Akinwumi Adesina: Africa must trade smart by ensuring rapid growth

 

 

The president of the African Development Bank (AfDB), Dr. Akinwumi Adesina, has said that with the rapidly changing world of trade and rising echoes of unilateralism, Africa must trade smartly, starting by ensuring rapid growth in intra-African trade.

Adesina pointed to the important role of the African Continental Free Trade Area (AfCFTA) in that regard, saying that, when fully implemented, the AfCFTA would raise the share of intra-African trade in Africa’s total trade from 16 per cent to 52 per cent.

It would also increase the value of Africa’s traded goods and services by $35 billion per year, he added.

He made the remarks in Abuja during a gala dinner organised to mark the 2018 Annual Meetings and 25th Anniversary of the African Export-Import Bank (Afreximbank).

Adesina commented Afreximbank for its achievements, saying that the AfDB was very proud that the institution it helped create 25 years ago had fully come of age.

“Today, Afreximbank is the leader on financing trade in Africa,” he said.

Highlighting the importance of trade finance, especially for small and medium-sized enterprises (SMEs), Adesina noted that the AfDB had provided trade finance lines of credit of $650 million and trade finance mitigation support of $250 million to support Afreximbank’s trade finance activities.

He called for strong partnership between AfDB and Afreximbank in the development of export processing zones, especially staple crop processing zones, so as to help transform rural economies based on agricultural industrialisation and value addition.

Earlier, Dr. Mahmud Isa-Dutse, permanent secretary in the ministry of finance of Nigeria, which hosted the gala dinner, congratulated Afreximbank on the celebration of its 25th anniversary.

He pledged Nigeria’s continuing support for the bank as it continued to deliver on its mandate of promoting African trade.

Rising debt service to revenue ratio can expose Nigeria to debt crisis, DMO warns

 

…Pegs 2018 borrowing limit at $6.25bn
…Asks FG to privatise Nipost, Mint, others

                                                             Oniha, DG, DMO

Debt Management Office, DMO,  warned that Nigeria’s high debt service to revenue ratio, which deteriorated in 2016, could trigger a debt crisis. The DMO gave this warning in its 2017 Debt Sustainability Analysis, DSA, saying the country could experience debt crisis in the event of prolonged shocks (decline) in revenue, exports and naira devaluation.
The DMO also said for the country to stay within its 25 percent debt to Gross Domestic Product, GDP, threshold, the three tiers of government should not borrow more than $6.25 billion in the 2018 fiscal year.
The DMO stated: “The Fiscal Sustainability Analysis for the Federation (federal, states and FCT), showed that the ratio of Total Public Debt-to-Gross Domestic Product, GDP, remained below its threshold throughout the projection period. The ratio of Total Public Debt-to-GDP for 2017 was projected at 19.80 percent.
“Both the External and Fiscal Sustainability Analyses showed that all the revenue indicators (the ratios of Debt-to-Revenue and Debt Service-to-Revenue) deteriorated under varying shocks, suggesting that any prolonged shocks on the revenue would lead to debt distress in the medium to long-term, except other sources of revenue are speedily developed to enhance the revenue generation performance of the country.”
The DMO recommended that in order for the country to remain in the proposed country-specific threshold of 25 per cent borrowing limit, it would have to borrow (domestic and external) the maximum of $6.25 billion or N1,906.37 billion for this year.
“In order to estimate the borrowing limit for 2018, it requires the determination of the difference between the proposed Country-Specific Threshold of 25 percent and the end period.
“Therefore, the maximum amount that could be borrowed (domestic and external) for the fiscal year-2018 by the government without violating the proposed Country-Specific Threshold of 25 percent up to 2020 would be $6.25 billion or N1,906 billion (at N305 per dollar).”
Asks FG to privatise Nipost, Mint, others “Accordingly, for the fiscal year 2018, the maximum amount of $6.25 billion that could be borrowed is proposed to be sourced equally (50:50) from the Domestic and External sources, respectively, as follows: new Domestic borrowing $3.125 billion or N953.18 billion and new External borrowing: $3.125 billion or N953.18billion.”
The DMO also recommended that the government should boost revenue generation strategies by broadening the tax base, increasing tax revenue collection and privatise some viable enterprises.
“In order to enable government raise fresh funds to supplement its revenue for capital investments, government is encouraged to privatise some of its viable enterprises and have them listed on The Nigerian Stock Exchange.
“Hence, the need for government to sustain the on-going efforts aimed at reforming, restructuring and repositioning some of these enterprises for privatisation or commercialisation, including Nigerian Postal Services, NIPOST; Nigerian Commodities Exchange, Lagos International Trade Fair Complex, National Stadia and Nigerian Security and Minting Company, NSPMC.
“Aside saving government huge budgetary funds usually allocated for such entities annually, it will lead to wealth redistribution through public ownership of enterprises, as well as facilitate further deepening of the domestic capital market.”

