bill, which is one of the largest in the world compared to the size of the economy; saving on public sector and official allowances; better targeting education loans; streamlining the capital budget and initiating gender-responsive budgeting. Discussions also considered measures to modernize tax policy and improve domestic revenue mobilization. The mission noted the need to address long-standing PFM issues to ensure the provision of reliable fiscal data, the integrity of government systems, and the sound use of public resources.

“Significant progress was made during the visit, and discussions will continue in the coming weeks. If agreement is reached on policy measures in support of the reform program, an arrangement to support Lesotho’s economic program would be proposed for the IMF Executive Board’s consideration.

“The IMF team thanks the authorities for their hospitality and constructive discussions.”

The IMF mission met with Prime Minister Majoro, Minister of Finance Sophonea, Central Bank Governor Matlanyane, and other senior government officials. The team also met with representatives of the diplomatic community, private sector, civil society, and multilateral development partners.

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Nigeria’s Inflation: Prices Increase at Slower Pace in September 2021

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Consumer Confidence

Prices of goods and services moderated further in Africa’s largest economy, Nigeria in the month of September 2021, the latest report from the National Bureau of Statistics (NBS) has revealed.

Consumer Price Index (CPI), which measures the inflation rate, grew at 16.63 percent year-on-year in September, slower than the 17.01 percent rate achieved in the month of August.

On a monthly basis, inflation rose by 1.15 percent in September 2021, representing an increase of 0.13 percent from 1.02 percent filed in August 2021.

Food Index that gauges price of food items grew at 19.57 percent rate in the month, below the 20.30 percent rate recorded in August 2021.

The increase in the food index was caused by increases in prices of oils and fats, bread and cereals, food product N.E.C., fish, coffee, tea and cocoa, potatoes, yam and other tuber and milk, cheese and egg.

However, on a monthly basis, the price of food index rose by 0.20 percent from 1.06 percent filed in August 2021 to 1.26 percent in September 2021.

The more stable twelve months average ending in September 2021 revealed that prices of food items grew by 0.21 percent from 20.50 percent in August to 20.71 percent in September.

Prices of goods and services have been on the decline in Nigeria in recent months, according to the NBS. However. on masses are complaining of the persistent rise in prices of goods and services across the nation.

Some experts attributed the increase to Nigeria’s weak foreign exchange rate given it is largely an import-dependent economy.

 

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