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Exclusives

Prices of food items rise across major markets as traders fear low patronage in December

This report contains information on items that witnessed price increase, price decrease, as well as information on special markets and market insights.

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Prices of food items rise across major markets, Traders, Taxation, Multiple taxation

As Nigerians prepare for the Christmas and New Year celebrations, it may be a challenging period for households as prices of major food items has increased across major markets in Lagos State, Nigeria.

According to the latest Household Market Survey conducted by Nairalytics – the research arm of Nairametrics, prices of tomatoes, pepper, onions, dairy products, and beverages recorded yet another significant spike.

READ: Prices of rice, tomatoes, frozen foods increase in September as traders lament low turnover

  • A big basket of round-shaped tomatoes spiked by 8.3% to sell for an average of N13,000, while a medium-sized basket now sells for an average of N8,000 – indicating 14.3% increase in two weeks.
  • Also, a big bag of dry onions recorded an 18.2% increase in price to sell for an average of N97,500.

In the latest survey, Nairalytics also found that the prices of dairy products and cocoa beverages such as Peak, Dano, Three Crown, and Loya milk, Milo, Ovaltine, and Bournvita all recorded significant increase in price across major markets in Lagos State.

This report contains information on items that witnessed price increase, price decrease, as well as information on special markets and market insights.

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READ: Market Survey: Price of tomatoes, palm oil, rice spike as traders lament low patronage

Items that witnessed price increase

  • A big basket of Round shaped tomatoes initially sold for an average of N12,000 now sells for N13,000 – indicating 8.33% increase compared to the price recorded two weeks ago.
  • A small basket of Round shaped tomatoes recorded 25% increase in price to sell for an average of N5,000 compared to N4,000 earlier recorded.
  • A 10kg bag of Mama Gold rice currently sells for an average of N4,800 as against N4,667 recorded earlier in the month of November.
  • A 50kg bag of Brown beans sold for an average of N42,000 two weeks ago, has increased by 2.98% to sell for an average of N43,250.
  • Also, a 50 kg bag of White beans now sells for an average of N42,750. This represents a 1.79% increase compared to N42,000 recorded two weeks ago.
  • A carton of 305g Indomie noodles now sells for an average of N3,263 as against an initial average of N3,150. This represents an increase of 3.57% in two weeks.

READ: Prices of tomatoes, garri, potatoes, others jump as low inventory hits major markets

  • A bag of Ijebu garri that was initially sold for an average of N14,125 now sells for an average of N14,375 – representing an increase of 1.77%.
  • The price of a 5 litres gallon of locally made Vegetable oil rose by 1.48% to sell for an average of N3,425, while 25 litres gallon increased by 0.3% to sell for an average of N16,625.
  • A big bunch of Plantain now sells for an average of N550 as against an initial average of N525.
  • A 500g pack of Louis sugar initially sold for an average of N538, increased by 9.3% to sell for an average of N588.
  • Also, the price of a 500g pack of Golden Penny sugar increased by 10.7% to sell for an average of N388, as against an initial average of N350.
  • The price of a 400g tin of Peak powdered milk increased by 3.13% to sell for an average of N1,238, while a 900g tin of the same brand increased by 16.4% to sell for an average of N2,750 compared to an initial average of N2,363.
  • A 500g tin of Milo cocoa beverage that was initially sold for an average of N1,038 now sells for an average of N1,475 – representing an increase of 42.2%, while the price of 1kg size of the same brand increased by 15.9% to sell for an average of N2,463.
  • The price of a big bag of Pepper rose by 126.7% to sell for an average of N17,000 compared to an average of N7,500 recorded two weeks ago.
  • A big bag of Dry onions that was sold for an average of N82,500 two weeks ago, witnessed a further increase of 18.2% to sell for an average of N97,500.