 

Before the closure of Third Mainland Bridge

 

Image result wey dey for pictures of third mainland bridge                      Third Mainland Bridge Lagos

 

It is gratifying to note that the Federal Government has shifted the date for closure of the Third Mainland Bridge in Lagos for repairs from Friday, 27th July to Friday, 24th August 2018.
Minister of Power, Works and Housing, Mr Babatunde Fashola, justified the action thus: “The shift was done in order to give succour and relief to the people of Lagos State and other inter-state road users and support the efforts of the state government”.
This shows there is genuine coordination of efforts among the organs of the Federal Government and between the Federal and Lagos State governments towards bringing sanity back to the highways of the nation’s economic melting pot. Hitherto, the desired synergy between the Federal Government and the Lagos State Government, whose elected officials are of the same party, had not been in evidence.
The importance of Lagos in the socio-economic and political affairs of the nation can no longer be ignored. The current scourge of traffic gridlocks due to the presence of thousands of trucks from all over the federation, choking mobility and hampering the economic well-being of the State and the nation at large, is a poignant pointer to the need to always give Lagos special considerations.
When the Third Mainland Bridge is eventually closed either for inspection or actual repair works, it will exert heavy impact on road users in the city-state and outliers. It will virtually return Lagos to the situation it was before the Bridge was inaugurated by former military President, Ibrahim Babangida, in 1990. When considered that the size of the city and its precincts as well as its population have grown to perhaps more than double what they were in 1990, the implications for the impending traffic nightmares can only be better imagined than experienced.
Before this bridge is shut down for repairs, we suggest that the authorities first examine the possibility of partial closure, whereby the inspection or repair work is alternately conducted on one side of the eight-lane bridge while motorists continue to use the other side.
If that is not possible, then there is no other alternative than the total removal of trucks from all the expressways of Lagos. During this period, the multi-agency task force jointly set up by the Federal Government and LASG must work virtually round the clock and strictly enforce zero tolerance to any form of road blockage in any part of the city.
The authorities should also consider letting heavy trucks run only during after-hours and either move to holding bays or go straight to evacuate goods from the ports.

AfDB approves $250m risk participation agreement with ABSA

 

 

The African Development Bank (AfDB), this week, approved an unfunded $250-million risk participation agreement (RPA) with ABSA Bank.

This RPA, housed within the AfDB’s Trade Finance Operations, will enhance Africa issuing banks’ ability to leverage trade financing through a multisectorial approach.

When fully used, forecast estimates indicate that the facility will catalyze roughly over $2-billion worth of trade in three years.

The facility’s alignment to address the acute market demand for trade finance  in Africa through Agriculture, Transport, and Manufacturing is consistent with the AfDB’s goals of ensuring that Africa industrialises and trades more.

By extension, this RPA will also foster financial sector development and regional integration, the AfDB said in a statement.

Presenting the project to the AfDB board,  financial sector development director Stefan Nalletamby made a robust case for how, through strategic partners like ABSA, the AfDB’s RPA instrument continues to facilitate trade on the continent; thereby helping to reduce Africa’s trade financing gap.

“This facility, through a 50:50 risk sharing approach, will help to promote broad-based economic growth on the African continent through increased facilitation of import-export  activities of African corporates and small- and medium-sized enterprises, and increase intra-Africa trade and regional  financial integration in line with the AfDB’s Hi5 strategic objectives,” he said.

