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Midterm Assessment: Nigeria’s Economy Under PMB’s Watch




President Muhammadu Buhari’s tenure as the president of Nigeria started at a time that the country stared recession in the face. It is however in the public courts with two sides dissipating energy on who and what caused the recession.

Some economic analysts argue that recession had commenced before the current administration came on board while others say the country’s economy receded after PMB took over the reins of the administration of the country. So in two years into the his regime, recession showed up, but economic indicators are showing that the economy is coming back on track.

It is clear that President Buhari came into power at a trying time for the country. Oil price which was the major revenue earner for the country was down to its lowest in decades while the country’s production capacity declined on the continued violence in the oil rich Niger Delta region.

The country’s Gross Domestic Product (GDP) which had risen to $546.7 billion as at 2014 began a decline in 2015 dropping to $486.8 billion as economic activities slowed down. By the third quarter of 2016, the government officially declared that the country was in recession as the economy of shrank by 2.24 per cent.

This was however not peculiar to the country as many economies across the globe, particularly countries dependent on revenues from commodity, also saw a slowdown in growth in 2016 due to decline in global commodity prices.

The price of oil which contributes close to 90 per cent of Nigeria’s revenue dropped  from around $110 per barrel in 2014 to around $35 per barrel in 2015 meaning government revenue from oil was down by more than half although the 2015 budget had been based on a pricing of $65pb.

This trickled down to the state level as federal allocation dropped and many states required a bail out after they were not able to pay salaries for months. Despite the stagnant and in some cases no income, the cost of living continued to rise as the depreciating value of the naira led to a rising inflation.

Inflation which had been kept in check at a single digit figure of 9 per cent in 2015 steadily rose in 2016 and reaching a high of 18 per cent in January 2017. Inflation figures had rising on a weaker naira as the reduced foreign exchange earnings of the country resulted in the erosion of the external reserves which plummeted to a low of $23 billion by October 2016. This reduced the ability of the Central Bank of Nigeria to continue to prop up the value of the naira which had been pegged at N197 to the dollar.

Stricter measures were adopted to reduce dollar outflow leading to the erosion of the value of the naira at the parallel market. The naira’s value against the dollar dropped as it sold for as low as N520 to the dollar sending prices to the roof.

In battling the recession, the Federal government in 2016 had introduced palliative measures having cut back some of its costs. Major among them was the removal of fuel subsidy which saw the price of petrol rise from N65 per liter to N145pl.

The palliative measures according to government, would help alleviate the hardship posed by the hike in fuel prices. The presidency rolled out a N500 billion social investment programmes as a ready-made palliative to lift Nigerians from poverty and economic hardship.

Major highlights of the palliative measures include payment of between N23,000 to N30,000 per month to500,000 unemployed graduates who would be trained, paid and deployed to work as volunteer teachers, public health officers and extension service workers and in addition, would be given electronic devices to empower them technologically both for their assignments and beyond . Similarly, 100,000 artisans would also be trained and paid.

At least 5.5 million Nigerian primary school children, in 18 states, three per geopolitical zones –were to be fed for 200 school days under the free Home-grown School Feeding Programme, while there was to be a direct payment of N5,000 monthly to one million extremely poor Nigerians for 12 months and the provision of very soft loans for traders, artisans, and agricultural workers. However, the country has been able to survive the recession within the tenure of President Buhari as analysts’ projections that the country would be out of recession in 2017 finally coming to fruition. The International Monetary Fund had recently revised upward the growth projections for the country while World Economics had declared that the country is out of recession.

While the IMF sees a growth of 0.8 per cent for the country in 2017, Standard and Poors Global ratings envisage a growth of 1.5 per cent and analysts at FBN Capital have a more optimistic growth projection of 2.2 per cent year on year growth for the country.

Economic indicators are pointing to the fact that the country is gradually but surely recovering with GDP and the CBN governor, Godwin Emefile had last month stated that the economy will be fully out of recession by the second quarter of the year as the value of the naira gained strength at the parallel market.

