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KPMG reveals 7 Fault Lines that may distort Nigeria’s economy in a new decade

KPMG has revealed 7 fault lines that may distort the growth of the Nigerian economy over the new decade.

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KPMG reveals 7 Fault Lines that may distort Nigeria's economy in a new decade

KPMG has revealed 7 fault lines that may distort the growth of the Nigerian economy over the new decade. The multinational professional services firm disclosed these at the Nigerian-South Africa Chamber of commerce council’s breakfast forum in Lagos.

Speaking at the forum, the Associate Director, Strategy and Economics, Management Consulting, KPMG Nigeria, Olusegun Zaccheaus, explained that the Nigerian economy failed to record any strong meaningful growth in the just-concluded decade due to several structural issues.

Nigerian economy is on a slippery slope of recovery, KPMG discloses  

According to KPMG, there are 7 major fault lines that may distort Nigeria’s economic landscape in the next decade, and these include external dependence, fiscal unsustainability, unorthodox monetary policy strategy, VUCA policy environment, low productivity, low consumption power and social-economic weak link.

The major fault-lines for the next decade   

  • External Dependence

According to the firm, Nigeria depends on external sources for fiscal revenue, FX inflows, deficit funding and capital flows.

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Specifically, KMPG emphasized that there is an overreliance of the Nigerian economy on external borrowing, oil price and foreign capital flows. Hence, any commodity shock that comes from the global economy will have severe implications on the Nigerian economy.

[READ MORE: Nigeria’s economy can’t survive without diaspora inputs, says PwC Chief Economist)

  • Fiscal Unsustainability

While providing further insights on the economy, KPMG revealed that Nigeria’s debt profile has grown significantly above the revenue. According to the firm, Nigeria’s debt portfolio has grown remarkably, compared to the fluctuating trend witnessed in revenue influx in the past years.

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KPMG noted that with the overly ambitious revenue target in the 2020 budget, the country’s debt stock is expected to hit a new high, further dragging the country into lingering debt problem.

It was disclosed that while debt has increased significantly in the Sub-Saharan region, with Euro bond wholesomely driving this, Nigeria is a leading contributor. Meanwhile, the firm noted that indeed, Nigeria may not have a debt problem but revenue. According to KPMG, Nigeria has one of the lowest Debt-GDP ratios in Africa, however, the country records one of the lowest revenues to GDP among Africa’s largest economies. 

READ MORE: Non-oil sector to contribute 80% of Nigeria’s revenue in 3 years – FIRS 

  • Unorthodox monetary policy strategy

Analysing Nigeria’s monetary policy environments, KPMG stated that the CBN has achieved some level of progress from its policies, and these include stabilizing FX market, improving liquidity and improved foreign portfolio investment.

According to KPMG, exchange rate has been stable since 2017, and this is traceable to the Central Bank strategy to defend the naira at the expense of the country’s reserves. KPMG disclosed that CBN intervened in the FX market in 2019 by injecting $39 billion into various windows to keep the naira stable at the prevailing market rates.

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Despite this, key underlying issues still exit. Some of the issues highlighted by KPMG include FX supply gap, continued depletion in external reserves, expensive OMO instrument and overvaluation of naira.

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On the issue of increase in Loan-to-deposit ratio to 65%, KPMG noted that the policy initiative indeed raised credit to the private sector by N2 trillion at the end of 2019, but Nigeria still ranks the bottom of credit pyramid when compared to countries like China, India, Brazil, Indonesia and South Africa.

  • VUCA policy environment

While putting the country’s policy environment in perspective, KPMG described it as volatile, uncertain, complex and ambiguous. On the volatile nature of the economy, KPMG stated that the speed of change which drives fluctuations in the global market directly triggers oil prices, aggregate demand and inflation respectively in the Nigerian economy.

Analyzing the uncertain landscape of the economy, the firm stated that the uncertainty which surrounds the Nigerian economy limits decision-making capabilities. Some examples listed include the sudden border closure, ban of Okada in some states, and so on.