Under the RPA, the AfDB and ABSA will share the default risk on a portfolio of eligible trade transactions originated by African issuing banks and indemnified by ABSA.

The AfDB’s commitment under the RPA is to assume up to 50% of every underlying transaction issued by the said African issuing banks, while ABSA will confirm such a transaction and bear not less than 50% of its underlying risk.

Nigeria Outlook H2-18: Caught Between Two Stools

 

Global Economy: Is the party over?

Entering H2-18, the harmonized global growth of last year is fizzling out amid trade tensions between the US, China and most of the advanced economies. Economies of commodity-exporting countries are poised to strengthen as demand and supply dynamics continue to favour gradual uptick in prices. However, policy normalization in the US is rattling financial markets with currencies of emerging and frontier economies taking the most hit.

According to the World Bank’s mid-year revised projections for 2018, 45.0% of countries are expected to experience further acceleration compared to 56.0% in 2017. Furthermore, growth in advanced economies is expected to moderate slightly to 2.2% in 2018 (from 2.3% in 2017), as fiscal stimulus in the United States offsets lags in other areas. Meanwhile, growth in commodity-exporting emerging market and developing economies is expected to strengthen as commodity prices trend higher. As such, global growth is projected to remain flattish at 3.1% in 2018 and moderate in the next two years to 2.9% by 2020.
Sub-Saharan Africa (SSA): Slow growth amid rising challenges

In H1-18, SSA growth was restrained by poor momentum in Nigeria and South Africa (as at Q1-18) despite higher commodity prices, sustained global growth and increased fiscal stimulus. During the period, major economies in the region (Nigeria, South Africa, Kenya, Ivory Coast, Ghana, Angola, and Senegal), all approached the Eurobond market, issuing a total of $15.2bn.

However, foreign exchange conditions weakened against the US dollar as portfolio funds reversed on the back of rising U.S treasury yields. A major milestone for the region during H1-18 was the endorsement of the African Continental Free Trade Area (AfCFTA) by 44 of the 55 African Union member countries, to promote intra-African trade and accelerate regional integration.

That said, economic outcomes were divergent across the region as output recovery in Nigeria moderated in Q1-18 owing to relapse in critical non-oil sectors. Also, despite clarity in the political climate, South Africa recorded a broad-based slowdown in Q1-18 as GDP growth eased to 0.8%y/y driven by an underwhelming performance in the manufacturing and mining sectors. In H2-18, the build-up to 2019 election in Nigeria, upticks in commodity prices and weak policy implementation, are the key factors to watch. Nonetheless, the ratification of the AfCFTA by individual member countries portends a positive outlook for the region beyond 2018.
Nigeria: Caught between two stools

Macro variables in the Nigerian economy moved in tandem with our expectations in H1-18. Q1-18 GDP sustained gradual recovery, up 1.95%y/y. Headline inflation rate moderated to 11.6% in May-18. FX rates were broadly stable across segments as external reserves surged, adding $9.0bn from Jan-18 to Jun-18, settling at $47.8bn. Furthermore, oil prices surprised positively, averaging $71.0/b relative to our projected $55.0-60.0/b for the year. Monetary policy stance was less hawkish, though policy rates were held unchanged throughout the period.

However, fiscal policy remained aggressive as the second tranche of the $5.0bn Eurobond approved by the national assembly in 2017 was issued in Feb-18 while the Voluntary Asset and Income Declaration Scheme (VAIDS) deadline was extended till Jun-18. Unsurprisingly, the 2018 Budget was delayed till June.

Going into H2-18, we expect pre-election politics to take center stage. We anticipate a choppier socio-political outlook as the usual electioneering cycle plays out again. Nevertheless, recovery in the broader economy is expected to improve, thanks to conditions in the oil market which continue to support Nigeria’s external trade balance, government revenue, business, and investor optimism.