Research analyst at FXTM, Lukman Otunuga, had noted that the country had displayed some resilience against the ongoing recessionary headwinds in 2017, with domestic data currently suggesting early signs of a potential recovery in economic growth.

Efforts to reposition the economy

The administration has however made commendable reforms to lay a foundation for renewed growth. Some of the specific reforms include the rationalisation of the public sector in order to cut the cost of governance; enforcement of the Treasury Single Account (TSA) to block financial leakages; renewed efforts at enforcement of tax compliance and introduction of whistle blowers policy.

To take the economy to a non-oil revenue based one, the federal government has expanded its tax payers base from less than 10 million in early 2015 to about 14 million by the end of December 2016. Federal Inland Revenue Service under the present administration increased revenue generation for 2016 alone to a record N3.3 trillion, first in the history of tax collection in Nigeria. Awareness on tax collection and payment has also improved significantly in the same period due to massive awareness campaign of the government.

To a rather ambitious step, the government’s preparation for zero-budgeting starting in 2016 and increasing the ratio of capital to recurrent expenditure to 30:7 is one of the aspects it has demonstrated readiness to reposition the economy and take it away from recession, a move experts say is commendable.

As part of determination to restore the nation’s economic growth following the high rate of inflation in the economy still in recession, the federal government launched Economic Recovery and Growth Plan (ERGP). The plan is an ambitious plan that seeks to achieve a 7 per cent economic growth by year 2020. In his remarks at the launching of the ERGP in April this year, President Buhari said apart from moving the country out of recession, the 3-year-programme will put it on the path of strength and growth, away from being an import dependent nation.

The administration is keen on restructuring the economy and her fiscal plan. In its 2016 and 2017 budgetary proposals, the government reduced the amount for recurrent expenditure against capital expenditure. In the 2016 and 2017 appropriation years, the sum of N1.587.6 trillion and N2.062 trillion were voted for capital expenditure concurrently (excluding statutory transfer). While N2.646.4 trillion and N2.980 trillion were appropriated for 2016 and 2017 respectively under the recurrent (Non-debt) expenditure. The 2017 proposed capital expenditure represents 41 per cent of the total budget, which is 13 per cent higher than 2016 appropriation for the same category.

According to the minister of finance, Kemi Adeosun, about N1.2 trillion was released for capital projects in the 2016 fiscal year. That is record breaking for the administration; even though experts have argued that the money makes no difference compared to the low value of the naira in 2016/2017 compared to 2014 when N1.10 trillion was given to capital projects and N2.43 trillion for recurrent expenditure out of a total budget of N4.91 trillion.

Nevertheless, the determination of the government to reduce the aggregate percentage for recurrent expenditure from about 69.51 per cent in 2014 to 41 per cent in 2017 is one thing that cannot be taken away.

On the monetary side, there have also been strenuous efforts to give the naira some facelift and narrow the spread between the official and parallel market exchange rate by the Central Bank of Nigeria (CBN). On the back of tumbling rising cost of goods, soaring unemployment rate, with a crippling inflation rate to 18.3 per cent while companies, including financial institutions post negative financial statements, the central had announced a flexible exchange rate for the financial market. Particularly worried by the continued spread in the official and parallel rate of the naira to the U.S. dollar, the bank intervened in the market with several FX trading windows for PTA, BTA and education and a special forex window for investors that allows them trade the naira at a market-determined rate. The CBN also opened a special foreign exchange window for Small and Medium Enterprises (SMEs) to enable them import eligible finished and semi-finished items not exceeding $20,000 for an enterprise per quarter.

Stock Market Sheds N1.9trn In 2years

Two years into the PMB’s administration, the Nigerian capital market may have lost N1.913 trillion, as a result of the economy recession. The Nigerian Stock Exchange data showed that the NSE market capitalisation on May 28, 2015 was N11.658trillion, while that of May 12, 2017 was N9.746 trillion. Market capitalisation is the total market value of the shares outstanding of a publicly traded company.

