Economic analysts and stakeholders expressed concerns yesterday as the country’s Gross Domestic Product (GDP) growth rate dropped to 1.94 percent (year on year) in real terms in the second quarter of the year (Q2 2019), compared to the 2.10 percent (revised from 2.01 percent) in the preceding quarter.
They urged the federal government to urgently evolve practical strategies to stimulate growth in key sectors of the economy.
According to the GDP Report for Q2 2019, which was released yesterday by the National Bureau of Statistics (NBS), the Q2 estimate represented –0.16 percentage point contraction of the economy.
However, compared to the corresponding quarter of 2018 (Q2 2018), which recorded a growth of 1.50 percent, the growth observed in Q2 2019 indicated an increase of 0.44 per percentage points.
Meanwhile, the country recorded average daily oil production of 1.98 million barrels per day (mbd), which is slightly less than the 1.99mbpd (revised from 1.96 mbpd) in Q1 and 7.6 percent higher than the 1.84 mbpd recorded in the same quarter of 2018.
While the oil GDP accounted for 8.82 percent of growth, the non-oil sector contributed 91.18 percent to GDP.
Daily oil production also dropped to 1.98 million barrels per day (mbpd) compared to 1.99 mbpd in the preceding quarter.
Aggregate GDP in nominal terms was valued at N34.944 trillion, an increase of 9.8 percent over the N31.79 trillion in the preceding quarter and 13.83 per cent over the performance in Q2 2018. Real GDP was estimated at N16.90 trillion.
The NBS explained that on a half-year basis, real growth in the first half of 2019 stood at 2.02 percent, higher than in 2018, which was 1.69 percent.
However, quarter on quarter, real GDP increased by 2.85 percent compared to a decline of –13.69 percent in the preceding period, the statistical body further noted.
It stated that a total of 15 activities grew faster in Q2 2019 relative to last year, while 13 activities had higher growth rates relative to the preceding quarter.
It added that the performance observed in Q2 followed an equally strong Q1 performance, and was likely aided by stability in oil output as well as the successful political transition.
The oil sector posted a real growth rate of 5.15 percent (year-on-year) in the quarter under review, representing a 9.10 percentage increase relative to the rate recorded in the corresponding quarter of 2018.
The sector, however, contributed 8.82 percent to total real GDP in Q2 compared to 9.22 percent in Q1.
Growth was largely aided by the non-oil sector, which grew by 1.64 percent in real terms during the reference quarter.
Buhari directs reduce operational costs
As part of measures to bolster the federal government finances, President Muhammadu Buhari has directed revenue generating agencies to drastically cut down their operational costs. The directive is coming as the nation’s annual fiscal plans have been hamstrung by serious mismatch between revenue targets and actual receipts.
In an interview on the sidelines of the just-concluded annual meetings of the International Monetary Fund (IMF) and the World Bank in Washington DC, United States, the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, said the president had directed the agencies to cut down their costs to boost government’s revenue drive.
According to her, there has been an improvement in the effort to change the revenue trajectory considering the improving performance of the agencies and Buhari’s directive on cost-reduction by government-owned enterprises, which account for independent revenues.
She said: “We are seeing a forward movement and the president has given a directive that the government-owned enterprises must reduce their cost-to-income ratio by 60:40. In the past, you would see agencies that generate revenue and spent almost about 95 per cent as expenditure. “
Independent revenue is the fund generated by agencies which are captured in the Fiscal Responsibility Act of 2007.
The Act stipulates that any government agency that generates revenue must remit 80 per cent of its operating surplus to the Consolidated Revenue Fund account.
The agencies include the Central Bank of Nigeria (CBN), Nigeria Deposit Insurance Corporation (NDIC), Securities and Exchange Commission (SEC), Nigeria Shippers Council (NSC), Nigeria Export Promotion Council (BEPC), National Health Insurance Scheme (NHIS’), Nigeria Civil Aviation Authority (NCAA) and Nigerian Communication Commission (NCC).
While admitting that the federal government was in deed beset by a revenue challenge, the minister noted that there was a cocktail of initiatives, including the launch of the Strategic Revenue Growth Initiative (SRGI), to surmount the obstacle.