The downside risk to stronger growth include the clashes between Herders and Farmers, which dragged Agriculture sector GDP in Q1-18, as well as a potential oil output volatility. Accordingly, we have adjusted our FY-18 GDP growth forecast to 2.3%. Inflation rate is likely to creep back to 12.9% by year-end averaging 12.6% for the year. We think events in the local and global economy do not favour a rate cut in the immediate term, hence, we expect the MPC to keep rates unchanged in H2-18. FX rate should remain stable despite political risk, thanks to a robust external reserves position which is enough to cover c.12 months of import.

Also, mop-up exercise by the CBN should increase as fiscal and political spending rises. Accordingly, the overall theme for the Nigerian economy in H2-18 hangs on a balance between uncertainties around global geopolitical/local pre-election uncertainties and investor optimism about the gradual improvement in the macroeconomic space. As such, we note that the outlook for the Nigerian economy in H2-18 is “Caught between two stools”.

Naira Assets: A wobbly finish to a stylish start

As against the stratospheric start to the year, Nigerian equities closed H1-18 flattish, up 0.1%, as foreign portfolio investors took a flight to safety in Q2-18. The fixed income market witnessed a moderation in yields (down 69bps) compared to Dec-17 as the CBN scaled down on OMO mop-up and the DMO opted for funding from the international debt market to average down cost of debt servicing and incentivize corporate issuers in the local market. In H2-18, we highlight that geopolitical and pre-election uncertainties in the global and domestic economy may offset the anticipated improvement in the macroeconomic space.

Thus, we revise our return estimates for the equities market to 4.6%, predicated on improved corporate earnings and the implementation of new Multi-Fund Structure for PFAs by PENCOM. For fixed income securities, the CBN would likely become more aggressive with OMO sales to keep naira assets more attractive and maintain FX stability. Amplified by the play of political uncertainties and fears of rising US interest rates, we expect a slight uptick in the yield environment.

Total: We Have Injected $10bn into Nigeria’s Economy

 

Total E&P Nigeria Limited has put the value of its total investment in the Nigerian economy in the last five years at $10 billion.

The Executive General Manager, CSR, Mr. Vincent Nnadi, said this at the Total Business Sustenance for New Entrepreneurs Graduation ceremony that took place in Abuja.

Nnadi, in an interview, disclosed that the oil and gas conglomerate was also planning projects worth $16 billion and plans to use mostly local skills and talents in order to continue its fight against unemployment.

“We have for the first time recorded a high level of local content on this project and 77 per cent of it is fabricated in Nigeria,” Nnadi explained.

“It is a very large contribution to the economy and will be using local expertise.
“We have a very strong cooperative social responsibility.
“We have to support our society to progress by helping to solve some of the societal problem. One of these major problems is the issue of unemployment.”

On the skills acquisition training in conjunction with Toncia Energy Consulting and Professional Services Limited, Nnadi said the company would be monitoring the trainees to ensure smooth transitioning from training to practice.

“This is the second level of skills training we are doing. The first level was basic skill acquisition.
“We mentor them and will expose them backing them up with microfinance.

“We are also working with some banks to financially support some of the best business plans and even creating market opportunities for them.

“We will continue to monitor them along with Toncia Energy to make sure they are actually practicing what they have studied.”
One of the trainees of the program, Christiana Titus, expressed her gratitude to Total.

2018: Devt Tips for a Better Second Half

 

 

 

Development in the past six months in this country throws up various perspectives and viewpoints, depending on who is involved. To a layman like this reporter, Nigeria’s development process has been marked by false starts, stalls and jump-starts.

 

Persistent Corruption
On one hand it is easy to feel elation at the federal government’s declaration of emergency on corruption in a half-year which followed the recent visit of the Chair of Transparency International, Delia Rubio to a recent high-level workshop organised by the Civil Society Legislative Advocacy Centre headed by Auwal Musa Ibrahim in Abuja.

But it is also sobering to discover that in 2017 Nigeria slid down 12 places on the global ranking of the Corruption Perception Index of the same anti-corruption agency (TI) with 28 marks out of a possible 100 marks, which was released earlier this year.

And while anti-corruption crusaders are busy jubilating over the recent conviction and 14-year sentences passed on two former governors who were prosecuted by the Economic and Financial Crimes Commission (EFCC) for corrupt practices while in office, many citizens still believe the current administration has not totally purged itself of corrupt individuals, with some bad and corrupt eggs still operating in its uppermost ranks.

