THISDAY: A SPECIAL REPORT
2018 depicts the beginning of a crucial election year’s eve. That is under normal circumstances. Under Nigeria’s peculiar circumstances, however, this month represents the start of the real election year, as preparations for the 2019 general election are expected to bring the whole country to a fever pitch.
Though the electoral commission has slated general elections for February 16 and March 2, 2019, election processes will begin this year with formal declaration of ambitions by aspirants and campaign for party tickets. Later in the year, parties will hold their respective primaries to elect their flag bearers. Also in the third quarter of the year, two states – Ekiti and Osun – will hold their governorship elections.
Traditionally, election eves are marked with increased spending, as politicians try to win favour with voters. This would mean different things for various sectors of the economy. For many aspects of the extractive (primary) sector, such as oil and gas, a boom is expected in the attempt to garner more funds in the oil-dependent economy, though there is a great risk of upsets. Manufacturing may not experience significant expansion. But the service sector would likely boom with activities.
For the Arts community, this year is expected to be a mixed bag of exciting expectations and uncertainties. In sports, Nigeria will be contesting for the FIFA World Cup with other qualified nations this June in Russia.
Several issues carried over from last year are expected to continue to trend in 2018. Such issues include the anti-corruption war, fight against insurgency, agitations for restructuring, and the detention of former National Security Adviser Col. Sambo Dasuki and leader of the Islamic Movement of Nigeria (INM) Ibrahim Yaqoub El Zakzaky, who had been in detention for over two years.
Seeking Economic Growth Amid Anxious Wait for 2019
2018 would be eventful for business, as stakeholders continue to strive for survival under a slow economic recovery process and brace themselves for political aftershocks. Vincent Obia, Kunle Aderinokun, Bennett Oghifo, Emma Okonji, Chineme Okafor, Olaseni Durojaiye, Solomon Elusoji, and Bamidele Famoofo report
Having come out of a protracted economic crisis in 2017, regarded as worst economic situation in recent years, Nigerians look into this year with hopes and aspirations. Policy analysts and stakeholders chart the way forward for the economy as they churn out their projections. 2018 has ushered in an economy replete with hopes of better deals for Nigerians, having surmounted the challenges that bedeviled it for a long period of time. As it is, the economy appears to be recovering from the quagmire as the performance indicators are now positive and still on the upswing. After five quarters of contraction, in the second quarter of 2017, the economy exited recession, which it entered in the second quarter of 2016. Since then, the economy turned the corner, maintaining the upward streak.
The gross domestic product (GDP) growth rate rose to 1.74 per cent (year-on-year) in the third quarter of 2017 from 0.72 per cent (revised from 0.55 per cent) in the second quarter . The Q2 2017 GDP growth rate represented an increase of 2.04 per cent over the contraction of 1.49 per cent recorded in the corresponding period of 2016.
Similarly, the consumer price index (CPI), which measures inflation, has consistently been on the decline for 10 months. The CPI dropped to 15.90 per cent in November from 15.91 per cent in the previous month, after it decreased from 15.98 per cent in September.
The volatility, which hitherto characterised the foreign exchange market has simmered down and stabilised. With a couple of interventions by the Central Bank of Nigeria (CBN), the exchange rate of the dollar to the naira has not only stabilised at the inter-bank segment of the market at N360/$, it has also converged with the rate at the parallel end of the market. The ingenuity of the monetary authority led the foreign reserves to accrete to a 39-month high of $38.2 billion last December.
Now in 2018, the federal government is saddled with the responsibility to continue to keep the economy on the path of recovery, stability and growth. In fact, the economic managers have the arduous task to ensure the economy not only maintain the upward streak, but record strong and inclusive growth. While it is apparent that politicking would characterise this year, preparatory to 2019 elections, the expectation, however, from the managers is to consolidate the gains of the out-gone year, so as to meet the set budgetary and economic targets as the government also makes frantic efforts to fulfill the campaign promises of the President Muhammadu Buhari administration.
The federal government has proposed an appropriation of N8.6 trillion for the fiscal year, which represents an increase of 16 percent over the 2017 budget. Nigerians would not accept any excuse for further delay in its passage into law and poor Implementation. The executive and the National Assembly should therefore quickly address the grey areas and harmonise their positions so that the appropriation bill could be passed into law.
As part of its strategy to mobilise revenue, the federal government has created Voluntary Assets and Income Declaration Scheme (VAIDS), a tax amnesty, which is expected to rein in tax revenue from evaders. The scheme, which has a nine-month duration, commenced on May 1, 2017. By the end of the scheme, the federal government estimated that it would realise $1 billion as tax revenue hitherto hidden from government records and unpaid to the treasury.
Besides, Nigeria’s exemption from output cut when OPEC and non-OPEC members agreed to extend the cut to the end of 2018, would aid the revenue projection of government in the 2018 budget, especially as the prices of crude oil, which stood at about $64 per barrel, continue to rally and remain well above the budget oil price benchmark of $45 per barrel.
Below is a quick look at what 2018 holds for business.
Oil and Gas
The oil and gas sector witnessed topsy-turvy conditions in 2017, which were accentuated by low prices and oil production levels. There were slight increases in both price and output. But the real challenge was the country’s abysmally low refining capacity, which left it dependent on imported fuel.
The Niger Delta issue, which the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, described as “the big elephant in the room”, funding for joint venture oil exploration, and commercialisation plans for gas – all of which should be addressed by the Petroleum Industry Bill – are among matters the federal government and relevant stakeholders are expected to deal with this new year. The PIB has remained in the works for a long time and would need some accelerated push to make it a reality for the good of the country’s oil industry. This is even more urgent as the government plans to open bids for marginal oil fields in 2018.
A troubled Niger Delta would derail the government’s new joint venture funding plans, which are somewhat built on incremental production. Similarly, gas would have to be given some more attention to power the economy, considering the volatility of oil and the global push for cleaner energy sources.
In 2018, Nigeria would be expected to address the challenges in its downstream petroleum sector, which have proved intractable overtime.
