Nigeria’s high poverty data is one that we have first, rejected – deemed as untrue, before eventually coming to terms with its sad reality. For a nation with one of the biggest economies of the world, the daunting results speak of a failure that we would rather hide behind the façade of our strong economy or our huge active population.
We, however, couldn’t pretend for long because soon enough, Nigeria overtook India, taking its title of the poverty capital of the world.
The National Bureau of Statistics (NBS), in a report about poverty and inequality from September 2018 to October 2019, stated that 40% of Nigerians (82.9 million) lived below its poverty line of N137,430 ($381.75) a year.
The Northern states rank poorest with nine of the top 10 poorest states in the country owing largely to the Boko Haram insurgency, massive unemployment rates, low access to healthcare services, and millions of children out of school – all which have been compounded by the COVID-19 pandemic.
In the most recent estimates, the World Bank estimates that 40 million to 60 million people will fall into extreme poverty (under $1.90/day) in 2020, compared to 2019, as a result of Covid-19, depending on assumptions on the magnitude of the economic shock. Even though the stats in themselves are bad, they hold many other truths. One of such lies in the purchasing power of the average Nigerian.
Poverty and the purchasing power of Nigerians
The World Bank categorizes poverty into three levels: Those who live on less than $1.90 a day, those who live on less than $3.20 a day, and those who live on less than $5.50 a day. Before now, the international poverty line had been set at a dollar-a-day by the World Development Report of 1990. However, it was updated to provide a more accurate description of the real cost of living in different countries.
Being the poorest country in Africa, it is safe to say that the average Nigerian, therefore, falls within the category of less than $1.90 a day, less than $3.20 a day, or less than $5.50 a day. In Naira terms, using an exchange rate of N390 to a dollar, it means the average Nigerian either has N741, N1,248, or N2,145 to spend in a day.
These funds cut across expenses on housing, feeding, clothing, communication etc. The 2019 expenditure pattern report – a measure of Nigeria’s spending pattern in both food and non-food items, revealed that 56.65% of the household expenditure in 2019 was spent on food, with the balance of about 43.35 spent on non-food items.
Also, a survey carried out by FinMark Trust in partnership with EFInA, just this month, reveals that Nigerian households are beginning to experience reduced income, lower food consumption, and reduced access to financial and health services following the onset of the COVID-19 epidemic and related lockdowns. Consequently, the low purchasing power is now even lower.
The implication of our purchasing power reveals two core truths:
- Industries that do not cover necessities immediately eliminate a huge portion of the populace.
- Even businesses that in core industries that are priced above the minimum spending value of the average Nigerian, eliminate millions of potential customers.
More so, these values represent spending spreads. In other words, with N1,248 to spend on pretty much everything, only a smaller percentage will be apportioned to even the most important cost items.
What this means: A business owner with a core product that costs just N1,000, you are already providing a luxury service in the Nigerian context. Items sold under these price points are like recharge cards, sports betting, sachet milk, etc., tend to make solid businesses as a result of their huge share within the spending capacity of most Nigerians.
In truth, the very essence of market segmentation – the division of a broad array of customers into sub groups, is that all businesses cannot cater to all markets.
However, the allure of maintaining low price points could also mean that Nigerians might be getting less value in order to just be able to afford a product. This goes to show the real purchasing power of Nigerians, and it is as instructive as it is worrisome because clearly, our high poverty rate affects every single one of us.
Nigeria’s debt rises to $79.5 billion, as debt to revenue ratio worsens
According to data obtained from DMO, $27.66 billion (N9.9 trillion) is the total external debt.
Nigeria, Africa’s largest economy’s total public debt rose to $79.5 billion (N28.63 trillion) as of the first quarter of 2020, which is March 31, 2020. This represents a 15% increase from the figure that was recorded for the corresponding period in 2019, which was about $69.09 billion (N24.94 trillion).
This was disclosed in a latest publication by the Debt Management Office (DMO) on Friday June 3, 2020.
Nigeria has seen its debt stock rise sharply in recent years as the country tries to fund infrastructural and developmental projects and boost its fragile economy, which has been in and out of recession. The country’s economy has been projected to fall into recession again, due to the adverse impact of COVID-19 that has seen oil prices crash globally.
According to data obtained from DMO, $27.66 billion (N9.9 trillion) is the total external debt. This represents 34.89% of the total public debt stock. Whereas, $51.64 billion (N18.64 trillion) is the total domestic debt, which represents 65.11% of the total public debt.
The Federal Government accounts for 50.77% of the total domestic debt, which is $40.26 billion (N14.53 trillion), whereas the State Governments and Federal Capital Territory account for 14.34% of the total domestic borrowing which is $11.37 billion (N4.11 trillion).
Nigeria has been under a lot of fiscal crisis following the crash of oil prices triggered by the coronavirus pandemic. The oil sector accounts for about 90% of the country’s foreign exchange earnings and about 60% of its total revenue.
The country, which had lined up a series of debt issue this year, had to halt the external commercial borrowing due to oil price collapse. The Minister for Finance, Zainab Ahmed, had last week disclosed that the country would no longer go ahead with its Eurobond debt issue.
The Nigerian government, for now, is focusing on the domestic markets and concessionary loans to help fund the 2020 budget deficit which is made worse by drop in revenue. In the recently approved 2020 revised budget, the federal government is expected to borrow N850 billion from the domestic market.