The best thing to do in the second half of this year is for the federal government to walk the talk and make the emergency declaration on corruption count by purging its ranks of corrupt individuals or those who have strong allegations of corruption hanging over their heads.

This will serve to pacify the disappointed citizens and neatly fit into the profile of PMB as a national, continental and global anti-corruption crusader.

 

State Police
The strident calls for the creation of State Police gathered steam in the first half of the year, mainly because of the incessant killings caused by marauding herdsmen, ritual killers and kidnappers.

Although the President directed the federal Police hierarchy to hire 10,000 new personnel, many view that as a drop in the ocean and just a temporary stop-gap measure which cannot successfully check the widespread killings and insecurity in the land.

This brings into play the need for State Police and even Community policing to complement the federal forces, which are reportedly currently less than 400,000-strong and which cannot adequately police Nigeria’s estimated population of 186 million citizens.

Incidentally, the National Assembly, especially the Upper chamber is spearheading the move for creation of State Police and they are powerful stakeholders in the quest to restore security in the country. Their efforts must not be allowed to flag in the second half, and the legislators should by supported by the Executive on this matter, for the benefit of all. That is not too hard to ask for.

 

Budget Implementation
The 2018 budget of N9.12 trillion was delayed for more than seven months by both the executive and legislature before the President finally signed the final copy into law in June.

The budget figure, which is the highest ever in the history of the country, has been described by the current administration as a pro-poor and people-friendly document, has a huge chunk allocated to capital expenditure and projects which are expected to benefit the general populace in a trickle-down style.

However, the ripple effect of the budget has not been fully felt by the citizens, and this second half of the year presents a golden opportunity for the federal government to put smiles on the faces of Nigerians.

Although the President initially accused the National Assembly of tampering with the budgetary allocations, he however signed the budget because, according to him, he “didn’t want to further slow down the pace of recovery of Nigeria’s economy”. He also pledged to work with the national assembly on the budget process and to bring a supplementary budget to re-capture the cuts made by the legislators during their oversight.

To the budget monitor, although the final passage of the budget was delayed, it is better late than never. The Ministry of Budget and National Planning and concerned players now have a good chance to effect some of the budgetary provisions in the second half of this year, and to finally put smiles on the faces of the long-suffering citizens. Nigerians are watching and waiting.

 

Agric Revival
On the agricultural front, Nigeria has recorded landmark results in the area of local rice production and market capture, which has reportedly reduced importation of foreign rice products by more than 90 per cent, despite efforts of smugglers.

Agricultural processing has also gone up several notches in the first half of the year, with the President commissioning some huge projects and processing plants around the country, which can only bode well for the economy and help reduce unemployment in the second half of the year.

With the active involvement of giant organisations like Dangote Group, Olam Nigeria and Flour Mills Nigeria in the agricultural sector, the private sector has shown a remarkable capacity to drive investments and profitable ventures in the industry, and the ripple effect is being felt around the country.

But to effectively raise the bar to make agriculture revenue a viable alternative to oil revenue, the federal government has to lead the struggle by granting some tax holidays, concessions and incentives to players in the vital sector, and the second half of 2018 presents a good chance to boost an already important industry. In this present agricultural revival, everyone is a winner and the positive trend is a welcome development.

 

Poverty Ranking
The first half of the year witnessed Nigeria’s emergence as the country with the highest level of extreme poverty, overtaking India in the process.

According to a report, the number of those living in extreme poverty in Nigeria is growing by six people every minute, while the May 2018 survey by the World Poverty Clock also showed that the country had an estimated 87 million people in extreme poverty; compared to India’s 75 million.

Ironically, the population of those living in extreme poverty is going down in India, which has an estimated population of over 1.3 billion, while Nigeria has an estimated population of 186 million.

The latest poverty ranking struck a blow to the federal government’s efforts to lift more citizens out of poverty, but it also presents a good opportunity for the current administration to re-jig its anti-poverty strategies in the latter part of this year.

