Fitch Ratings has revised the Outlook on Nigeria’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to Stable from Negative and affirmed the IDR at ‘B’.
On the reason for the upgrade; information available on the firm’s website revealed that a decrease in the level of uncertainty surrounding the impact of the global pandemic on the Nigerian economy, increasing relative stability in oil prices, easing of global funding conditions, and domestic restrictions on movement have all played a key role in the new outlook.
The latest rating is based on some underlying assumptions such as; the report expects global economic trends to develop as outlined in Fitch’s most recent Global Economic Outlook, published 7 September 2020. The report also projected Brent oil prices to average USD41/barrel in 2020, USD45/barrel in 2021, and USD50/barrel in 2022. In addition, the report expects Nigeria’s oil production volume to average 1.93mbpd in 2020, 1.87mbpd in 2021, and 2mbpd in 2022, all things being equal.
According to the report, Nigeria recorded an ESG score of 5 for both political stability and rule of law, institutional, and regulatory quality. The country also recorded an ESG score of 4 in both human rights and freedom and creditors’ rights.
Recall that the key evaluation criteria for Fitch ratings of either positive or negative are usually; external finances, macroeconomic policies, and public finance.
On the external finance criterion, the report stated that; “Nigeria has navigated external liquidity pressures from the shock, through partial exchange rate adjustment combined with de facto capital flow management measures and foreign-currency (FC) restrictions, while disbursement of external official loans has supported the level of international reserves. Though external vulnerability persists from currency overvaluation and a possibly large FC demand backlog, this is adequately captured by the ‘B’ rating, in our view,”
In terms of monetary policy which is a subset of macroeconomic policies, the report highlighted that; “The Central Bank of Nigeria (CBN) continues to prioritize exchange rate stability over other policy goals, in Fitch’s view. A 6% depreciation in March of the Investor and Exporter (I&E) exchange rate, at which most FC transactions are carried out fell short of fully correcting the naira’s appreciation by about 35% in real terms, between mid-2016 and February 2020. Steep real appreciation has been driven by persistent double-digit inflation, which has offset gains from the devaluations in 2016 and 2017. Meanwhile, the CBN has achieved progress towards its stated goal of unifying the exchange rate, following a cumulative 19% two-step devaluation of the ‘official’ exchange rate, which is mostly used for the government’s and the oil sector’s FC transactions.”
On the fiscal policy and public earnings, the report added that; low fiscal revenues are a major credit weakness. GG receipts averaged 6.8% of GDP in 2015-2019, well below the current ‘B’ median of 22%. Revenues will benefit from the removal of the fuel subsidy, which has cumulatively cost the budget around 7% of 2019 GDP in 2016-2019.
The government has affirmed its firm commitment to this reform as well as its intention to continue phasing out costly electricity subsidies. However, the energy price reform faces strong opposition from labor unions, and the authorities have reinstated subsidies in the past, in response to social protests.
Gbajabiamila roots for the review of Federal Character Laws
House of Reps Speaker has called for the review of the federal character structure the country runs.
The speaker of the House of Representatives, Hon. Femi Gbajabiamila, has lent his voice to one of the pressing issues in Nigeria, which concerns reviewing the Federal Character Laws as enshrined in the 1999 constitution.
The honourable speaker made the revelation during the Young Parliamentarians Forum (YPF) National Strategy Meeting and Retreat in Abuja.
According to him, the need to broaden the scope of the federal character laws in the Nigerian constitution has become imperative.
He is of the opinion that it contrasts with the nation’s realities, as it limits national opportunities to geographical spread alone, without factoring in other criteria like gender, persons living with disabilities, and age classification.
What they are saying
Commenting on the need for the review of the federal character laws in Nigeria, Hon. Gbajabiamila said:
“In thinking outside the box, I think we should consider an amendment in the constitution to the definition of federal character because when we talk about Federal Character within the context of appointments, infrastructure and the rest of it in the constitution, Federal Character as it is, is limited to where you are from, like your ethnicity.
“I think it’s time that we expand the definition of Federal Character because the character of a Nation is not just based on your tribe, it’s based on Religion, it’s based on where you are from, it’s based on your sex, it’s based on your age. So when you are talking about Federal Character you look at all those things and they are what make up the Federal Character.”
The Speaker ended by charging the young legislators to provide solutions to some vital questions on burning national issues.
