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International Energy Agency’s ‘Black April’ forecast torpedoes Nigeria’s 2020 budget

There is a strong indication that the Federal Government of Nigeria may still find it difficult to implement the adjusted 2020 budget that was recently sent to the National Assembly for vetting.

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Fitch downgradesS&P downgrades Nigeria, Nigeria’s credit rating faces downgrade by Fitch, Oil price crash, Coronavirus: The trouble that lies ahead for Nigeria, Avoiding 2016: What Nigeria should do to fight the coming economic storm, Fitch downgrades, federal government (FG)

There is a strong indication that the Federal Government of Nigeria may still find it difficult to implement the adjusted 2020 budget that was recently sent to the National Assembly for vetting. As you may well know, the adjusted budget was pegged at an oil price of $30 per barrel and crude oil production estimate of 1.7 million barrels per day.

Nigeria’s 2020 Appropriation Act was initially based on crude oil production volume of 2.18 million barrels per day, with a $57 benchmark per barrel. As of April 15, 2020, the price of Brent Crude was $27.69 per barrel.

Output cuts not enough: Last week OPEC and its allies agreed to deeper output cuts in a bid to save declining oil prices. Following the deal, Nigeria’s Minister for Petroleum, Timipre Silvia, announced that the country will now be producing 1.412 million barrels per day, as against 1.829 million barrels per day. With this volume, if crude oil is sold at an average price of $25 bpd in April, then the country would be earning N13.41 billion per day as against the N17.29 billion that was earned prior to the cut.

A new problem: Unfortunately, there is a troubling new twist to this arrangement. As Nairametrics reported, the International Energy Agency (IEA) has projected that global oil demand in April will be 29 million b/d lower than a year ago; down to a level last seen 25 years back (1995). This shows that no amount of output cut by producers can fully offset the near-term falls facing the market. Already, this month has been described as ‘Black April’, especially for a country  like Nigeria which has recently been facing serious troubles as far as revenue generation is concerned.

More work for the Presidency: If the IEA’s projection manifests, it means that the economic team of President Muhammadu Buhari will have more to do in order to quickly address the revenue shortfall of the budget. That is not all.

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The government would still find it difficult to close the revenue gap with tax, as the commercial hub centre of the economy, Lagos, has been lockdown for about three weeks to control the spread of COVID-19. If the lockdown is prolonged extended beyond four months, 2020 would be a Black year for Nigeria.

But there is hope: The IEA report noted that there is hope for a rebound in the second quarter of 2020. Some part of the report said:

“Demand is expected to be 23.1 million b/d below year-ago levels. The recovery in 2H20 will be gradual; in December demand will still be down 2.7 million /d y-o-y.

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“If production does fall sharply, some oil goes into strategic stocks, and demand begins to recover, the second half of 2020 will see demand exceed supply. This will enable the market to start reducing the massive stock overhang that is building up in the first half of the year. Indeed, our current demand and supply estimates imply a stock draw of 4.7 million b/d in the second half.”

In the meantime, the global capital expenditure by exploration and production companies has been forecast to drop by about 32% to $335 billion in 2020. This will mark the lowest level since 13 years. Unfortunately, this will come with some negative implications as you can see in the quote below:

“This reduction of financial resources also undermines the ability of the oil industry to develop some of the technologies needed for clean energy transitions around the world.”

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

Nigerian fintech companies raised $600 million in five years – McKinsey Report 

McKinsey report has revealed that Nigeria’s fintech companies have raised over $600 million in funding in the last six years.

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fintechs, commercial banks, Events in FinTech industry in 2019, Nigeria's fintech industry 2020: The growth frontier of the new decade

In a space of five years, Nigeria’s fintech companies have raised over $600 million in funding, attracting 25($122 million) of the $491.6 million raised by African tech startups in 2019 alone – second only to Kenya, which attracted $149 million.  The period under review is 2014- 2019. 

This information is contained in a recently published report by McKinsey titled Harnessing Nigeria’s Fintech Potential.” The report highlighted the combination of youthful demographic, increasing smartphone penetration, and concerted efforts to driving financial inclusion as factors that interplay to produce conducive and thriving enabler or platform for the fintech firms in Nigeria. 

The report outlined some of the feedback against fintech companies ranging from poor user experience, underwhelming value-added from using some of the financial products, low returns on savings, and limited access to investment opportunities. 

The report also showed that Nigerian fintech companies are primarily focused on payments and consumer lendinghaving allotted an aggregate of 39% on payments to consumers, SMEs, and corporate FSP, and an additional 25% to consumer lending. The breakdown is depicted below. 

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Source: McKinsey report, 2020. 

On the driving factors behind the increasing choice of payment and consumer lending as an area of concentration by fintech companies, a part of the report read thus; 

The factors driving growth in each of these segments vary. Payment-focused solutions have surged over the past two years, spurred in part, by the central bank’s financial inclusion drive and favorable regulatory policies, including revised Know Your Customer (KYC) requirements for lower-tier accounts and incentives, to accelerate development of agent networks across the country. PagaOPayCellulant, and Interswitch’s QuickTeller compete with mobile banking applications and bank unstructured supplementary service data (USSD) channels to send and receive transactions and bill payments. 