READ: Unity Bank Plc posts gross earnings of N11.04 billion in Q3 2020

Items that witnessed price decrease

  • A 50kg bag of White beans that was sold for an average of N13,250 now sells for an average of N10,750 across – a decrease in price of 18.9%.
  • Also, the price of a 50kg bag of Yellow garri reduced by 16.04% to sell for an average of N11,125 compared to an initial average of N13,250.
  • A big basket of Oval shaped tomatoes now sells for an average of N9,000. 18.2% reduction compared to N11,000 recorded earlier in the month, while a small basket reduced by 15.4% to sell for an average of N5,500.
  • The price of a big bag of Melon reduced by 7.89% to sell for an average of N43,750 compared to an initial average of N47,500.
  • A 50kg bag of foreign rice (Caprice) now sells for an average of N29,167. 1.69% reduction compared to an average of N29,667 recorded two weeks ago.

READ: Minimum wage earners should be exempted from paying income tax – FG

Items that maintained initial prices

  • A 50kg bag of Royal Stallion and Mama Gold rice continues to sell for an average of N30,333 and N29,750 respectively.
  • A 50kg bag of Mama’s Pride rice still sells for an average of N25,500, while a 50kg bag of brown beans (Oloyin) still sells for an average of N20,500.
  • A big basket of Sweet potatoes sells for an average of N5,500, a small basket sells for an average of N700, while the smallest basket is sold for an average of N325.
  • Also, a big basket of Irish potatoes sells for an average of N20,000, same as recorded two weeks ago.
  • A 50kg bag of Honey well and Mama Gold flour still sells for N13,950 and N13,850 respectively, after witnessing significant spike in price last month.
  • 5kg cylinder of Cooking gas is currently filled for an average of N3,450, the same as recorded two weeks ago, while a 5kg cylinder is filled for an average of N1,625.
  • A big bag of bush mango seed (Ogbono) continues to sell for an average of N120,000.
  • A carton of Full chicken is sold for an average of N14,167, Turkey (N19,000), while Chicken lap is sold for average of N14,000.

READ: Unknown identity moves $415 million worth of Bitcoins

Special markets/items

Despite the persistent increase in the price of household food items, traders across Lagos markets have increased their inventory of items, as they anticipate high demand in the month of December due to the yuletide season.

According to Mrs. Aina, a major rice dealer at Daleko market, she said that December comes with an expectation of increased sales, especially the consumption of grains being a major food item during the yuletide.

“We are anticipating high patronage of rice in December, as the people prepare for the Christmas and New Year celebrations, as well as those who want to gift people with food items in the period,” Aina said.

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READ: Oil prices tumble, oil traders jittery on OPEC+ meeting

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She, however, reiterated that the persistent increase in the prices of food items could discourage buyers from buying more.

A visit to Daleko market revealed that despite the increase in the stocks, sales are still dwindling as a result of the persistent increase in the price of most of the food items. Mrs. Olayemi told Nairalytics research that sales are not as good as before, due to several complaints by the consumers on the continuous increase in the price of food items.

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Market insights

  • The price of food items continues to spike significantly across major markets in Lagos State as most traders attributed the increase in the price of food items to increased insecurity across the country, especially in the North where most of these food items are being transported from.
  • A major tomatoes’ seller at Mile 12 market, Malam Issa, disclosed to Nairalytics research that due to the fear of banditry, kidnappers and Boko Haram, most farmers decided to stay at home, which has, in turn, reduced the quantity of goods available for sales, and as the demand for the items continues to grow, traders are forced to increase the prices.
  • Speaking to another major tomatoes’ trader at Mile 12 market, who prefers to remain anonymous, the increase in the price of round shaped tomatoes is because of the low supply of item to the market. He explained that the round-shaped tomatoes are of different kinds, some of which are from the north while some are imported from neighbouring countries like Ghana. The oval-shaped tomatoes on the other hand are mostly grown in the western part of Nigeria, he explained.
  • Nairalytics investigated what informed the sudden rise in the price of beverages. In an interview with one of the beverage traders, she attributed the increase in price of most items to increase in transportation cost and sustained increase in the price of other agricultural produce in the country. According to her, the increase in the cost of conveying these items to their various locations has significantly affected the price they sell to the final consumers.