READ MORE: Nigeria’s 3.46 trillion fiscal deficit, a source of concern – MPC Member  

On the other hand, the complex environment reflects in multiple taxation, stamp duty, increase in electricity tariffs and so on. While the ambiguous landscape is characterized by the exchange rate systems which has made the economy unattractive for foreign direct investment.

  • Low Productivity

On the low level of productivity, KPMG revealed that low productivity is a critical problem limiting economic potential of individuals and firms in Nigeria. The firm disclosed that Nigeria’s productivity level has been trending below the country’s GDP, as labour productivity continues to slope to the negative region.

According to KPMG, major productivity issues affecting corporates include poor infrastructure, power supply, opportunity cost of port congestion and poor regulatory interventions. Although, KPMG noted that the country recorded some progress through improvement in the ease of business ranking and reduction in tax burden on SMEs.

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  • Low Consumption Power

According to KPMG, Nigeria has been faced with declining GDP per capita since the aftermath of recession in 2016, and the trend may be exacerbated by the recent policy move by the government to raise VAT from 5% to 7.5%.

For individuals, the firm disclosed that limited income growth, increased taxes, electricity tariff hike, inflation and high unemployment are key issues that pitched against consumers.

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  • Social-Economic weak link

Lastly, KPMG stated that the social wheel of pressure is spinning, as 31% of the youth-led labour force is unemployed, meaning the key engine for Nigeria’s growth remains grossly underutilized.

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The firm noted that corruption remains endemic, healthcare sector at the low ebb, out of school children remain high amidst insecurity, mortality rate concern and migration. According to KPMG, the rising social wheel of pressure is expected to see more skilled youths migrate to other countries of the world.

[READ ALSO: KPMG lists trends that will determine Nigerian economy in 2020)

How Corporates can survive

While concluding, KPMG stated that for corporates to guide against the fault lines in Nigeria, there must be headroom for shocks. According to KPMG, creating headroom for shocks as a corporate will largely create a buffer for a firm to escape the negative effects of the fault lines.

Other strategies listed for corporates include hedging, strategic agility, regulatory compliance, creating alternative scenarios, investing for upsides and achieving minimum scale for survival in the industry.

Abiola has spent about 14 years in journalism. His career has covered some top local print media like TELL Magazine, Broad Street Journal, The Point Newspaper. The Bloomberg MEI alumni has interviewed some of the most influential figures of the IMF, G-20 Summit, Pre-G20 Central Bank Governors and Finance Ministers, Critical Communication World Conference. The multiple award winner is variously trained in business and markets journalism at Lagos Business School, and Pan-Atlantic University. You may contact him via email - [email protected]

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Financial Services

Protecting your money from fraudsters

The ability to carry out transactions from the comfort of your homes, comes with the responsibility of safeguarding your money.

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Financial crisis is imminent in Nigeria -Dr. Segun Aina, Yahoo Yahoo

The advent of the cashless policy in Nigeria came as both a gift and a curse. On the plus side, one does not need to lug bags of cash around, especially for interstate transactions—just get depositors to transfer funds to your account, and you in turn, transfer to your business partners.

The policy has also made banks more innovative by creating various payment platforms that don’t need physical cash. Each bank has a robust mobile banking app where customers can transfer funds, subscribe for cable TV, book flights, buy airtime, etc., without entering a banking hall. For those without smart phones, the Unstructured Supplementary Service Data (USSD) option is there. Even ATM cards have been upgraded to do more than pay cash. What a time to be alive!

However, with these strides in innovation, come the downsides—robbers have adapted with the times by moving from the highway and taking their “trade” online. The  various options open to customers for processing transactions can also be manipulated by thieves to defraud account holders of their hard-earned funds.

Hopefully, after reading this article, readers would be better armed to protect their funds from these “online robbers.”

