₦airaland Forum

Stakeholders including analysts and economists are highlighting areas where the new Nigerian government should focus to generate quick-wins for the economy.

This follows a groundswell of opinion that President Muhammadu Buhari is lacklustre and slow off the blocks after 30 days in office.

Investors had hoped for a rally after smooth elections in March ended uncertainties about political risk in Africa’s biggest economy.

However worries over the government’s finances and the continued slide in the naira (NGN) have spooked investors.

“Reform priorities include a probable doubling of the rate of VAT to 10 percent in order to boost state government revenue, as well as some form of fuel subsidy adjustment,” Standard Chartered Bank said in a June 24 research note approved by chief economist, Marios Maratheftis.

“With a fixed exchange rate, FX reserves rather than the NGN bear the brunt of any external shock, hurting Nigeria’s creditworthiness, and potentially raising the cost of any external borrowing.”

The organised private sector (OPS) on its part has warned that the nonpayment of workers salaries by some states of the federation is a threat to the national economy.

The OPS observes that the purchasing power of Nigerians has been reduced by this trend, adding that it has adverse effects on national output.

Consequently, they argue that the low purchasing power of consumers of goods and services, resulting in lower sales of goods by manufacturers is becoming evident in factories run by their members.

They further argue that indications are rife that companies currently battling with absence of supportive infrastructure amid dwindling sales and low capacity utilisation, may resort to retrenchment of workers in order to keep afloat.

Nigerian sovereign bond yields increased by more than 10 basis points along the curve on Monday, with the most liquid five-year bond yield climbing 12 basis points to 14.71 percent, and the 10-year benchmark yield climbing 10 basis points.

Traders said investors are worried about the impact of a weaker currency on inflation and a possible rise in government borrowing.

The previous (Jonathan) administration proposed to borrow N502 billion in 2015 Federal budget. However 71.6 percent of this amount had been issued as at April 2015.

The Federal Government owes more than N2 trillion in due obligations, including N800 billion ($4 billion) in contractor arrears, N204 billion ($1 billion) in subsidy arrears, and N1 trillion ($5 billion) in JV cash call arrears, according to documents seen by BusinessDay.

The new government can raise money by selling down its stake in the JVs to 49 percent (from 55 percent currently); similar to the same stake the Nigerian government has in NLNG, according to Austin Avuru, CEO of Lagos-based Seplat.

“Movement by the government to a deregulated downstream oil sector will mean that by 2017 when the Dangote refinery comes on stream, Nigeria should have three billion standard cubic feet (Scf) a day of gas production and 1.1 million refining capacity. It will be a completely different economy then,” Avuru said.

Analysts say near-term, the constrained Foreign Exchange (FX) availability also exerts a cost on the real economy, adding to uncertainty and delaying investment activity.

A decision to clear the “substantial” backlog of unmet dollar demand is vital to economic growth going forward, according to Peter Amangbo, Group Managing Director and CEO of Zenith Bank.

Nigeria’s currency traded as low as N226 to the dollar on the parallel market on Monday, down 2.7 percent since the Central Bank of Nigeria (CBN) unveiled new foreign exchange rules designed to conserve dwindling reserves, traders said.

“There must be adjustments to the current FX levels,” Stephen Onasanya, Group Managing Director and CEO of First Bank Plc, said.

“Companies have naira but no FX to buy.’’

Other areas of quick economic wins for the new government include full implementation of the single treasury account, fiscal and monetary policy co-ordination, and a quick resolution of the state governments fiscal crises to help boost domestic consumption.

Without a resolution, banks will become somewhat careful in lending and any new lending might come at a relatively expensive price to the state governments, according to Abiodun Keripe, head, Research and Strategy at Elixir Investment Partners Ltd.

“A more long-term solution to this challenge will be for state governments to deepen their IGRs while having limited exposure to borrowings,” Keripe said.

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Nice If true

Yes

The Federal Government owes more than N2 trillion in due obligations, including N800 billion ($4 billion) in contractor arrears, N204 billion ($1 billion) in subsidy arrears, and N1 trillion ($5 billion) in JV cash call arrears, according to documents seen by BusinessDay.


I remember many of commentators on the Go and Die Osho lying thread about NNPC N8.1T crying over NNPC's withholding. I hope this JV cash arrears of $5B stands out to them. Also this $5B arrears is not correct, the IOCs say is almost 3 times this number.

atlwireles:
The Federal Government owes more than N2 trillion in due obligations, including N800 billion ($4 billion) in contractor arrears, N204 billion ($1 billion) in subsidy arrears, and N1 trillion ($5 billion) in JV cash call arrears, according to documents seen by BusinessDay.


I remember many of commentators on the Go and Die Osho lying thread about NNPC N8.1T crying over NNPC's withholding. I hope this JV cash arrears of $5B stands out to them. Also this $5B arrears is not correct, the IOCs say is almost 3 times this number.

I hope you know that these were accumulated during GEJ's tenure?

shachris:
I hope you know that these were accumulated during GEJ's tenure?

How old are you, if I may ask? Go and review the history of Nigeria's JV cash arrears. When in the last 30 years has NNPC met their JV investment requirement.

atlwireles:
How old are you, if I may ask? Go and review the history of Nigeria's JV cash arrears. When in the last 30 years has NNPC met their JV investment requirement.

One question, Was the contractor arrears and subsidy arrears there when OBJ handed over to GEJ and Yaradua?

shachris:
One question, Was the contractor arrears and subsidy arrears there when OBJ handed over to GEJ and Yaradua?

so, you think governments handover to new governments with zero liabilities on their balance sheet? You are an APC e-warrior, spend more time educating yourself on government finances, pick anytime period since 1979. Your questions will be answered.

atlwireles:
so, you think governments handover to new governments with zero liabilities on their balance sheet? You are an APC e-warrior, spend, more time educating yourself on government finances, pick anytime period since 1979. Your questions will be answered.

Dullards follow after their President Buhari aka baba go slow

atlwireles:
so, you think governments handover to new governments with zero liabilities on their balance sheet? You are an APC e-warrior, spend, more time educating yourself on government finances, pick anytime period since 1979. Your questions will be answered.

how much liability did OBJ hand over to yaradua? How much is GEJ handing over to PMB?

This is not about party affairs man. These are affairs that would affect me, you and our children to come.

scribble:
Dullards follow after their President Buhari aka baba go slow

clueless denizens of an ogogoro distilling fisherman. Simple question you cannot answer.

Another avenue for APC e-warriors and PDP e-warriors to start causing rifts and chaos. Jobless gays @ the trolls above me

shachris:
clueless denizens of an ogogoro distilling fisherman. Simple question you cannot answer.

You my friend are a world class dullard

shachris:
how much liability did OBJ hand over to yaradua? How much is GEJ handing over to PMB?

This is not about party affairs man. These are affairs that would affect me, you and our children to come.

Nothing here affects my children, so forget that line of argument. Secondly, do your own research. As for party affairs, your comments already betrayed your position.