This rising debt has put a lot of pressure on the government’s resources as it spent $1.69 billion (N609,13 billion) to service its domestic debt in the first quarter of 2020 alone.
Nairametrics had reported that Nigeria’s global rating is at risk due to the sharp rise in the country’s sovereign debt and a growing finance gap. According to a report from the global rating agency, Fitch Ratings, this could trigger a rating downgrade as policymakers struggle to stimulate growth and deal with the impact of low oil prices and sharp drop in revenue.
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According to Fitch, the country’s debt to revenue ration is set to deteriorate further to 538% by the end of 2020, from the 348% that it was a year earlier.
Nigeria and US Authorities battle former Enron Nigerian Subsidiary over $80 million Yacht
Both Nigerian and American governments have opposed Enron Nigeria’s appeal.
19 years after the bankruptcy of Enron Corporation, one of the biggest corporate bankruptcies in American history, a former subsidiary of the company is battling Nigerian and American Authorities over the sale of a yacht valued at over $80 million acquired by Nigerian businessman Kolawole Aluko.
The yacht was seized by the US Government in 2018 after prosecutors say it was bought with the proceeds of bribes paid to Nigeria’s former Minister of Petroleum, Diezani Alison–Madueke.
The yacht was later auctioned for $37 million in 2019. The Nigerian government also dropped claims to the proceeds of the sale recently and a Texas Court ordered all proceeds should be retained by the US Government.
However, a former unit of the Bankrupt Enron, Enron Nigeria Power Holdings claims it’s entitled to the proceeds and demands $22 million in a bid to get an arbitration awarded to them against the Nigerian government for suspending a contract signed with Enron in 1999 to build and operate a Power plant.
Enron Nigeria claims the Nigerian government dropped claims to the proceeds of the yacht’s auction in an attempt to fraudulently transfer assets to stop creditors from accessing them. Saying Nigeria dropping its claims was “a recognition of the factual and legal basis” in a DOJ court filing.
Both Nigerian and American governments have opposed Enron Nigeria’s appeal.
Enron Nigeria Power Holdings Ltd is owned by ex-Enron staff involved in the negotiations for the Power Plant contract in Nigeria and was bought out of bankruptcy for $750,000 in 2004 by a Cayman Islands registered company.
An arbitration ruling in 2012 awarded Enron Nigeria Power Holdings $11.2 million including interest in damages against the Nigerian government.
The DOJ says Mr. Aluko bought the yacht for $82 million in 2013 and funded a lavish lifestyle for Alison Madueke in exchange for NNPC contracts valued at over $1.5 billion.
Aluko and his business partner, Olajide Omokore are also accused of laundering illicit revenues into and through the United States
Apapa Command’s revenue rises 10.59% to N227.3 billion in the first half of 2020 – Customs
Abba-Kura also praised the Customs Service for its achievements in spite of multiple challenges.
The Nigerian Customs Service announced on Thursday that its revenue for the Apapa Command rose by 10.59% from the previous year as it has generated N227.3 billion during the first half of 2020.
While disclosing this, the Customs Area Controller, Mohammed Abba-Kura said, “There has been a steady improvement in revenue collection all through the half-year except for the month of May which recorded a decline of about 3.531 billion, when compared between year 2019 and 2020. The command in the half-year of 2019 collected a total sum of N203.264 billion as customs duty and other charges like seven percent surcharge, Value Added Tax, one percent Comprehensive Import Supervision Scheme (CISS) among others.
“From January to June this year, the command collected a huge sum of N227,347,046,233.53, which represents an increase of N24,082,991,550.84 or 10.59 percent increase from the previous year.”
According to NAN, Abba-Kura also praised the Customs Service for its achievements in spite of multiple challenges they have faced this year.
“In spite of all challenges, the Apapa Area Command has maintained its tempo at ensuring that maximum revenue is collected in addition to trade facilitation and suppression of smuggling,” he said.
The Area Controller further disclosed that the Command seized 142 containers of various items during the period. The seizures were related to smuggling and were seized pursuant to sections 46 and 48 of the Customs and Excise Management Act (CEMA) which enforces laws related to forfeiture of goods that are illegally imported.
The seized goods ranged from luxury cars like Rolls Royce 2018 and a 2019 Lamborghini Hurricane. Others include pharmaceuticals, rice, clothes, assorted foodstuff, and other materials.
Meanwhile, in terms of exports, the value of exported products so far is about N52,369,506,770.90 – Free on Board Value, mainly Agricultural produce and Mineral resources.
Unfortunately, the Coronavirus pandemic has inevitably affected the operations of the Command this year.
According to Abba-Kura, “ten of our men in Apapa command got infected with COVID-19 and were sent to the isolation centre and as at today, they are all well now and we appreciate the Lagos State government and doctors at the Lagos University Teaching Hospital for their help.”
Note that the Customs revenue growth comes at a time of declining revenue for Nigeria, even as the Federal Government’s debt service as a percentage of revenue rose to 99% in the first quarter of 2020. Therefore, it is a good development.
Nairametrics reported the country earned N950.5 billion in revenue compared to a prorated budget of N1.9 trillion, representing a whopping shortfall of 52%. Oil revenue was N464 million representing a shortfall of 30% when compared to budget while non-oil revenue was N269 billion representing a shortfall of 40% in the first quarter of 2020.