Explore Data on the Nairametrics Research Website


ItemsBrandUnitMUSHIN (26/11/2020)DALEKO (26/11/2020)OYINGBO (26/11/2020)MILE 12 (26/11/2020)Average MUSHIN (12/11/2020)DALEKO (12/11/2020)OYINGBO (12/11/2020)MILE 12 (12/11/2020)Average
Bag of RiceMama Gold10kg46004800480050004800 NA4500450050004666.6666666667
Bag of RiceRoyal Stallion50Kg30000 NA300003100030333.33333333330000 NA300003100030333.333333333
Bag of RiceRice Master10kg5000 NA450047505000 NA45004750
Bag of RiceMama Gold50kg29500295003000030000297502950029500300003000029750
Bag of RiceCaprice50kg29000 NA290002950029166.66666666730000 NA290003000029666.666666667
Bag of RiceMama's Pride50kg25500255002500026000255002550025500250002600025500
Bag of BeansOloyin50kg20000210002100020000205002000021000210002000020500
Bag of BeansWhite50kg40000430004500043000427504000043000450004000042000
Bag of BeansBrown50kg43000420004500043000432504000042000450004100042000
Tuber of YamAbuja1 Big Size Tuber800750700800762.5700800700800750
Tuber of YamAbuja1 Medium Size Tuber550500550500525550500500500512.5
Carton of NoodlesIndomie305g (Belle full)32003250330033003262.532003100320031003150
Carton of NoodlesIndomie200g (Hungry man)3200320032003200320032003200320032003200
Carton of NoodlesChikki100g2200220021002300220022002200210023002200
Carton of NoodlesMinimie70g19001750170018001787.519001750170018001787.5
Carton of NoodlesGolden Penny70g1700150016001600160017001500160016001600
Bag of GarriIjebu80kg14500140001450014500143751400014000145001400014125
Bag of GarriWhite50kg10500110001100010500107501300013500130001350013250
Bag of GarriYellow50kg11000110001150011000111251300013500130001350013250
Basket of PotatoSweetBig Basket5500550055005500
Basket of PotatoSweetSmall Basket700700700700700700
Basket of PotatosweetSmallest Basket400250325400250325
Basket of PotatoIrishBiggest Basket200002000020000200002000020000
Basket of PotatoIrishMedium Basket2500250025002500
Basket of PotatoIrishSmall Basket170015001600170015001600
Packet of PastaGolden Penny500g4400440043004200432544004400430042004325
Packet of PastaDangote500g4200430043004300427542004300430043004275
Packet of PastaPower (1 pc)500g250230250230240250230250230240
Packet of PastaBonita (1 pc)500g220230230220225220230230220225
Gallon of Palm OilLocal5 Litres2700260028002600267527002500280026002650
Gallon of Palm OilLocal25 Litres13000130001300013000130001300012500130001300012875
Gallon of Vegetable OilLocal5 Litres3400340035003400342534003300350033003375
Gallon of Vegetable OilLocal25 Litres16000170001700016500166251600016800170001650016575
Gallon of Vegetable OilKings5 Litres3200300030002800300032003000300028003000
Gallon of Vegetable OilWesson5 Litres4500390039004300415045003900390043004150
Gallon of Vegetable OilMamador3.8 Litres25002450250028002562.525002450250028002562.5
Gallon of Vegetable OilPower3 Litres1900180018002200192519001800180022001925
Bunch of PlaintainPlantain1 Big Bunch500600500600550500500500600525
Bag of FlourDangote50kg1360013600138001400013750 NA13600138001400013800
Bag of FlourHoney well50Kg14000136001400014200139501400013600140001420013950