In 2017, Nigeria’s power sector had challenges that threatened its sustainability. It struggled to survive, but not without some defining scars that constitute a hindrance to the business end of the electricity market. In the year, revenue shortfalls that accumulated due to the refusal of the Nigerian Electricity Regulatory Commission to allow the 11 electricity distribution companies charge what they feel are cost reflective tariffs for electricity supply to their customers, shot up to N460 billion. NERC has conducted up to three tariff exercises, but it has refused to allow the Discos to operate them, and this among other indecisions of the government, affected the commercial values of the market.
The government has taken significant steps to address the operational challenges of the sector – initiating among others, the Power Sector Recovery Programme with the supports of the World Bank and N701 billion financial support for electricity generation. But the government would be expected to effectively implement the PRSP in order to address the distribution and commercial ends of the power market in 2018. Many experts believe the PSRP is a remarkable policy, but its execution would determine how productive it would be in addressing the market’s troubles.
Helping the Discos get over their debt overhang would be a big boost for the sector. But 2018, being close to an election year, could make it tricky in terms of the government taking hard decisions needed to get the sector back on track.
Operators in the country’s agricultural sector have identified government’s commitment to fast-tracking the export process, deepening a seamless fertiliser distribution among farmers, as well as reviving the Export Expansion Grant as some of the issues that will help the industry’s growth in the new year. Some insist that government must also encourage operators in the sector to increase stakes in produce processing. Experts say there is a huge foreign exchange potential in agricultural produce export but government must put in place a seamless export process at the seaports to unlock the latent benefits.
“Government has promised to reform the ports as part of its ease of doing business initiative. If government can do that the country stands to reap huge foreign exchange from the export of agricultural produce. Another thing is that government should commit to reviving the Export Expansion Grant, as many exporters would leverage it and it would boost the country’s foreign exchange receipts and deepen the government’s economic diversification initiative,” stated Managing Director of Dada Incorporated, a major trader of cashew and Cocoa exporter, Adedapo Dada.
How the manufacturing industry fares in the coming year may be dependent on the fiscal and monetary policies adopted by the federal government, particularly, as regards the cost of capital, infrastructure and the construction of the proposed industrial parks by the federal government.
The country’s power problem will also impact the performance of the sector in this year. As at May 2017, Nigeria’s power generation peaked at 5,222.3 MW in December 2017, while electricity demand is expected to reach 50,000MW by 2022. Most manufacturers have resorted almost entirely to the use of generators and inverters, and this has significantly increased the cost of doing business. Many manufacturers with large plants requiring steady power supply solely rely on their own generating sets to avoid operational losses resulting from frequent power outages.
The country’s auto industry is expected to grow by about five per cent this year, after the market closed with a drop of 48 per cent in sale of brand new vehicles in the third quarter of 2017, from about 14,500 units in 2016 to about 7,000 units at the end of the third quarter of 2017. Managing Director of Toyota Nigeria Limited, Mr. Kunle Ade-Ojo, gave these figures at the company’s quarterly review of the country’s auto market, held at its headquarters in Lagos recently.
According to Kunle Ade-Ojo, “In 2018, we hope to see a bit of balancing with the recovery of passenger vehicles. This year, a lot of companies were very careful because of the economic recession. They buy vehicles that would help improve productivity of their businesses. As the economy improves, so will there be balancing of sales across the models and vehicle segments. A more realistic growth will be experienced next year. However, there are risks. As 2018 budget is signed into law, we might begin to see some marginal activities in businesses. We are hoping that there will be an improvement generally.”
Occasioned by its weak financial status, and its desire to expand its network operations, Etisalat, now 9mobile, had in July 2013, took a loan from 13 local banks, worth $1.2 billion. The telecoms company, however, struggled to repay the loan, citing economic downturn of 2015-2016 and naira devaluation, which negatively impacted on the dollar-denominated component of the loan.
Its inability to repay the loan, forced it to change its brand identity from Etisalat Nigeria to 9mobile, after the banks threatened to take over the operations of the telecoms company.
The threat from the banks, triggered the withdrawal of Emirates Telecoms Group, and the resignation of every member of the former Etisalat Board and its former management staff.
In order to get a credible investor that will inject the needed funds to revamp the telecoms company, Barclays Africa was appointed the financial adviser for the acquisition of 9mobile, and five firms were shortlisted from over 16 local and international firms that initially indicated their interests to acquire 9mobile.
The final five include Teleology Holdings Limited, promoted by Adrian Wood, the pioneer CEO of MTN Nigeria; Smile Telecoms Holdings, with operations in Nigeria, Tanzania, Uganda, Congo DR and South Africa; Helios Investment Partners; Bharti Airtel and Globacom, the telecoms company owned and operated by a Nigerian, Mike Adenuga Jnr.
Barclays Africa, which is managing the bid process, had the initial mandate to complete the exercise and hand over 9mobile to its new investor or group of investors, on or before December 31, 2017. But citing delay in submission of Expression of Interest (EoI) by the bidders, Barclays wrote to the Nigerian Communications Commission (NCC), the telecoms industry regulator, asking for extension of date for the completion of the bid exercise, and January 16, 2018 was approved as the new date to conclude the sales and handing over of 9mobile to its new owners. Citing the rise in technological activities around Financial Technology and Artificial Intelligence in 2017, technology experts have predicted that FinTech and AI would drive activities across all sectors of the global economy in 2018, Nigeria inclusive. While FinTech has brought a whole lot of disruption in the financial services sector, using latest technology solutions to change the face of financial services delivery in the banking sector, technology experts are using AI to create robots that will deliver multi-tasking jobs in the future.
Accenture, a global technology solution company with presence in Nigeria, penultimate week in Lagos, showcased its latest technology capabilities that will enable businesses across different sectors in the country boost their productivity and efficiency through its recent innovations and investments in AI, Virtual Reality, robotics, and blockchain.
Managing Director, Accenture Nigeria, Mr. Niyi Tayo, said recently that AI and robotics will rule the world in 2018. He strongly advised organisations to act fast on developing their AI journey for 2018. Managing Director, Huawei Nigeria, Mr. Kevin Li, advised the federal government to begin aggressive investment in broadband in order to boost broadband penetration across the country, since FinTech and AI largely depend on broadband accessibility.
2018 promises to be a big year for Nigerian workers. In 2018, it is expected that a new minimum wage will be set, a decision that will have reverberating effects across the economy. Also, the fight over the sale of Nigeria’s national assets will continue, as more labour unions come out to protest the move.