1. Do not divulge sensitive account details to unknown callers

As surprising as it seems, many people still fall prey to this trick, despite several warnings. There have been many instances of people admitting that they received calls from unknown callers, who claim to be staff of various banks. They are told that their accounts require some form of upgrade\corrections, and to do this, information like ATM card PINs and PANs, and details of messages sent to the account owners’ phones are needed. The “bank staff” then creates mobile banking apps tied to the bank accounts of the unsuspecting owners, and from there, all funds are transferred to several unknown recipients.

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2. Protect card details

As already stated, ATM cards are not just used for cash withdrawals now—they can also be used for funds transfers, bills payments, online transactions, etc. this means that one does not necessarily need the physical presence of their card to process some transactions. With knowledge of the card Primary Account Number (PAN), which are the 16 digits displayed on the card’s surface, the Personal Identification Number (PIN), and Card Verification Value (CVV) number, displayed on the back of the card, funds can be moved from one’s account.

It is therefore important to protect these details, especially when using the card in public places like ATM lobbies, and POS machines. You should be equally careful not to call out such details, if absolutely necessary, within earshot of people.

3. Always keep your phone safe

Imagine mourning the loss of your phone, then having the added heartache of losing the funds in your bank account(s).

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The value of a phone goes beyond its price, these days. It contains private valued information of its owner, among which are bank account details; it also contains the SIM through which transaction alerts are received. The SIM makes it possible to process USSD transactions.

There have been instances where phones were given to repairmen, only for the owners to realise later that funds had been transferred from their accounts via USSD to unknown beneficiaries. Even relatives have been known to secretly steal funds from accounts, just by handling the owner’s phones.

Always keep your phone locked, and know where it is at all times.

4. Pay attention to transaction alerts

It is very easy to assume that all is well with one’s account, and not bother with checking transaction alerts. After all, it is what you withdrew that must have left the account, right? Wrong!

As explained above, funds could have left your account without your authorisation. So pay attention to your transaction alerts, especially the balances, and quickly investigate any transaction that was not initiated with your permission—the earlier the better, for quick resolution with your bank.

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Also note that the absence of alerts despite transactions could also be a red flag, as the SIM could have been swapped, giving fraudsters a free hand to run your account.

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5. Know the USSD code for instant account deactivation

Imagine the horror of receiving alerts showing that your account is being continuously debited as you helplessly watch it happen, especially during over weekend when banks are closed.

This doesn’t need to happen. Right from the first debit, you should be able to take action and deactivate your account to prevent further debits. This is why it is important to know the emergency code of each bank where your funds are kept. For example, with Zenith Bank, any phone can be used to enter USSD code *966*911#, provide your account number, and the number used to receive alerts, and the account gets instantly deactivated. After this, you can take your time to investigate the stolen money, instead of frantically running around to stop further debits.

It is also important to know the various ways to reach your bank during emergencies—get their customer care lines from their websites, and if they have chatbots, engage them; also know their email addresses. Getting your account officer’s number too is useful.

Conclusion

Apparently, with the ability to carry out transactions from the comfort of your homes, comes the responsibility of safeguarding your money (to an extent). These tips should make it easier to do so.

However, in a case where the money has already been stolen, contact your bank as soon as possible for investigation and possible recovery.

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Coronavirus

COVID-19 Update in Nigeria

On the 30th of October 2020, 170 new confirmed cases and 3 deaths were recorded in Nigeria

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The spread of novel Corona Virus Disease (COVID-19) in Nigeria continues to record significant increases as the latest statistics provided by the Nigeria Centre for Disease Control reveal Nigeria now has 62,691 confirmed cases.

On the 30th of October 2020, 170 new confirmed cases and 3 deaths were recorded in Nigeria, having carried out a total daily test of 3,008 samples across the country.

To date, 62,521 cases have been confirmed, 58,249 cases have been discharged and 1,141 deaths have been recorded in 36 states and the Federal Capital Territory. A total of 620,758 tests have been carried out as of October 30th, 2020 compared to 617,750 tests a day earlier.