Bag of FlourMama Gold50kg13800136001400014000138501380013600140001400013850
MilkPeak Powdered (Tin)400g12001300120012501237.512001200120012001200
Milkpeak Powdered(Tin)900g2800275027002750275023502400240023002362.5
MilkPeak milk (Refill)500g1200110012001200117510001000100010001000
MilkDano Powdered (Tin)500g1200120011001200117510001000100010001000
MilkDano Powdered(Tin)900g2600250024002500250026002000200020002150
MilkDano (Refill)500g100095010001000987.5800800800800800
MilkThreeCrown (Refill)380g800750800750775700700750700712.5
MilkLoya Powdered (Tin)400g10001100110010501062.5 NA1000100010501016.6666666667
MilkLoya (Refill)400g900800850800837.5 NA800850800816.66666666667
MilkCoast (Refill)500g750750750750750 NA750750750750
Cocoa BeveragesMilo (Tin)500g1500145015001450147510001100105010001037.5
Cocoa BeveragesMilo (Tin)1kg25002450240025002462.522002100210021002125
Cocoa BeveragesMilo Refill500g110011001000110010751000900900900925
Cocoa BeveragesBournvita Refill500g1300130012001300127510001000950900962.5
Cocoa BeveragesBournvita (Plastic)900g2200220023002200222520002000200020002000
Cocoa BeveragesOvaltine Refill500g10009001000950962.5850800850850837.5
Cocoa BeveragesOvaltine(Plastic)500g15001500145014001462.511001100100011001075
CoffeeNescafe Classic50g600600600600600600600600600600
TeaLipton Yellow label52g300290300300297.5300290300300297.5
TeaTop tea52g300300300300300300300300300300
SugarSt' Louis Sugar(Cube) 500g600600600550587.5500550550550537.5
SugarGolden Penny Sugar (cube)500g400350400400387.5300350350400350
BreadVal-U1 loaf450450450450450450450450450450
BreadButterfield1 loaf450450400450437.5450450400450437.5
EggN/ACrate12001200125012001212.512001200120012001200
Bottled Water (Refill)CwayRefill650650650650650600600650600612.5
Juice5 Alive1 litre550550550600562.5550550550600562.5
JuiceChivita1 litre550550600550562.5550550600550562.5
GasRefilling12.5kg3500340034003500345035003400340035003450
GasRefilling5kg1600160017001600162516001600170016001625
TomatoesBig Basketround shaped13000130001200012000
TomatoesMedium Basketround shaped8000800070007000
TomatoesSmall Basketround shaped5000500040004000
TomatoesBig BasketOval Shaped900090001100011000
TomatoesSmall BasketOval Shaped5500550065006500
FishKote (Horse Mackerel)1 kg650600600600612.5650600600600612.5
FishTitus (Mackerel)1 kg600650650650637.5600650650650637.5
PepperBig bag170001700075007500
PepperMedium bag8000800040004000
MaizeYellow25000220002300023333.33333333321000200001950020166.666666667
MaizeWhite25000225002200023166.66666666720500195002000020000
MelonBig bag435004400043750470004800047500
OnionsBig bagDry Onions9500010000097500800008500082500
OnionsBig bagNew Onions700007000070000680006500066500
Bush mango seed(Ogbono)1 big bag120000120000120000120000
Frozen foodFull chickenCarton14500140001400014166.66666666714500140001400014166.666666667
Frozen foodChicken lapCarton1400014000140001400014000140001400014000
Frozen foodTurkeyCarton1900019000190001900019000190001900019000
CrayfishNylon125001350013000125001300012750