Meanwhile, the barrage of strikes experienced through 2017 is not expected to subside. Although the economy has shown some improvements since its emergence from recession, analysts believe government’s notorious reputation for reneging on agreements will serve as fodder for increased agitations. Labour movements, such as the Academic Staff Union of Universities and the Petroleum and Natural Gas Senior Staff Association of Nigeria, are expected to return to the negotiating table with the federal government in the new year to avert more industrial strike actions.
But, as the year winds down, analysts also predict that government would work to minimise such strike actions with an eye on 2019, an election year. To avoid political disaffection, sweet deals that benefit Nigerian workers, at least in the short term, are expected to be struck in late 2018.
Activities both on the capital market and money market in Nigeria closed on a stable note in 2017. The capital market, especially, has enjoyed some good patronage from both domestic and foreign investors in the outgoing year, which is a clear departure from the lull the market experienced in 2015 and 2016. The All Share Index stood at 37,858.33 points as at December 19, 2017, though analysts believe it may close around the 36,000 marks. Meanwhile, Foreign Direct Investment and capital inflows, which were believed to boost activities in the country’s bourse in 2017, are likely to continue in 2018, as more FDI and capital inflow are projected by analysts.
Trading Economics in its economic forecasts on Nigeria, which covers the period between 2017 and 2020, projected that FDI in Nigeria will move up to about $1.21 billion by third quarter of 2018, from $852 million in Q4, 2017. It said though capital inflow in 2018 will fluctuate, it will close on a positive note in Q3, 2018. The FSDH Research unit also stated that a speedy passage of the 2018 budget with the current attractive valuation of equities in the Nigerian bourse were factors that will boost investment in the market in 2018. Other factors that FSDH said will help investment in the equities market in 2018 are corporate earnings and the economic policy direction of the federal government.
Meanwhile in the money market, it is expected that fixed income instruments will become less attractive to investors, as interest in treasury bills and bonds is expected to drop. Inflation rate, which consistently dropped in the last 10 months of 2017 and stood at 15.90 per cent as at November, is expected to drop further, according the Central Bank of Nigeria and FSDH. FSDH puts average inflation in 2018 at 8.93%, while adjusted inflation is expected to be 10.80%. CBN expects inflation to come down to lower double digit in 2018, but says a single digit figure is feasible in 2018.
Monetary Policy Rate is expected to remain at 14% and Cash Reserve Ratio for banks is likely to drop marginally to 21.13% by Q3, 2018, while deposit rate is projected to improve to encourage saving. 9.82% is projected by Q3, 2018 as against 7.5% at the moment, as lending rate by banks is likely to drop only marginally from average 17.88% to 17.43% by Q3, 2018.
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What Analysts Say…
Having come out of a protracted economic crisis in 2017, regarded as worst economic situation in recent years, Nigerians look into this year with hopes and aspirations. Policy analysts and stakeholders chart the way forward for the economy as they churn out their projections.
In their outlook for this year, analysts at Renaissance Capital expect the federal government stepping capital expenditure and pick-up in demand, on the back of improved FX liquidity, to help lift growth to 2 per cent in 2018 vs. our 0.7 per cent projection for 2017.
Led by Director and Sub-Saharan Africa Economist, Renaissance Capital, Yvonne Mhango, who sent an email to THISDAY, the analysts reasoned that, ”Nigeria’s recovery has largely been driven by the oil sector. Outside of agriculture, the remaining two-thirds of the economy is sluggish. Manufacturing’s return to negative growth territory highlights the fragility of this recovery.”
Noting that, “The consumer confidence index’s YtD upturn, since it bottomed in 4Q16, suggests demand is picking up, albeit off a low base,” they stated that, “The lopsidedness of the recovery implies downside risk to our 2018 forecast.”
Rencap, however, projected a monetary easing cycle. According to the analysts, “Since July, we have seen Nigeria’s monetary policy committee (MPC) become less hawkish. A couple of members voted to ease policy, in part to spur a recovery in YoY credit growth – which fell to -5.4per cent in October, vs. 21per cent a year earlier.
“However, most MPC members opted to hold the policy stance mainly because they want more time to see how various economic indicators evolve. We expect inflation to slow to an average of c.12per cent in 2018, from c.16.5per cent in 2017. We think the MPC could start cutting the policy rate as soon as March 2018, by 1ppt, when we expect headline inflation to have moderated to c. 14per cent.”
“Arguments in favour of looser policy include the fact that inflation is not demand driven, and the likelihood that a favourable oil price will help sustain FX stability in the short term. In all, we think a 2-ppt rate cut is likely in 2018. We believe this will complement the authorities’ efforts to lower interest rates on treasury securities, by raising the foreign debt share in public debt. The risks to our view include a fall in oil prices and/or production, which undermines the naira and compels the maintenance of a tight policy stance,” they added.
Similarly, RenCap estimates that in 2018, a moderate increase in import demand, on the back of improving fundamentals, partly explains its projection of a smaller current account surplus of 1.8per cent of GDP in 2018, vs. 2.4per cent in 2017E.
“We see limited upside in export revenue in 2018. This because we expect oil production to stabilise at the levels it recovered to in 2017, c. 2Mbd, and for the price to also stabilise at c. $55/bl. On the import front, we expect the pick-up to be tempered by a consumer that remains challenged.”
Rencap thinks “a stronger external sector and tighter monetary policy imply NGN appreciation risk in the near term,” believing “This risk may be contained by the central bank’s desire to build up FX reserves.”
“We assume accommodative policy in 2018, ahead of the February 2019 elections and expect the NGN to trend moderately weaker to NGN373/$1 at YE18.”
Nevertheless, the analysts foresee “unattainable fiscal targets.”
According to them, “Nigeria’s FY18 ‘budget of consolidation’ is intended to build on the gains of the FY17 ‘recovery and growth’ budget. Indeed, growth was restored in 2Q17 and there have been developments on the infrastructure front. However, Nigeria’s fiscal (under) performance in FY17 and some assumptions that we view as unrealistic suggest that FY18 budget targets are unlikely to be met. A 30 per cent revenue increase is planned for FY18, to NGN6.6trillion, while there was a 14 per cent shortfall at 9M17. The proposed 16 per cent increase in spending may be more modest, to NGN8.6trillion.