FAAC disburses N682.06 billion to 3 tiers of govt in September [Full-List]
FAAC disbursed the sum of N682.06bn to the three tiers of government in September 2020.
The Federation Account Allocation Committee (FAAC) disbursed the sum of N682.06bn to the three tiers of government in September 2020. This is contained in the latest monthly FAAC report released by the National Bureau of Statistics.
According to the report, the federal allocation of N682.06bn disbursed to the three tiers (FG, States and LGAs) indicates a 1% marginal increase when compared to N676.4 billion disbursed in August 2020.
Explore the Advanced Financial Calculators on Nairametrics
A cursory look at the report showed that in September, the Federal Government received a total of N272.90bn (40%), States received a total of N197.65bn (21.6%) and Local Governments received N147.42bn (21.6%). The sum of N30.88bn (4.5%) was shared among the oil producing states as 13% derivation fund.
In addition, revenue generating agencies such as Nigeria Customs Service (NCS), Federal Inland Revenue Service (FIRS) and Department of Petroleum Resources (DPR) received N6.66bn (1%), N13.48bn (2%) and N5.70bn (0.8%) respectively as cost of revenue collections.
Further breakdown of revenue allocation distribution to the Federal Government of Nigeria (FGN) revealed that the sum of N196.56bn was disbursed to the FGN consolidated revenue account; N4.78bn was disbursed as share of derivation and ecology; N2.39bn as stabilization fund; N8.03bn was for the development of natural resources; and N6.12bn to the Federal Capital Territory (FCT) Abuja.
States federal allocation rose marginally
In September 2020, allocation to states rose by 3.4% to N197.65 billion compared to N198.8 billion recorded in the previous month.
The top five states with the largest share of monthly allocation in September are Delta (N13.8 Billion), Lagos (N11.44 billion), Rivers (N11.04 billion), Akwa Ibom (10.33 billion) and Bayelsa (N8.33billion). On the other hand, the top five states at the bottom of the ranking are Ekiti (N3.8 billion), Ogun (N3.7 billion), Plateau (N3.6 billion), Osun (N3.24 billion), and Cross River (N3.23 billion).
The federal allocation disbursed to the three tiers in September showed consistent improvement, when compared the previous months. However, this is still a short fall when compared to N740.87bn disbursed to the three tiers in the corresponding period of 2019.
The marginal growth recorded in the disbursed federal allocation may be due to the rise in revenue generation, on the back of earlier improvement in both domestic and cross border economic activities.
For states in Nigeria that largely depend on federal allocation to meet recurrent obligations, this may represent some sort of boost. However, the outbreak of the Covid-19 pandemic (second wave) currently emerging in some developed economies may threaten oil price (the country’s main revenue source), as industrial activities may collapse globally for the second time in the year.
WTO: Nigeria to persuade the US to join the consensus on Okonjo-Iweala – Trade Ministry
Nigeria is making moves to reach out to the US to agreed to appoint Okonjo-Iweala as Director-General of the WTO.
The Federal Ministry of Industry, Trade & Investment has said that Nigeria is currently reaching out to the United States and South Korea to back the WTO preferred candidate, Dr. Ngozi Okonjo-Iweala, for the role of DG of WTO.
This was disclosed in a statement by the Ministry and reported by Reuters on Saturday morning.
Recall that Nairametrics reported this week that the Ministry of Foreign Affairs announced in a statement that Nigeria’s candidate for Director-General of the World Trade Organization (WTO), Dr. Ngozi Okonjo-Iweala, had secured the support of the majority of the member-nations – but was yet to be declared and returned as the winner, as the United States opposed the consensus.
Nairametrics also reported this week that Dr. Ngozi Okonjo-Iweala was close to being appointed as the new Director-General of the World Trade Organisation (WTO). A group of ambassadors also known as “troika” had proposed Okonjo-Iweala to lead the WTO, giving her a clear path to becoming the first woman to head the WTO since it started 25 years ago.
The U.S President, Donald Trump, blocked the appointment of Ngozi Okonjo-Iweala as the WTO’s next DG on Wednesday, declaring support for South Korea’s Yoo Myung-hee instead.
The Ministry said that the FG would try to persuade the United States to join the consensus, as most of the WTO’s members had agreed to appoint Okonjo-Iweala as DG.
“Nigeria is currently reaching out to all members of the WTO including the United States and South Korea to overcome the impasse as well as persuade the United States to join the consensus,” the trade ministry said.