The NSE All-Share Index also crashed to 28,192.46 basis points from 34,310.37 basis points. However, in the last three week, the stock market shows a sign of stability in growth as the market gained N1.03 trillion as a result of foreign exchange stability and positive economic policies.

Since early 2014, the performance of the Nigerian stock exchange (NSE) is in fact abysmal, resulting in shading of value by the market. At the end of year 2014 the market ended as one of the worst in the world, prompting more investors to be cautious in putting their money in the NSE.

It would be recalled that when President Buhari was announced winner of the 2015 Presidential elections on March 31, 2015, the All Share Index recorded what is now known as a “Bull-Hari” effect. It recorded about 10 straight day of gains as investors basked in the excitement of a peaceful election and surprising acceptance of defeat by President Goodluck Jonathan.

However due to uncertainty over the government policy, the stock market recorded months of volatility as investors continue to be kept in the dark about the economic policies of the government. Investors both local and international have basically given up on the economy fleeing Nigerian stocks. The fall in oil prices, continued dithering by the Central Bank of Nigeria (NSE) on its forex policies, corruption allegations against past governments, bankrupt states, drop in GDP and rising unemployment have all contributed to the negative outlook placed on the Nigerian economy thus damaging investor sentiments further.

Although the president got off to a slow start, there are a few things that are already taking shape. Despite a sharp increase in the pump price of petrol, there appears to have been an end to the corruption-riddled fuel subsidy. The Central Bank of Nigeria (CBN) has introduced a floating exchange rate which many believe would encourage foreign investment inflows and other reforms.

Capital market has always been at the receiving end of any policy or event undertaken within the economy, even outside an economy.

Banks battle foreign exchange, TSA under President Buhari

Financial institutions in the country for the past two years were faced with naira devaluation, foreign exchange income, asset quality, capital and fully implementation of Treasury Single Account (TSA) under President Muhammadu Buhari administration.

To be accountable and increase government revenue, President Buhari administration had fully implemented TSA with corresponding strict industry regulations, which have capacity to adversely impact both liquidity position and lending capacity of the industry.

In addition to this, the new policy by Federal Government on full implementation of TSA compounded the liquidity challenges within industry.

However, the reduction in harmonized Cash Reserve Ratio (CRR) on public sector deposits to 22.5 per cent from 75 per cent in 2015 eased the anticipated liquidity challenges.

While announcing the reduction of the CRR, which is estimated to inject about N900 billion into the banking system, the Central Bank of Nigeria (CBN) Governor, Godwin Emefiele, warned banks to channel the additional funds to small and medium enterprises (SME) or risk losing the CRR funds boost.

This directive raises fresh risks for banks because they have hitherto developed tiny capabilities to create loans for the SME sector.

The SMEs sector has continued to record revival under President Buhari with CBN and SMEs investing heavily in the sector in a move to develop local contents.

Following the dwindling global oil prices, both CBN and financial institutions battled to stay afloat of the drop in foreign reserves and foreign exchange crisis respectively, amid deteriorating   loans portfolio in most especially the Oil and Gas sector.

According to experts, Nigeria recorded over 70 per cent drop in the price of crude oil, which contributes the largest share of Foreign exchange reserves and Federal Government Revenues.

Despite the macro-economic challenges, Nigerian bank’s assets and profitability continued to grow in the past two years while others banks impairment  and operating expenses doubled over the years, a factor that dragged profit downward and no returns on dividend.

Few banks adopted an aggressive marketing style at increasing customers’ base and expanding outlet in order to attract more customers.

The aggressive sourcing for new deposits yielded positive results given massive unbanked populace.

Banks continued to raise fresh capital via commercial papers, bonds and right issues despite the uncertainty in the equities and exit of foreign investors.

The CBN reforms in the past two years have continued to strengthen banks across board with some decisive actions that include removing top management, fight against Anti-Money Laundering (AML) and push for financial inclusion across the country.

Banks reacted to President Buhari’s fight against corruption with the disclosure of illegal funds stockpile in various banks accounts of top politicians across the country.