About Nairametrics Food Price Survey

Nairametrics Food Price Watch is a bi-weekly Household Market Survey that covers the prices of major food items in Nigeria, with emphasis on five major markets in Lagos – Mushin market, Daleko market, Oyingbo market, Idi-Oro market, and Mile 12 market.

Nairametrics Research team tracks, collates, maintains and manages a rich database of macro-economic and micro-economic data from Nigeria and Africa. Our analysts share some of the data collated on Nairametrics, using formats such as docs, tables and charts etc. The team also publishes research based analysis as articles on a regular basis.

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Exclusives

China Harbour Engineering Company latest equity infusion into Lekki Port is $221million – CEO, Lekki Port

CEO, Lekki Port LFTZ, discusses how Lekki Port will create an immense macro and catalytic economic impact on Lagos State and Nigeria in general.

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China Harbour Engineering Company latest equity infusion into Lekki Port is $221million - CEO, Lekki Port

Contrary to allegations that lack of fund has been the major source of delay of the Lekki Deep Sea port project, the management of the port has cleared that such claim is false and that it recently got an equity infusion worth $221 million from China Harbour Engineering Company, its major shareholder.

In an interview with Nairametrics, the Chief Executive Officer, Lekki Port LFTZ Enterprise Limited, Mr. Du Ruogang, talked on the catalytic economic impact on Lagos State and Nigeria, which include the creation of about 170,000 jobs and approximately $201 billion in revenue to State and Federal agencies from taxes, royalties and duties. Excerpts:

It appears the completion date has been shifted several times for a while now. Specifically, when will the facility be ready for business? Is the deadline realistic and how prepared are you?

Personally, as the CEO of Lekki Port, with full responsibility for delivering this project, I am fully committed to ensuring the project completion by the end of 2022. My team and I, in conjunction with the EPC Contractor, are working very hard to meet this deadline, and we are doing our best to anticipate any unforeseen circumstances that can derail this goal, so we can eliminate them and stay focused. We are very committed to honouring our pledge to the Honourable Minister of Transport, Rt. Honourable Rotimi Amaechi for a 2022 completion date. This was in November 2020 when he visited the port site.

READ: Lekki Deep Sea Port must be operational by 2022 – Amaechi

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What would be the impact of Lekki Port on the Nigerian economy after completion?

Lekki Port, when operational, will help to ease the congestion in existing ports and generally upgrade the continued development of the maritime and port facilities in Nigeria. With full collaboration from all port users and the regulatory authorities, we hope to cut down the operating costs and improve efficiency of doing business in Lagos, Nigeria.

What are the pressing challenges faced by the management, are there any funding issues?

There are no funding issues. All the equity partners have fully funded the project, with the latest equity infusion being the $221million received from China Harbour Engineering Company.

READ: Tolaram to spend $1.1 billion on West Africa’s biggest port 

There are 4 beneficiary owners of The Lekki Port LFTZ Enterprise Limited, the sole operators of Lekki Seaport i.e. Four China Harbour Engineering Company, Tolaram Group, Lagos State Government and the Federal Government through the Nigerian Ports Authority (NPA). Which of these entities is the majority shareholder of the company and what percentage shareholding does each of these entities have?

China Harbour Engineering Company and Tolaram Group jointly hold 75% of the project through Lekki Port Investment Holding Inc. The other shareholders are Lagos State Government (20%) and the Nigerian Ports Authority (5%).

Do you have any plan to list the company on the Nigerian Stock Exchange?

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Yes, at the right time Lekki Port intends to list the company on the Nigerian Stock Exchange.

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READ: China Development Bank, Sanwo-Olu sign $629m facility to complete Lekki Deep Seaport 

What is the financial benefit of the port (after completion) to the Nigerian economy?

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When completed, Lekki Port will create an immense macro and catalytic economic impact on Lagos State and Nigeria in general. This includes the creation of about 170,000 jobs and approximately $201 billion in revenue to State and Federal agencies from taxes, royalties and duties. Also, over the term of concession, there will be direct and induced business revenue impact of $158 billion as well as qualitative impact on manufacturing, trade and commercial services sector.

In summary, Lekki Port will have an aggregate impact of approximately US$ 361 billion on the Nigerian economy.

READ: Lekki Port to commence operations by 2022

Five years into your operation, where do you see the Lekki seaport?

Lekki Port when operational will help to ease the congestion in existing ports and generally upgrade the continued development of the maritime/port system in Nigeria. Within five years of operation, we hope to have become the transhipment hub for the West African region.

Essentially, we hope to be doing our own part in increasing commercial operations in Nigeria and indeed, across the entire West African region.

READ: Dangote makes about N2.47bn from cement sales every day

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In terms of marine infrastructure, we are aiming for global standards. Vessels will approach through a 9 km long and 19 m deep navigation channel reaching the 600 m wide turning basin. The port is protected against the ocean waves and currents by a main breakwater of 1,900 m long and a secondary breakwater of 300 m, providing a controlled environment for the handling of vessels alongside the 1,500m quay at a water depth of 16.5 m, and 3 Liquid Bulk Jetties with 19m water depth. For safe and secure handling of shipping, berthing facilities for marine services (tugboats, pilots’ boats) are provided as well.