“However, when one considers that spending was 30 per cent below target at 7M17, we think the FY18 target is unattainable. We expect revenue shortfalls to undermine plans to reduce the FY18 deficit to NGN2.0trillion (1.4 per cent of GDP, by our estimate) vs. the FY17 target of NGN2.4trillion.”
Also, in their projection, made available to THISDAY, the Manufacturers Association of Nigeria (MAN) highlights some of the likely benefits and issues that may be on the front burner in 2018.
MAN President, Dr. Frank Jacobs, pointed out that, improvement in road infrastructure would enhance movement of goods and services within the regions that the projects are located. “No doubt, these projects would ensure seamless haulage with minimal damages on transit; improve economic activities, access to market; access to education and healthcare facilities, while at the same time narrow the infrastructure gap in the economy.”
Jacobs believed every Naira spent on provision of road infrastructure, “may trigger at least 5 per cent economic growth.” This, he pointed out, was “based on the report of World Economic Forum which affirmed that every dollar spent on any capital project such as road construction generates an economic return of 5-25 per cent.”
In the same vein, he said MAN estimated that, in this fiscal year, “The huge outlay of capital expenditure on infrastructure may not produce desired impact on manufacturing output, employment as well as construction and allied activities, if not properly monitored.” “Improper management of the inflation rate that may result from the likely overly increase in money circulation, especially those that are not channeled into the productive sector,” he added.
Jacobs estimated that there would be “Tighter regulatory environment as agencies would be all out to excessively drive to meet set targets and improve Internally Generated Revenue, not minding the implications on businesses – FIRS, NESREA, LIRS, NAFDAC, SON, NCS may be on the loose.”
Jacobs reasoned that, there would be a “likely loss of focus in effective implementation of policies due to excessive focus on electioneering activities.” According to him, “Nigeria may lose more on the Foreign Direct Investment (FDI) front as investors react to the prevailing economic circumstances of the country and the looming uncertainty that usually characterizes electioneering activities.”
The MAN president foresees “palpable inability to genuinely sustain the current FX supply which may lead to further depreciation of the Naira,” while also cautioning that, “Increased poor access to credit facilities would be triggered by further liquidity squeeze.”
For the CEO, Global Analytics Consulting Ltd, Tope Fasua, 2018 promises to be an interesting year, given that government is likely to try and correct the mistakes of 2016 and 2017.
Fasua believed “some of the policy options which took us into a recession have now been properly identified and mitigated.”
“This is chiefly the foreign exchange regime which outlawed an otherwise lawful and emotive segment of the economy like the payment of school fees, medicals and normal travel expenses for holiday-makers and the likes. Also, the Central Bank of Nigeria has created other clever windows by which forex user can access legitimate markets, even if at a premium. People seem not to mind, and there is now relative calm,” he pointed out.
Fasua, who said he was deeply worried by Nigeria’s spate of foreign borrowing, and indeed any borrowing at all, however, believed that, “we can be more determined about boosting domestic revenue.”
According to him, “Nigeria is hemorrhaging not only taxes, but dues, fines, levies, duties and rates due to government directly and indirectly. Impunity has become our second name and we have many people who have become so obscenely ‘rich’ on corruption that they now believe they are above the law and bigger than the country. These are the ones who would always beat the system and refuse to pay their obligations to society. There is a price to pay for elitism. The upshot of the approach we have taken is that the gap between rich and poor keeps expanding while government that should play the umpire is incapacitated by impunity, lackadaisical work attitude and of course, corruption.”
The economist stated: “The paradox of finance is that money goes where money is. With Nigeria’s rising foreign reserves (presently at $38billion, with a strong push for $40billion), we hear already that more foreign investment (perhaps of the portfolio type) has been heading Nigeria’s way. Good enough. But increasing foreign reserves while ballooning our debt portfolio also has its blowback effects. Is this a good strategy? Are we adequately and sustainably diversifying our economy? Do we understand that economic diversification is not just about the diversification of government income or forex sources from crude oil to say solid minerals or agriculture, but how the economy can interact rigorously with itself, how Nigerians can spend their incomes on Nigerian goods and how cash flows can percolate between the rich and the poor, while lifting millions out of poverty?
“2018 should be the year of deep thinking, and even deeper actions,” Fasua concluded.
Managing Director and Chief Economist Africa, Global Research, Standard Chartered Bank, Razia Khan, projected that Nigerian elections, scheduled for February 2019, would be a key driver of economic activity in 2018. Notwithstanding, she added, “We expect economic growth to improve, driven by higher oil prices, more stable oil output (even given likely compliance with an OPEC production cap) and improved execution of the Federal Government (FG) budget.”
“To date, a series of shocks have weighed down economic performance – flawed FX policy choices in the immediate aftermath of the oil price decline (since rectified with reforms in April 2017); Niger Delta militancy which cut Nigerian oil output; and a slow pace of capital expenditure, given financing constraints. We expect an improvement in each of these factors in 2018, which will help boost growth,” Khan stated.
Khan noted that Nigeria’s economy will recover, but “from a weaker base.” According to her, “Despite an acceleration in y/y GDP in Q3-2017, helped by improved oil output, non-oil GDP growth has disappointed. Several key sectors (construction, manufacturing, trade, transportation and even finance) still contracted in Q3. In the first three quarters of 2017, the Nigerian economy grew only 0.43 per cent y/y. Consequently, we lower our full-year 2017 GDP projection to only 0.7 per cent (1.2 per cent previously). We still expect a lift to economic performance in the coming years, but the current weakness will matter. We lower our 2018 and 2019 GDP forecasts to 3.0 per cent and 3.8 per cent (3.5 per cent and 4.1 per cent previously).”
But the renowned economist pointed out that the current economic weakness should spur reform efforts. “In the very near term, and with elections approaching, Nigeria will focus on faster implementation of fiscal expenditure. A new approach to external borrowing should relax the financing constraint that has inhibited public investment since the oil price shock.
“We also believe that Nigeria will make an even greater effort to maintain relative FX stability (and have recently changed our forecasts accordingly), allowing the Central Bank of Nigeria (CBN) to embark on accelerated and front-loaded policy easing, to boost private-sector lending. Nigeria will rely more heavily on external borrowing, borrowing an additional USD 2.5billion in 2018 (in addition to any budget financing), to retire maturing T-bills and drive down the high cost of domestic debt service.”