The CBN had ordered workers in all the 19 Deposit Money Banks in the country to declare their assets. The move analysts said looks like the Federal Government is beginning to expand its ongoing anti-corruption crusade to the private sector, especially the banking industry.

It was contained in a letter through the Banking Supervision Department of the CBN to all the 19 commercial banks in the country.

They supported CBN drive on the ban of items that can be produced locally using Nigeria’s hard-earned Foreign Exchange, another decisive step to grow the nation’s economy and create more jobs.

Faced with recession, the apex banking regulating body and financial institutions have strengthened policy coordination between the key aspects of economic policymaking space.

This would include fiscal, monetary, exchange, and trade policies, which must be targeted at protecting farmers, companies and industries that are committing resources to support government’s drive to diversify the economy away from oil and gas into manufacturing, Agricultural among other real sector of the nation’s economy.

Insurance Industry In the last 2 years

Few months, thereafter, the Federal Government confirmed the appointment of the Alhaji Mohammed Kari, as the commissioner for insurance. Until his appointment, he was first the Deputy Commissioner, Technical and later became the Acting Commissioner, after Fola Daniel left office.

In the insurance industry, operators continue to complain of low businesses from individuals and companies as the insured were not financially buoyant to renew their policies, while some firms suspended their yearly policy and subscribe to quarterly policies.

Moreover, insurance claims increased as values for replacing insured assets soared.

There were no much activities of significance from then till the end of 2015.


In 2016, the country was finally caught in the web of recession as companies started declaring losses. To cope with this reality, individuals and companies began to cut cost.

Most people yanked off insurance budget from their scale of preference, while those who wants renewals of their covers were yearning for monthly or quarterly insurance covers, at the expense of annual premium. It is a development that eats into the profits of the underwriting firms, as some of them were declaring losses.

The forex and scarcity of dollars limited the ability of insurers to underwrite businesses in the Aviation, Oil and Gas, Marine, among other sectors, as there were scarcity of dollars to underwrite these businesses, while compensation, mostly in dollar terms, was pinching insurers because they have to part with lots of money unlike before recession.

Following a directive in the 2009 Corporate Governance Code of the National Insurance Commission(NAICOM) mandating executive directors and non-executive directors, who have stayed over a stipulated period of years, precisely, nine years on the board of insurance firms, to exit these companies, this led to mass exit of Executive and non-Executive Directors on some insurers’ board. There are strong indications that this development could threaten and destabilise the operations of the affected firms.

To further compound the woes of the industry, the insurance industry regulator, the National Insurance Commission (NAICOM), barred about 58 insurance companies in the country from using financial institutions, telecommunication companies and airlines, as channels to sell their products and services, unless these distribution agencies are licensed by the commission to do so.

The commission equally disclosed that all previous and current relationships of underwriting firms with the aforementioned agencies are no longer valid.

With this development, Leadership finding shows that most underwriting firms who are in partnership with the big telecommunication outfits, such as Glo, MTN, Airtel, on mobile insurance had to terminate such transactions that is generating the benefiting insurers several millions of naira on a monthly basis.  However, the bancassurance arrangement between the banks and insurers was equally put on hold. This, on its own, closed an income-generating windows for some operators.

The commission, however, plans to establish new distribution channels, as it wants to license any agency and referral agents that are doing businesses and earning commission from the insurance industry.

Amidst the economic recession that is battling the country, Leadership learnt that, in the course of the year,  some insuring public have devised means to make fraudulent claims from insurance companies, in a bid to make quick money, of which some underwriters lose millions of Naira, a development that is eroding their profits.

Contributions of the Nigeria Custom Service to the economy

Through the Nigerian Custom Service (NCS), the administration has intensified efforts at repositioning the nation’s economy. Customs service was one of the redemption points for revitalisation of the economy. This followed the appointment of Col. Hameed Ali (rtd), a disciplinarian and aristocrat to handle the affairs of the service that that seen rapid reforms, and restructures which in turn has increased revenue generation as well as tightening war against smuggling.

This has led to the quantum removal of defects, strengthened the structure and adoption of simplified procedures in line with international best practices.