Fintech activity in lending is picking up, thanks to the fact that fintechs are able to leverage payment data to determine lending risk more easily, and utilize smartphones as a distribution channel. For example, fintech startups such as Carbon and Renmoney have successfully leveraged alternative credit-scoring algorithms, to provide instant, unsecured, short-term loans to individuals. A few fintechs, such as Migo, have also stepped up to offer unsecured working-capital loans to SMEs with minimal documentation. Banking fintech solutions have been fast followers here, with leading banks launching digital lending platforms like Quick Credit by GTBank and Quickbucks by Access Bank. 

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In general, access, convenience, and trust have all played key roles in the increasing use of fintech products. For example, in the last six months, 54% of consumers have reported increased usage of their fintech products 

Why this matters 

In line with the National Financial Inclusion goals of 2020, and owing to the fact that despite the remarkable progress recorded by traditional banking institutions, the vast majority of consumers are underserved.  Hence, the issue of accessibility especially in remote areas, affordability, and user experience have been a front-burner issue. 

The aforementioned issues have created an opening that fintechs have been quick to take advantage of, providing enhanced propositions across the value chain, to address major points in affordable payments, quick loans, and flexible savings and investments among others. 

Conclusion 

Fintech accounted for only 1.25of retail banking revenues in 2019, signaling a room for development. Despite recording a growth of fintech investments in Nigeria to the tune of approximately $460 million in 2019, majority of these investments were from external investors. This was only a small fraction (1.27%) of the $36 billion invested in fintech globally. 

The report opined that full optimization of fintech companies in Nigeria can stimulate economic activity, by creating a multiplier effect, and can drive progress towards development goals. Economic impact will primarily come from expanding revenue pools and attracting foreign direct investment to the country. The sector can unlock a plethora of economic benefits by driving increased fintech productivity, capital, and labour hours through digitization of financial services.  

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PenCom recovers N17.51billion from defaulting employers, imposes penalties

N17.51 billion was recovered by PenCom from employers who refused to remit pensions from workers’salaries

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Nigeria’s Pension Asset increased by N228 billion in October, PFAs increase investment in infrastructure to N40.52 billion   

The National Pension Commission has recovered N17.51 billion from employers that refused to remit deducted monthly pensions from their workers’ salaries to their Retirement Savings Accounts with the respective Pension Fund Administrators.

This was disclosed by the Commission in its 2020 second quarter report which was released on Friday.

Out of the N17.51 billion, the principal contribution was N8.89 billion, while the penalty imposed on the employers was N8.63 billion.

The report read, “Following the issuance of demand notices to some defaulting employers whose outstanding pension contribution liabilities had been established by the recovery agents, 16 of the affected employers remitted the sum of N261.33 million representing principal contribution of N152.79million and penalty of N108.54million during the quarter. This brought the total recoveries made from inception as at June 30, 2020 to N17.51billion.”

According to the report, one batch of NSITF lump sum payment application totalling N225,442.72 was however received on behalf of five NSITF members during the quarter.

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It said the application was processed and five members’ contributions were transferred to their bank accounts.

Consequently, it added, the cumulative sum of N2.94billion had been paid into the bank accounts of 36,551 NSITF contributors as lump sum/one off payment from inception to June 30.

For the quarter ended June 30, the commission said it processed monthly pension payments totalling N62.25million in respect of 3,629 NSITF pensioners.

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As of June 30, it said the total pension payment to NSITF pensioners amounted to N4.73billion.

The commission added that it reviewed the request for the payment of attributable income to eligible NSITF members and granted a “no objection” for payment of N2.92billion to 165,954 eligible NSITF members whose NSITF contributions were refunded to their RSAs or bank accounts as of December 2018.

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Coronavirus

COVID-19 Update in Nigeria

On the 26th of September 2020, 136 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 increases as the latest statistics provided by the Nigeria Centre for Disease Control reveal Nigeria now has 58,198 confirmed cases.

On the 26th of September 2020, 136 new confirmed cases and 3 deaths were recorded in Nigeria, having carried out a total daily test of 7,968 samples across the country.

To date, 58,198 cases have been confirmed, 49,722 cases have been discharged and 1,106 deaths have been recorded in 36 states and the Federal Capital Territory. A total of 502,545  tests have been carried out as of September 26th, 2020 compared to 494,577 tests a day earlier.

COVID-19 Case Updates- 26th September 2020,

  • Total Number of Cases – 58,198
  • Total Number Discharged – 49,722
  • Total Deaths – 1,106
  • Total Tests Carried out – 502,545

According to the NCDC, the 136 new cases were reported from 16 states- Lagos (41), Ogun (27), Rivers (19), Abia (10), Oyo (6), Plateau (6), Bauchi (5), Ondo (5), Ekiti (4), Kaduna (4), Edo (3), Ebonyi (2), Bayelsa (1), Delta (1), Osun (1), Yobe (1).

Meanwhile, the latest numbers bring Lagos state total confirmed cases to 19,215, followed by Abuja (5,644), Plateau (3,379), Oyo (3,254), Edo (2,623), Kaduna (2,393), Rivers (2,324), Delta (1,802), Ogun (1,823), Kano (1,737), Ondo (1,625), Enugu (1,289), Ebonyi (1,040), Kwara (1,028), Abia (891), Gombe (864). Katsina (848), Osun (827),  Borno (741), and Bauchi (697).

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Imo State has recorded 566 cases, Benue (481), Nasarawa (449), Bayelsa (398),  Jigawa (325), Ekiti (321), Akwa Ibom (288), Niger (259), Adamawa (237), Anambra (234), Sokoto (162), Taraba (95), Kebbi (93), Cross River (87), Zamfara (78), Yobe (76), 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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