She said: “We do have a revenue problem in Nigeria. We launched the SRGI to address the revenue challenges that we have. So, you would see that we have several initiatives that we put together which were assigned to different portfolio agencies, including the Federal Inland Revenue Service (FIRS), Nigeria Customs Service as well as the NNPC.
“We have also put in place a monitoring mechanism to enhance the tracking of the performance of those agencies and both the FIRS and Customs as well as ourselves are using automation to enhance the collection performance of revenue collecting agencies.
“If you remember in 2015, the average revenue performance was 55 per cent. So, we are seeing revenue performance inching up very slowly but at some point, we expect a much faster progression. Half year 2019, the revenue performance was 58 per cent.
She said company income taxes perform was better in the third and fourth quarters of the year, adding that by half year, when companies are doing their audited account, a much better performance is expected.
VAT: CUPP sues FG
The Coalition of United Political Parties (CUPP) yesterday said it had commenced legal action at the Federal High Court against the increase in Valued Added Tax (VAT) and other policies allegedly capable of unleashing sufferings on Nigerians.
The federal government had recently announced its plan to increase VAT from five per cent to 7.5 per cent.
The CUPP spokesman, Mr. Imo Ugochinyere, in a statement, said the suit was aimed at bringing succour to Nigerians, who he said, had already been traumatised and impoverished.
He alleged that Nigerians were daily being punished by the President Muhammadu Buhari-led federal government through obnoxious tax regime and hiking of prices of government services.
According to him, the Federal High Court presided over by Justice Ekwo Ekwo of Court 5 has since commenced hearing in the litigation.
Ugochinyere said, “We have asked the Federal High Court to determine three questions and we are optimistic that they will all be answered in our favour as they are all issues of law and public interest.
“For a government to clearly go outside the direct provisions of the law just to (inflict) suffering on citizens and tax them out of existence is condemnable, arbitrary, undemocratic, tyrannical, capricious, oppressive, cruel and indeed must be rejected and resisted.
“Is it not worrisome that a government that has failed for six months to implement a new minimum wage regime which would have barely lifted the purchasing power of workers has since that time increased VAT, agreed to return toll gates, embarked on unbridled borrowing, increased electricity tariff without commensurate increase in electricity supply, uses a quarter of the budget to service debts and imposes other jankara economic policies and wicked taxes all aimed at tightening the economic space of the common citizen while they live in affluence and extravagance including abandoning governance to unelected hands and junketing from one foreign country to another.”
Emefiele says Nigeria’s borders remain closed for now
Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele, yesterday listed the gains of border closure since August to include boosting domestic trade, job creation and enhancing Nigeria’s economic policies.
Though he said he was not an advocate of permanent border closure, Emefiele added that before the borders would eventually be reopened, affected countries must be effectively engaged with a view to agreeing on certain terms and conditions.
Answering questions from State House correspondents in Abuja after a meeting with President Muhammadu Buhari before the president’s departure to Saudi Arabia, Emefiele illustrated how some businesses, which he said had almost collapsed before the border closure, suddenly became productive barely a week after the closure.
He narrated the experiences of rice millers and members of the Poultry Association of Nigeria whom he said had before the closure called him to lament about low sales, only to witness a sharp rise in demand shortly after the closure.
He described smuggling of foreign products into the country as a major impediment to the growth of local industries and businesses, adding that rice and poultry businesses have been booming optimally since the borders were closed.
According to Emefiele, the closure of the borders has not only boosted businesses in the urban areas, rural areas are also bubbling because businesses such as grain production are now productive as farmers have maximised profits since the closure.
He said: “Recently, and this is the absolute truth. About two weeks before the border closure, the chairman of the Rice Processors Association, incidentally, he owns Umza Rice in Kano, called me and said that all the rice millers and processors were carrying in their warehouses nothing less than 25,000 metric tonnes of milled rice in their warehouses; that this rice had been unsold because of smuggling and dumping of rice through the Republic of Benin and other border posts that we have in the country and that he would want us to do something about it.
“Secondly, we also have members of the Poultry Association of Nigeria who also complained that they have thousands of crates of eggs that they could not sell together with even some of the processed chickens that they could not sell, also arising from the problem of smuggling and dumping of poultry products into Nigeria.”
He said he was told that after some meetings that were held in addition to those engagements that the CBN also held with the president, the border was closed subsequently.