In addition, realising that, “Weak domestic demand and sluggish implementation of the capital budget have contributed to weak import demand,” Khan said, “Consequently, we revise our C/A forecasts. We now see a surplus of c.1 per cent of GDP in 2017 (0.6 per cent previously).”
“In 2018, this should return to a deficit of 0.8per cent (previously 1.2per cent) as the pace of capital expenditure steps up. The CBN will use external borrowing to build its FX reserves, in order to reassure on the sustainability of its stable FX policy, even as it embarks on more aggressive easing. The gap between the USD-NGN (Nigerian naira) rate at the CBN’s special intervention auctions and the investors and exporters (I&E) window has narrowed substantially. However, we see little additional effort to harmonise Nigeria’s different FX rates, suggesting that the implicit fuel subsidy (derived from a more favourable FX rate of c.305 for fuel importers) will likely remain in place,” she noted.
Considering that 2018 is a pre-election year, Khan projected that the government would do a lot of spending and cut rates.
According to her, “Nigeria has promised a record budget for 2018, with plans to increase spending to NGN 8.6tn. To date the slow pace of budget execution has been a significant factor in negative money-supply growth. This may change in 2018, with the hope (subject to parliamentary cooperation) that the budget will be approved early on in the year. While press reports have focused on the outsized nature of the budget (nominally up 16per cent y/y), in real terms this does not signify much of an increase. Our concerns are two-fold: (1) how much of the NGN 8.6trillion spending plan will actually be implemented and (2) whether the revenue assumptions stack up.”
“Nigeria has long promised to focus on non-oil revenue mobilisation. The 2018 budget assumes non-oil revenue of NGN4.2trillion, and oil revenue of NGN 2.4trillion, delivering a fiscal deficit of NGN 2trillion (down, ostensibly, from 2017’s NGN 2.4trillion). To date, however, non-oil revenue has disappointed. Non-oil revenue receipts in 2016 and 2017 failed to keep pace even with NGN depreciation, suggesting little-to-no structural improvement in tax collection. In our view, the proposed higher rate of tax on luxury goods and hoped-for revenue momentum under the ‘Voluntary Asset and Income Declaration Scheme’ – even factoring in an aspirational USD1 billion for the latter – are unlikely to provide the scale needed for a sustainably wider tax base. Nigeria is likely to undershoot substantially its non-oil revenue assumption for 2018, unless there are further tax reforms,” she added.
Khan also projected that, “With oil revenue based on output (including condensate) of 2.3mb/d and a price of USD 45/bbl (we expect an average price of USD 61/bbl in 2018), oil revenue should outperform budget assumptions. Based on this, and the slow pace of spending execution so far, we lower our budget deficit forecasts to 3.6per cent and 3.2per cent of GDP in 2017 and 2018 (4.4per cent and 4.0per cent earlier).
The economist foresees accelerated and front-loaded easing.
According to her, “Given the likely effort to boost growth ahead of 2019 elections, we now see the CBN front-loading policy easing in 2018, resuming its easing cycle in March, rather than May as we previously believed. Higher oil prices, and faster FX reserves accumulation are likely to make the CBN more comfortable that the risks to FX stability can be contained. We now see 400bps of easing in 2018, with cuts of 100bps each at the March, May, July and September meetings, taking the MPR to 10per cent by end-2018 (11per cent previously). Indeed, the recent marginal reduction in OMO yields may be an early sign of this future easing intent. Five new members will be appointed to the MPC from January, likely adding a dovish bias. Supported by a favourable base, we expect inflation to reach single digits from mid-2018.”
Nevertheless, Khan said the CBN would be expected to clarify on the extent of its deficit financing. “The authorities intend to reconcile data, netting off what is already in the Treasury Single Account held at the CBN from the support otherwise provided as ‘ways and means’ financing to the FG. Despite inflation’s downward stickiness to date, this should create more confidence in future price stability, as it becomes clear that there is no excessive monetisation of the deficit.”
However, Director, Union Capital Markets Ltd, Egie Akpata, believed the Nigerian economy would likely perform better in 2018 than it did in 2017.
According to him, “Key variables like oil price, external reserves, exchange rate and interest rates are all moving in the right direction.”
Akpata expects the interest rates to keep falling into Q1 2018 and remain relatively low till the second half of the year when they will start to trend upwards.
He expressed concern that, the reaction of foreign portfolio investors to the election build up will have an impact on actions of the CBN as far as interest rates are concerned. “Going into the election, the government will increase spending and the CBN is likely to be forced to mop up this liquidity by offering increasingly higher rates.”
But he added that, “It is unlikely that interest rates on treasury bills will reach the peak yield of 23per cent experienced this year but year-end rates will be substantially higher than the single digit rates in January.”
Besides, Akpata stated: “I would expect an increase in corporate bond issuances in 2018 than we had in 2017. SEC regulations will limit the number of states that can access the bond market for relatively low priced money. However, in an attempt to time the market bottom a number of corporate issuers will end up waiting too long and missing the opportunity to issue at a decent rate.”
In his own analysis, CEO, The CFG Advisory Ltd, Adetilewa Adebajo, noted that, “While 2017 will see three consecutive growth number the growth of 0.8 percent projected by the IMF, it is still nowhere close to the population growth of 3 percent and the sustainable growth target must be above 6 per cent. The bank lending portfolio has not grown in the last one year as banks prefer to mop deposit and invest in treasury bills giving Nigerian banks the largest deposit to loan spreads in the world.”
Adebajo, who believed, “Without meaningful bank lending, full economic recovery will remain a mirage,” projected that, “With inflation on the way down, and government debt service at 66per cent of revenues, the pressure is on to cut rates by the end of Q1 2018.”
“We see limited upside in export revenue in 2018. This because we expect oil production to stabilise at the levels it recovered to in 2017, c. 2Mbd, and for the price to also stabilise at c. $55/bl. On the import front, we expect the pick-up to be tempered by a consumer that remains challenged.”
“Tighter regulatory environment as agencies would be all out to excessively drive to meet set targets and improve Internally Generated Revenue, not minding the implications on businesses – FIRS, NESREA, LIRS, NAFDAC, SON, NCS may be on the loose.”