READ: Dangote Cement, MTN, Nigerian Breweries, 9 others raise N478.4 billion from commercial papers

The Container Terminal will have a 1,200m long quay for 3 container berths and a storage yard with over 15,000 ground slots. The terminal is designed to support a throughput of 2.7 million TEUs annually. The Dry Bulk Terminal will have an available quay length of about 300m which will be sufficient to accommodate 1 berth for a Panamax size vessel (75,000 DWT).

The Liquid Berths will be capable of servicing vessels up to the size of 45,000 DWT initially, with design flexibility for expansions, catering to an increase to a capacity of 160,000 DWT. The berth will be equipped with loading arms and connected by pipelines running along the breakwater to carry cargoes between tank farms and the vessels. Finally, there will be in-built technology that allows for screening and processing which will promote efficient movement of goods within 48 hours.

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Exclusives

Nigeria records $4.3 billion in Corporate Deals in 2020

Paystack, Flutterwave, 54 gene, Trade Depot headline as Nigeria generates $4.3 billion from corporate deals.

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Nigerian owned businesses and businesses operating in Nigeria recorded over 106 corporate deals valued at over $4.3 billion (N1.63 trillion) in 2020. 

This is according to data compiled by Nairalytics the research arm of Nairametrics between January and December 2020 all at different stages of completion.  

Nigeria’s investment climate was precarious in 2020 as the global economy spluttered due to the Covid-19 pandemic. Nigeria’s GDP contracted by 3.62% (year-on-year) in real terms in the third quarter of 2020 after enduring a 6.1% contraction in the previous quarter, a development that was also attributed to the sustained shocks emanated from the continued spread of the virus as well as weak global oil prices.  

Thus, foreign investor sentiments towards investing in Nigeria remained dampened due to the economic downturn stifling foreign portfolio inflows into the country. Data from the National Bureau of Statistics (NBS) shows that capital inflow into Nigeria was estimated at $8.61 billion between January and September 2020, compared to $20.19 billion recorded in the corresponding period, falling by 57% year on year.  

In addition, data obtained from the Nigerian Stock Exchange (NSE) reveals that about N226.13 billion was recorded from Foreign Portfolio Investors between January and November 2020 as domestic investors drove market turnover for the most part of the year.

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Despite the economic downturn, the economy witnessed several corporate deals consummated or under different stages of completion for the period ended December 2020.

Corporate Deals Soar 

Corporates ranging from Startups to more matured businesses announced the closure or intent to secure funding through debt or equity-related deals amidst covid-19 and the lockdown. From Silicon Valley to South Africa the deals flowed in from all over the world boosting the capital structure of most Nigerian firms.

  • A total of 106 deals were captured in 2020 valued at $4.3 billion or N1.6 trillion occurred during the year with transactions ranging from raising equity, debt issuances, outright acquisitions, and divestments.
  • While the tech community dominated most of the equity-related deals, more established companies focussed on public offerings and debt securities such as commercial papers to raise money.
  • It is no surprise that the largest deal captured in 2020 was the International Breweries rights issue valued at about N165 billion or $457 million.
  • Dangote Cement was next to a bond issuance of about N150 billion, one of the largest private-sector debt-related deals for the year. BUA Cement followed suit with its own debt issuance of about N100 billion.
  • In terms of commercial papers, MTN raised N100 billion, the largest commercial paper issuance raised during the year.
  • In the tech community, the $200 million acquisition of Paystack by Stripe was by far the largest deal directly affecting a Nigerian based tech-related company.
  • Bolt, the cab-hailing tech firm operating across Nigeria and some African countries also got a significant funding boost raising about $100 million.

 

Why this matters

While the Nigerian economy suffered one of the biggest drops in portfolio investments in 2020 there was a flurry of mega deals that boosted the capital structure of most firms operating in the country.