If the number of people living in extreme poverty in Nigeria can be reduced considerably through government efforts and interventions, it would be a strong point in the favour of an administration which seeks to stage a comeback to power at the general elections next year. That, to this reporter, is a valid development yardstick.

 

Political Instability
Politics and development are interwoven in the quest for good governance, and one cannot be sacrificed at the expense of the other in any country that wants to move forward.

However, the problem is that Nigeria is going through a hybrid period of political instability, which also has its ripple effect on the economy and her development process.

This year has particularly witnessed upheavals in the political space and being so close to the election year, which is just a matter of months away, the present administration has to calm the troubled political waters in the most adroit way so as not to upset the gains recorded so far in Nigeria’s relative progress.

Although carpet-crossing and horse-trading cannot cease in politics, each camp owes it to the citizens who elected them into power to maintain peace and decorum devoid of rancour and acrimony, with a ripple effect on peaceful development and harmony.

If this current administration can manage to get along with its foes in the political space through matured compromise in this volatile second half of the year, that can only bode well for the citizens and for the country’s development. That is a worthwhile goal.

Accrued Rights: PFAs Yet to Feel Impact of N54bn Released By FG

 

 

 

 

Pension Fund Administrators (PFAs) are yet to feel the impact of the N54 billion released by the federal government last year for payment of accrued rights of pensioners for 2016 and 2017.

A reliable source  disclosed that the attributed the development to the non- appointment of board for the pension industry regulator, the National Pension Commission (PenCom), a situation which was said to have been slowing down activities of both the pension fund administrators and PenCom.

The Managing Director/Chief Executive Officer, IEI-Anchor Pensions, Glory Etaduovie, who also confirmed this, said though the fund was said to have been paid, not all PFAs have received it.

He said though the affected PFAs were still hopeful, the delay in releasing the said funds to the pension fund administrators managing the RSAs of those affected, may not be unconnected with lack of board for the regulator.

He said delay in appointment of board for the commission was also affecting the activities of the PFAs.
Before now managing directors of some PFAs had complained that delay in releasing the accrued rights is affecting smooth running of the contributory pension scheme (CPS).

But the federal government had last year, made budgetary provision of N54 billion for payment of accrued rights of its workers and pensioners for 2016 and 2017.
Accrued rights are entitlements of workers in pension terms before the advent of the private sector managed contributory pension.

It is pension rights of government workers that were in service before the commencement of CPS.
The CPS enabling laws demands that the government should release the money to PenCom, who in turn releases to the workers or pensioners through the various PFAs managing their RSAs.

But the government has been owing the pensioners in this regard.
Findings showed that since the inception of the CPS, total accrued rights owed by government to workers and retirees amounts to N300 billion.

The Acting Director General National Pension Commission, Aisha Dahiru Umar, had said the released fund would boost efforts at clearing outstanding pension liabilities especially the accrued rights of retiring government workers.
But some PFAs maintained that they were yet to feel the impact of the released funds.

Etaduovie, while speaking at a forum organised by the National Association of Insurance and Pension Correspondents (NAIPCO), also noted that one of the major challenges facing the CPS despite its success story and advantages was the unwillingness of some state governments and their workers to accept the scheme.

According to him, most state governments take the CPS for granted, while some have no political will to key into it.
He said similarly, some civil servants at state level do not like the CPS because they assumed that it pays them less than the Defined Benefit Scheme, “forgetting that it is better to have what is theirs very handy than waiting for the huge one you are not sure of.”

“There appears to be a dislike by some civil servants for the contributory pension scheme because it is thought that it pays lower than the defined benefits scheme. This leads to attempts by some implementers to frustrate it in many states.

“This is not true as the individual contributors’ funds would grow as the number of years a person is working increases and the investment returns are applied on a compound interest basis.

“They forget quickly that the governments can no longer carry such weights directly as it did in the past. Presently, it is difficult for many state Governments to meet up salary payments. This is the new reality”, he emphasised.

He said for now, only 15 state governments have keyed into the scheme adding that it was painful that others have decided to take the scheme for granted.
He cautioned against this saying some, “states are not able to pay salaries and government is not buoyant anymore to carry burden of pension benefits provisions.”