“The paradox of finance is that money goes where money is. With Nigeria’s rising foreign reserves (presently at $38billion, with a strong push for $40billion), we hear already that more foreign investment (perhaps of the portfolio type) has been heading Nigeria’s way. Good enough.”
“Given the likely effort to boost growth ahead of 2019 elections, we now see the CBN front-loading policy easing in 2018, resuming its easing cycle in March, rather than May as we previously believed.
“Key variables like oil price, external reserves, exchange rate and interest rates are all moving in the right direction.”
“With inflation on the way down, and government debt service at 66per cent of revenues, the pressure is on to cut rates by the end of Q1 2018.”
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People, Issues, Events that Will Shape 2018
Carried over from last year, below are some of the people, issues and events that are likely going to characterise 2018. Olawale Olaleye writes
Last year posed a lot of challenges, both for the leadership and the led. Although nothing completely out of reckoning, what was clearly missing in many instances has been a “blue sea leadership”, which unfortunately remains the bane of Nigeria’s development and nation-building. But because the challenges of 2017 were somewhat overwhelming, it left behind some of its character traits as the markers that the 2018 might have to deal with.
With these defining elements and familiar character traits of the present leadership, projections into the New Year might be easy. But whilst some of these markers are not established as fait accompli, their existence lends credence to how the New Year could largely pan out and of course, give room for some of the extrapolations that would follow in their wake.
The 2018 Budget
To kick-off the New Year, expectations are high that the 2018 budget would kick-in early enough. This is also in view of President Muhammadu Buhari’s intention to return the country to the January-December budget cycle, when he presented his 2018 budget in good time last year.
Although reactions from the National Assembly have been one of mixed feelings, the lawmakers, who had initially commended the president’s move, later discovered that some of the assumptions may not be realistic. But whatever happens at the end of the day, an early approval of the budget is expected to further boost economic activities as early as possible. Therefore, the year is going to start with issues around the budget – legislative debate, passage of the appropriation bill and signing of the bill into law.
Ekiti and Osun Governorship Elections
It is public knowledge that the Independent National Electoral Commission (INEC) has announced the dates for the 2019 elections, billed to hold on February 16 and March 2 of next year respectively. But preceding the national elections in 2019 are two major governorship elections this year, holding in Ekiti and Osun States respectively. While the Ekiti election is scheduled to hold on July 14, 2018, that of Osun holds on September 22, 2018.
Without any jot of doubt, the elections of Ekiti and Osun would be a major pointer to the 2019 polls. Whilst these elections would provide a good platform for the two major political parties to reposition and assert themselves ahead of 2019, it would also clearly set the tone for what to expect at the general election.
It is a no-brainer that security challenges would be one of the very ugly and seemingly helpless trends to define the 2018. And as expected, two unfortunate incidences had already happened in the New Year – in Benue and Rivers States – with scores dead.
The news that the US had elected to help the country fight insurgency is elating. Sadly, it is just one leg to the multi-faceted security challenges the country currently faces. From herdsmen attacks to armed robbery, kidnapping and ritual killings – insecurity is one obnoxious marker carried over, not just from 2017 but many years back.
Towards the end of last year, President Buhari, after series of meetings with party men and stakeholders, promised to make more appointments and possibly expand his cabinet size just to contain the growing discontents in the party and government. Unfortunately, the first set of appointments made days ago by the president was fraught with errors of attention to details. About eight dead persons’ names were on a list said to have been put together over two years ago.
Although the presidency had apologised and promised to address the errors, it is expected, however, that more appointments would come in being the year preceding the elections of 2019 and the likelihood for government to want to patronise all the relevant tendencies is high.
PDP’s Reconciliation Effort
The new leadership of the Peoples Democratic Party led by Mr. Uche Secondus is expected to firm up its reconciliation efforts in the New Year following the aftermath of the December 9, 2017 national convention. It is true that the reconciliatory panel led by the Bayelsa State Governor, Hon. Seriake Dickson, recorded significant progress last year as some of the aggrieved chairmanship aspirants had agreed to let go and join hands with the new leadership.
But the hope of a peaceful reign, at least for now, may have been jeopardised by the recalcitrant few, who had gone ahead to set up a new PDP, because they were not happy with the handling of the convention that produced the Secondus-led leadership. Efforts to contain the brewing in-house tension will dominate some of PDP’s activities in the new year.
With just about a year to next year’s general election, one of the developments likely to typify the political space is the emergence of more and more presidential hopefuls in the thinking that President Muhammadu Buhari is beatable if the current mood of the nation is anything to ponder.
Although the president is yet to formally indicate his intention to seek re-election or not, there are clear signals that he might likely run. But that has still not stifled those also eyeing his job. So, there would be more gladiators hopping on the turf as the 2019 elections draw close.
Better described as a cat with unlimited lives, the President of the Senate, Dr. Bukola Saraki, is one man, who has proven to be a hard nut to crack. From landing into an insidious crisis immediately after he won his election as Senate president, the senate president has fought many successful battles. From the Code of Conduct Tribunal (CCT) to the Economic and Financial Crimes Commission (EFCC), Saraki weathered the storm of alleged political persecution and still standing tall.
However, with last year’s Appeal Court ruling which agreed with the judgment of the CCT and struck out 15 of the 18-count charge dismissed by CCT, the retrial of the three other charges is certainly going to continue this year, whether or not it would remain a distraction to his personal cause and career.
The Chibok Girls
Four years after their abduction from Chibok, Borno State, there are still over a hundred girls still stuck with their abductors in different parts of northern Nigeria and across the bordering countries. The promised rescue of the Chibok girls was a major campaign tool for the APC in 2015 and one unfortunate factor that undid the PDP.
As it is, it remains one issue that the APC would have to deal with in this New Year and during the elections. And with about 106 girls so far released, rescued or found wandering, government has promised to put in more effort for their release in this Year.
Kanu and Parents Still Missing
Leader of the Indigenous People of Biafra (IPOB), Nnamdi Kanu, has been missing since his family house in Arochukwu, Abia State was raided by the military in September of 2017. The recriminations that trailed his whereabouts have left everyone even more clueless.
But particularly disturbing is that it isn’t just Kanu that is missing, his two parents who are traditional rulers in their community, also disappeared with him. Certainly, news of his whereabouts will continue to make headlines this year.