On anti-smuggling,  the Nigerian Custom Service, in 2015 and early 2016 implemented the ban on importation of rice and vehicles through the land borders. This single act have not only curtailed the activities of smugglers and smuggling in the country but has increased patronage to the nations sea port for imports of same items thereby streamlining all revenues to the federal government.

Vigorous anti-smuggling activities have also resulted in huge seizures of goods, including 661 units of pump action rifles in Lagos.

To buttress conformity with trade regulations, Mr Ali reconstituted Custom compliance team. The new Compliance team is charged with vigorously crackdown on all forms of smuggling activities nationwide with particular focus on the enforcement of non-importation of rice and vehicles through the land borders.

Albeit to say that the various efforts at trade consolidation is paying off as seen in huge seizures and huge revenue generation.

Against dwindling revenue that has purged almost all revenue generating agency of government, the present administration through the NSC continue to strive on its mandate of revenue generation.

In line with this, in 2015, total revenue of N904, 072,689,941.72 was generated against a target of N944, 446,908,000.00.  For 2016, a total of 898,673,857,431.07 against a target of  N937,331,237,000.00 and for the first quarter of 2017, (JAN- MARCH 2017) NCS  generated an impressive N239,408,000,980.63 as against a target of N193,220,770,875.99.

Likewise in the area of seizures,  the present administration through the NSC had a total of 5,485, seizure, culminating to N7,512,544,036 paid duty value, for 2026, an impressive 6,150 with a duty paid value of N10,252,408,422 and for the first quarter of 2017, a total of 1,291 totaling N2,366,891,463.61 in duty paid value.

To consolidate Nigeria stand as the hub of African economy,  the NCS is working towards   promotion and facilitation of trade and competitiveness.

Before now, the reality at the Nigerian ports is challenging; however efforts are been put in place to remove difficulties associated with doing business in Nigeria.

Midterm report for RMAFC

The present administration through the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) has been canvassing for general reform of the Nigerian economy through diversification, away from our over-dependence on the oil and gas sector to other sectors such as solid minerals, agricultural and manufacturing.

The Commission is empowered by the 1999 to monitor accruals to and Disbursement from the Federation Account and also advise the Federal and States Government on fiscal efficiency and method by which their revenue can be increased.

Repositioning the mining sector

One of the areas the Commission has beamed its search like in the last two years is in the area of mineral resources development and advancement. It is indisputable that the country is well endowed with abundant solid mineral resources. However, it is disheartening to note that the contribution of the sector to the Nigerian economy is very negligible, contributing only 0.3 per cent to the nation’s Gross Domestic Product (GDP).

According to the acting Chairman, RMAFC, Mr Shettima Umar Abba Gana,  the commission undertook a nationwide monitoring exercise of the Solid Mineral Sector in the 36 States of the Federation and the Federal Capital Territory (FCT) between October and November 2016. This according to him was necessitated by the realization that the sector has huge economic potentials which have been virtually left untapped.

“We were able to establish linkages and foster harmonious relationship amongst critical stakeholders in the Country. This was followed by the convocation of a one-day National Seminar on the Role of Mining Sector in Diversifying the Revenue Base of the Nigerian Economy”

“The mining sector is expected to play a very crucial role in the change agenda of the present administration in its diversification drive to broaden the economic base of the nation, create employments for the teaming unemployed youths and achieve sustainable long term economic development.” he said.

In the course of the exercise, the Commission discovered that on paper, over 7000 mining licenses were said to have been issued nationwide. However, barely 10% of this figure was found to be active, resulting in huge revenue losses to the Federation. In addition to this, the Commission also observed that the sector is bedeviled with numerous challenges which inhibit the sector from contributing meaningfully to the nation’s Gross Domestic Product (GDP).

The data obtained from the Federal Mines Offices across the Federation indicates clearly that the revenues generated do not reflect the true picture of activities in the sector. Moreover, only a few States made available their records on revenue collected.  Irrespective of that, the sum of N3,212,404,198.31 was realised as the amount collected by the Federal Mines Offices in twelve (18) States during the period under review.