A week after the borders were closed, he narrated, the same Rice Millers’ Association called to tell the bank that all the rice that they had in their warehouses had all been sold.
“Indeed, a lot of people have been depositing money in their accounts and they have even been telling them ‘please hold on don’t even pay money yet until we finish processing your rice,” he said.
Emefiele said the poultry association had told him that they had sold all their eggs. “They have sold all their processed chickens and that demand is rising. So, when you asked, what is the benefit, the benefit of the border closure on the economy of Nigeria (I just used two products – poultry and rice) that it has helped to create jobs for our people. It has helped to bring our integrated rice milling that we have in the country back to business again and they are making money,” he said.
The CBN governor said the rural communities were bubbling because there were activities and rice farmers were able to sell their paddy, adding that the poultry business was also doing well even as maize farmers, who produced maize from which feeds were produced were also doing business.
“These are the benefits,” he emphasised.
Emefiele urged the federal government to list out terms and conditions to be met by Nigerian neighbours before the borders are reopened.
According to him, such terms and conditions must include the kinds of commodities that can be shipped to their countries, pointing out that such commodities must be meant only for their local consumption.
He added that situations where certain commodities, after being shipped to such countries, head for Nigeria would not be acceptable as they undermine the country’s economic policies, threaten the productivity of domestic industries and the desire for job creation.
According to him: “We are not saying that the borders should be closed in perpetuity, but before the borders are reopened, there must be concrete engagements with countries that are involved in using their ports and countries as landing ports for bringing in goods that are smuggled into Nigeria.
“That engagement must be held so that we agree on the basis under which: what are the kinds of products that they can land in their countries because if they land those products in their countries, and it is meant for their own local consumption, it is understandable.
“But the fact that those products are landed in their countries and then trans shipment of smuggled items into Nigeria is something that I am sure you all agree as Nigerians we should not allow to happen because it undermines our economic policy. It undermines our own desire to make sure that industries are alive and jobs are created in Nigeria.”
Access Bank to acquire Kenyan bank
Access Bank is set to acquire the Transnational Bank Limited of Kenya. The deal, which comes exactly seven months after Access Bank successfully consummated a business combination deal with the defunct Diamond Bank would see the bank expand its footprint in Africa.
The Managing Director/Chief Executive Officer, Access Bank Plc, Mr. Herbert Wigwe, confirmed the development. He anticipated that the deal would be finalized before the end of next week.
Wigwe said Access Bank would formally notify the Nigerian Stock Exchange (NSE) today (Monday).
According to him, the acquisition aligns with Access Bank’s strategic vision.
He said: “We are going to issue a statement on the Nigerian NSE tomorrow (today). Kenya is a big market in Africa, it is a major trade route and major payment corridor.
“This aligns with our strategic vision. We have our own regulatory and board approvals. In Kenya, the bank is going through its own regulatory process. But the deal is imminent, so it could happen this week or next week.”
It was gathered that the Access Bank would acquire a 93.57 percent stake in the Kenyan bank as it seeks to consolidate its presence in the continent.
Access Bank would now join GT Bank and the United Bank for Africa Plc, two other Nigerian banks with a presence in the Kenyan market.
Access Bank Plc at the weekend reported a significantly improved performance for the nine months ended September 30, 2019, reflecting the positive impact of its previous merger with the defunct Diamond Bank. The bank posted a growth of 44 per cent in profit after tax (PAT) to N90.7 billion in 2019, up from N62.9 billion in the corresponding period of 2018.
The breakdown of the performance showed that Access Bank Plc ended the period with net interest income of N210 billion, compared with N123 billion in 2018, while non-fee income rose from N37 billion to N56 billion. Impairment charges stood at N10.611 billion, compared with N8.353 billion in 2018.
Personal expenses went up from N41.4 billion to N54.6 billion, while other operating expenses increased from N82 billion to N121 billion in 2019. Despite the high costs recorded, Access Bank Plc posted a profit before tax of N103 billion in 2019, up from N70.2 billion in 2018, while PAT rose by 44 percent to N90.7 billion, from N62.9 billion in 2018.
A further analysis of the results showed that its merger with defunct Diamond Bank is yielding fruits as deposits soared from N2.56 trillion to N4.24 trillion, while loans and advances improved from N1.993 trillion. Total assets jumped from N4.942 trillion to N6.58 trillion.