Dasuki and El-zakzaky’s Detention
Two people – former National Security Adviser, Col. Sambo Dasuki and leader of the Shiite Muslim group, Sheikh Ibrahim El-zakzaky – had been in detention since Buhari assumed office and on different charges.
While Dasuki is kept in detention on charges of corruption relating to arms deal under President Goodluck Jonathan, El-zakzay is being held behind bars for allegedly disturbing the peace of his community after his group had a bloody clash with the military.
In spite of the different court orders approving their release, the Buhari government has remained adamant. They are both in their third year in detention and it is almost certain that their matter would continue to be an issue this year.
The Restructuring Debate
One of the debates that shaped political discourse last year was the need for restructuring, a development that has been more or less forced on the government of the day as the ruling party was compelled to set up a committee led by the Kaduna State Governor, Malam Nasir El-rufai, an opponent of restructuring, to ponder the idea and how best the APC could help structure it.
Unfortunately and perhaps, because of the disposition of El-rufai, not much progress has been made as far as the restructuring debate is concerned. But clearly, it is not going away anytime soon and would remain one of the discussions to define 2018, going forward.
The War on Corruption
The fight against corruption was and remains one of Buhari’s campaign jokers. There is no gainsaying the fact that corruption is endemic and also systemic. It was no wonder that many trusted Buhari with the promise to decimate the scourge if elected president in 2015.
But almost three years after assuming office, the fight against graft has continued to be trailed by allegations of persecution and selective prosecution. The war against corruption hasn’t yielded as much as expected. But the political season is here again. Thus, how the concerned government agencies like the EFCC and ICPC handle matters of corruption will be an issue in the New Year as 2019 inches closer.
APC’s Elusive Convention
For almost two years, the APC has consistently failed to hold a national convention being a major prerequisite in political party administration. Although for the obvious fear of a likely backlash, the party is believed to have stylishly avoided holding the exercise. But, as it is, the party can no longer run away from it.
Whether or not the APC likes it, a national convention is inevitable this year and the outcome, to a very serious degree would shape a lot of things in the party, including the poorly managed but present and palpable malcontents in the party.
A Whiff of Expectations
For the Nigerian arts world in 2018, it’s a mixed air of exciting expectations and uncertainties, writes Yinka Olatunbosun
The past year offered a few clues as to what to expect in 2018. A number of annual art traditions were broken while some laudable comebacks were recorded. A few art events are struggling to keep the fire burning. Let’s skip the pages to the part where celebrations are inevitable.
For the art community, it will be a great sin against the memory of highlife legend, Rex Lawson to forget the man behind his signature conga beats- Chief Tony Odili. Arguably the oldest music artist in Nigeria, Odili turns 90 this January. The sad news is that he lives in penury since the death of his former band leader, Lawson, especially when he sustained a major injury after a fatal boat mishap on his hands. But the good news is that is he alive and active with the drums and there are plans to celebrate the man this year.
The British Council Nigeria usually sets the pace in making theatre come alive every March with the Lagos Theatre Festival. In the meantime, the cultural institution beckons at two West African artists for an international residency program that will last for several months.
Also, the biggest visual art event of the year, Art X holds a certainty spot on the art calendar. The audience will be larger. To accommodate a bigger audience for the talk sessions, Art X may be looking at expanding the venue with satellite venues in view.
Keeping up with the April global tradition in music, the Lagos International Jazz Festival is expected to return with an iconic musician at the centre of celebration and unexpected headliners. Last year, the fuji music King, Abass Akande Obesere was a pleasant surprise. The headliners are usually confirmed about two months to the show.
With Felabration, the 2017 edition is yet to get a competition. This year, Fela’s 80th posthumous birthday will be celebrated in filmography, lectures, contests, performances and studio albums by new generation of artists.
Inside the literary art, the Lagos Book and Art Festival will honour another distinguished Nigerian, who is either an artist or an author who has contributed to the development of arts in Nigeria. In Abeokuta, the literati will gather for the annual literary feast, Ake Book and Art Festival. While some meal tickets from the previous editions still occupy the corners of our bags, it is expected that the stakeholders in the media who have effectively contributed to the knowledge economy over the years will be part of this edition.
Music will offer more exciting collaborations and rivalries. Although the previous year ended with the surprise reunion of Wizkid and Davido on stage, breaking the jinx of two rivers that never mix, it is expected that there will be some lingering “beef’’ such as Paul and Peter of P-square if the fundamentals principles of private and public image in music artistry are not applied. The Music Society of Nigeria (MUSON) is expected to bring more to the table this year with the annual concert and talk sessions. While still holding true to the culture of promoting pure classical music, MUSON will show a more contemporary tilt with very promising headliners, depending on the availability of sponsors. One of the concerns of MUSON Concert organisers is that classical music does not readily get sponsorship as popular music. Meanwhile, the show is an eye-opener on the undocumented number of Nigerians who relish classical music.
In photography, there will be more contests, photo festivals and workshops. With LagosPhoto serving as the touch-bearer, other photography events will sustain the burning flame in emerging and established photographers. From selfies to showbiz, this industry is to be taken seriously just as the documentary film in Nigeria has been. Typically, the IREP Documentary Film Festival holds a monthly film screening in Lagos in collaboration with the Goethe Institute Nigeria. The frequency of screenings had reduced in the previous year but with the week-long film festival, movie buffs will discover new truths in films that are presented at the festival with a usual venue- Freedom Park.
Also, the Vision of the Child is a visual art event that unearths hidden artistic talent in children. In the previous edition, it included a writing contest with a theme selected by the convener and Nobel Laureate, Prof. Wole Soyinka. This unfailing tradition continues this year.
For the theatre, uncertainty trails the existence of the National Theatre as calls are rising for its sale following the years of misuse and neglect by its management. While the number of artists in Nigeria is on the rise, the lack of proper venues built for performing arts is worrisome. Instead of revitalizing the once cultural hub with all year performances, the National Theatre has effectively served as a local pub, with large vacant auditorium at each entrance surrounded by thorn-filled grasses waiting to be pruned.