COVID-19 Case Updates- 30th October 2020,

  • Total Number of Cases – 62,691
  • Total Number Discharged – 58,430
  • Total Deaths – 1,144
  • Total Tests Carried out – 620,758

According to the NCDC, the 170 new cases were reported from 11 states- Lagos (106), FCT (25), Oyo (14), Edo (7), Kaduna (7), Ogun (4), Bauchi (2), Benue (2), Kano (1), Osun (1), Rivers (1)

Meanwhile, the latest numbers bring Lagos state total confirmed cases to 21,212, followed by Abuja (6,053), Plateau (3,630), Oyo (3,447), Rivers (2,810), Edo (2,664), Kaduna (2,648), Ogun (2,031), Delta (1,814), Kano (1,747), Ondo (1,666), Enugu (1,314),  Kwara (1,069), Ebonyi (1,049), Katsina (952), Osun (926), Abia (898), Gombe (883).  Borno (745), and Bauchi (713).

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Imo State has recorded 616 cases, Benue (493), Nasarawa (482), Bayelsa (412),  Ekiti (332), Jigawa (325), Akwa Ibom (295), Anambra (277), Niger (274), Adamawa (257), Sokoto (165), Taraba (146), Kebbi (93), Cross River (87), Yobe (82), Zamfara (79), while Kogi state has recorded 5 cases only.

READ ALSO: COVID-19: Western diplomats warn of disease explosion, poor handling by government

Lock Down and Curfew

In a move to combat the spread of the pandemic disease, President Muhammadu Buhari directed the cessation of all movements in Lagos and the FCT for an initial period of 14 days, which took effect from 11 pm on Monday, 30th March 2020.

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The movement restriction, which was extended by another two-weeks period, has been partially put on hold with some businesses commencing operations from May 4. On April 27th, 2020, Nigeria’s President, Muhammadu Buhari declared an overnight curfew from 8 pm to 6 am across the country, as part of new measures to contain the spread of the COVID-19. This comes along with the phased and gradual easing of lockdown measures in FCT, Lagos, and Ogun States, which took effect from Saturday, 2nd May 2020, at 9 am.

On Monday, 29th June 2020 the federal government extended the second phase of the eased lockdown by 4 weeks and approved interstate movement outside curfew hours with effect from July 1, 2020. Also, on Monday 27th July 2020, the federal government extended the second phase of eased lockdown by an additional one week.

On Thursday, 6th August 2020 the federal government through the secretary to the Government of the Federation (SGF) and Chairman of the Presidential Task Force (PTF) on COVID-19 announced the extension of the second phase of eased lockdown by another four (4) weeks.

READ ALSO: Bill Gates says Trump’s WHO funding suspension is dangerous

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Coronavirus

Cristiano Ronaldo now tests negative for Coronavirus

Cristiano Ronaldo tested negative for coronavirus after nearly three weeks that he tested positive.

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Cristiano Ronaldo tests positive for COVID-19

Juventus F.C. star, Cristiano Ronaldo, has tested negative for coronavirus, nearly three weeks after he tested positive.

This was disclosed by his club via its website on Friday.

It stated, “Ronaldo carried out a check with a diagnostic test (swab) for COVID-19. The exam provided a negative result.

“The player has, therefore, recovered after 19 days and is no longer subjected to home isolation.”

What you should know

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Ronaldo had tested positive for COVID-19 on October 13, while playing with Portugal. He had been in self-isolation since returning to Italy.

The 35-year-old missed four games including Wednesday’s 2-0 Champions League defeat to Lionel Messi’s Barcelona, and Juventus’s 2-0 win at Dynamo Kiev in their Group G opener.

The five-time Ballon d’Or winner’s return will be a boost for Andrea Pirlo’s faltering side who are fifth in Serie A, four points behind leaders AC Milan.

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