In recent years, the National Gallery of Arts, domiciled in the National Theatre Complex offered no show. It is very disappointing for any tourist who expects to be guided by a poster announcing the shows for the season but meets only an obituary of an artist whose funeral has long been forgotten. Worse still, the heavy presence of trucks inward Eko Bridge and Ijora axis is making the National Theatre inaccessible and obviously, the sale of the edifice is not the solution to this and other lingering infrastructural and logistical challenges that may have contributed to the fall of the National Theatre from the place of glory.
The greatest optimism in Nigerian theatre tradition comes from the private sector. In the past year, Nigeria theatre became a major cultural export with Kakadu the musical, WAKAA and Saro the musical in international shows. This year, more international shows are expected to hold in London and other major cities in the world while new theatre venues are expected to be launched in Lagos. The return of Terra Kulture as Terra Arena is still a talk-of-the-town as many theatre performances had been produced on the stage.
While the anticipation of a new contemporary museum of arts is high, it can be said that the construction of the Omooba Yemisi Shyllon Museum of Contemporary Arts at the Pan-Atlantic University, Ibeju-Lekki is close to completion and may be open to the public this year. Shyllon, a very famed Nigerian art collector in Nigeria is donating some of the works in his private collection to this unique museum.
Next year, the Living Legend Project will celebrate the Obi of Onitsha at its 10th year anniversary edition. The founder of the project, Olu Ajayi also promised to take art to his hometown, Ososo, Edo State for youth empowerment.
Russia World Cup Set to be Highlight of Nigerian Sports in 2018
It’s another World Cup year and this time more than in recent years, Nigerians are optimistic of a successful outing, probably better than any other edition. This, despite the fact Nigeria have been drawn in a group some pundits see as the ‘group of death’ alongside two time champions and last edition’s finalists Argentina, a very talented Croatia side and giant killing Iceland.
The optimism stems from the way the Eagles navigated their qualification for global sports’ premier event: Nigeria came top in a group that included African champions Cameroon, a tough Zambian side that eventually finished second, and a highly –rated Algeria side that were number one in Africa at the time of the draw. The Eagles were so good that they could afford to qualify even after they were penalised three points for fielding an ineligible player in their last game against Algeria.
If the World Cup is the highlight of the year, the match against Argentina – the last of the group stages – will be a fitting climax and a marker of how much the Eagles have progressed in recent years. For the umpteenth time, both teams have been drawn together in the same group, with Argentina superstar and Barcelona stalwart, Javier Mascherano describing the fixture as a World Cup Clasico.
The match slated for June 26 at the St Petersburg stadium would be the fifth time in six World Cups that Nigeria would be playing the South American giants. In 1994, a Diego Maradona inspired team came froma goal down to win 2-1 courtesy of a Claudio Cannigia brace. In 2002, Gabriel Batistuta made the difference with a lone goal. In 2010, it was a Gabriel Heinze goal that separated both teams while Lionel Messi helped his team defeat the Eagles 3-2 in 2014.
In fact the only occasions the Eagles have won have been in friendly games. The most recent – a friendly in Russia last month – gives cause for optimism. A young Nigerian team came from two goals down to beat a strong Argentine team 4-2. Lionel Messi was the only superstar to miss the game for the Argentines.
The rivalry between both countries goes beyond the senior level though. Argentina prevailed over Nigeria in the final game of the FIFA Under 21 tournament in 2005, in what was Lionel Messi’s (and Mikel Obi’s) breakout tournament. ZThree years later at the Beijing Olympics, the same players were central characters as the Argentines won gold at the expense of their Nigerian counterparts with the same scoreline as in 2005: 1-0.
Incidentally, Nigeria’s biggest success onn the global football stage was against Argentina. The victorious Olympic team of 1996 won the gold medal match against a star-studded Argentina 3-2, after previously dispatching Brazil 4-3 in an epic semi-final. It is safe to say (and concur with sports experts) that the June 26 game at the Russia 2018 World Cup would be one of the most anticipated in Nigeria’s sports calendar. Already, the match has been touted as one of the top ten games to see in the competition.
Staying with football, 2018 might be the year when a Nigerian player goes on to be the very best on the continent if they continue their upward trajectory. The World Cup would be an oppoprtunity for Premier League stars like Victor Moses and Alex Iwobi to increase their stock as they play central parts in the fortunes of their respective teams, Chelsea and Arsenal. Both have become central to their teams exploits and just need to step up a notch to be genuine global superstars.
A few youngsters to look out for include Kelechi Iheanacho, Victor Osimhen, Ola AIna and possibly, Tosin Adarabioyo. They are indicative of a bright future for Nigerian football.
Moving away from football, Nigfterians can look forward to the exploits of world heavyweight champion, Anthony Joshua. Admittedly, Joshua fights under the British flag, the country he represented and won ogold for at the London 2012 Olympics. However, Joshua’s penchant to identify with the nation of his birth has made hime a Nigerian hero and every staep he makes in 2018 will be keenly followed, supported and applauded in Nigeria.
The WBA and IBF champion is bound take centre stage in2018 with defences of his title and unification bouts in the works. Three names that are on the shortlist of possible contenders include WBO champion, Australia’s Joseph Parker, which is seen as the most likely fight to take place.
However, the boxing World is smacking its lips at the prospect of Joshua taking on WBC champion, America’s Deontay Wilder, who has a record of 38-0 with 37 knockouts. The fearsome boxer has been making the right noises and calling Joshua out in a fashion that suggests a face-off is just a matter of time.
Meanwhile, former champion, jthe undefeated Tyson Fury who has just been cleared to resume his boxing career after being stripped of his titles is waiting the wings. The towering boxer – at 6ft 9inches – is seen as the greatest threat to Joshua’s dominance as long as he gets back in shape. According to Fury, all he has to do to regain his belts is to outbox “a bunch of bodybuilders”.
TO kick off the excitement this year would be the Nigeria’s historic participation at the Winter Olympics in the relatively little known sport of bobsled.
The trio of Segun Adigun, Ngozi Onwumere and Akuoma Omeoga completed the required races to qualify for the PyeongChang Olympics in South Korea, becoming the first Africans to do so. They were former US-based sprinters who through personal efforts defied all odds to make it to the competition. Through massive campaigning and marketing, they crowd-funded the $150, 000 required to fund their efforts in the races.
Now they are stars in their own right and their stock can only increase when the competition commences; regardless of their performance at the Olympics, they have made history and a are source of pride and inspiration to their fellow citizens, especially women.