  • Nairametrics research believes a large chunk of this funding will be spent in Nigeria as the country picks up from the economic ruin that was 2020.
  • The funds will flow into marketing budgets, capital expenditures, hiring of talents and executives, software acquisitions, etc.
  • Nairametrics also expect a significant rise in corporate deals on the Nigerian Stock Exchange as more companies take advantage of low-interest rates to either raise cheaper debts or replace expensive debts with equity.
  • Nigeria has a thriving Deals market that provides a significant source of revenue to law firms, financial advisory firms, auditors, fund sourcing firms, and investors.
  • Nigerian regulators also earn significantly from fees and taxes collected as the deals are consummated.

 A comprehensive report on all 106 deals will be published by Nairametircs next Monday. Kindly send in your email address here to get a copy.

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Exclusives

Nigeria spends N29 trillion on recurrent (non-debt) expenditure in last 10 years

Nigeria spent N29.3 trillion on recurrent expenditure, 10x more than capital expenditure.

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The Federal Government of Nigeria has spent N29.3 trillion in the last 10 years on (non-debt) recurrent expenditure. The government has earned N33.2 trillion as revenue in this period.

This is according to data compiled from the budget implementation report of the federal government compiled and published by the Budget Office of Nigeria.

High on non-debt recurrent expenditure

Nigeria’s recurrent expenditure includes spending on personnel expenses, pensions, and gratuities, service-wide votes, and overheads. It has consumed about 50.6% of total budget expenditure and 88.5% of revenue in the last decade.

  • Nigeria is amid an economic crisis brought upon by the fall in oil prices and more recently the covid-19 pandemic.
  • The federal government currently relies on about 33% of its actualized revenue since 2015 when oil prices started their sustained fall. It was about 55% between 2013 and 2015.
  • With oil revenues falling, the impact of a continuous increase in recurrent expenditure has widened Nigeria’s fiscal deficits closing at N6.1 trillion in 2020, the highest since we started tracking records in 2009.
  • Economic analysts have for years pointed to Nigeria’s high spending on recurrent expenditure compared to capital expenditure as a phenomenon that is inimical to economic growth.

Nigeria has recorded a budget deficit every year since 2009 averaging about N1.1 trillion in the 5 years before the Buhari Administration came into power in 2015. However, since 2015, budget deficits have averaged N3.3 trillion.

The government budget deficits have meant increased borrowing, exacerbating the situation. Last year, Nigeria borrowed N2.8 trillion from the central bank via the Ways and Means provisions. To service this borrowing about N3.2 trillion was spent in 2020, once again the highest on record.

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Recurrent expenditure vs Capital expenditure

A cursory review of the data shows that at N29.3 trillion, recurrent non-debt expenditure is about 3x more than the N10 trillion spent on capital expenditure in the last 10 years.

  • The Buhari Government has often compared itself with prior PDP led governments claiming it has spent more on capital expenditure. In 2020, the government spent N1.7 trillion on capital expenditure, the highest on record.
  • They have also spent between N1.4 trillion and N1.7 trillion between 2017 and 2020.

Whilst, their numbers have been impressive, spending on Capex as a percentage of total government expenditure is far lower than any other year in the last 10 years.

Here are some stark numbers

  • Nigeria spends on average 21% of the total budget on capital expenditure. The highest percentage was 29.8% in 2017.
  • It was 20.9% in 2020.
  • In contrast, recurrent expenditure as a percentage of total expenditure is as high as 115% on average in the last 10 years. It was 86% in 2020.
  • While capital expenditure has risen to N1.7 trillion in 2020 compared to just N958 billion in 2017, it is far lower in dollar terms at $4.6 billion compared to $5.8 billion respectively.

In the recently approved budget for 2021, Nigeria plans to spend N13.5 trillion in budgetary expenditure out of which N4.3 trillion is for capital expenditure and another N5.64 trillion on recurrent(non-debt) expenditure.

If this plan pans out the government would have succeeded in increasing its capital expenditure as a percentage of total expenditure to 32% in line with 30% included in the ERGP.

If history is to be relied upon as a basis for projecting, the government is more assured of hitting its recurrent non-debt expenditure spend than capital expenditure.

Nigeria’s Capital Expenditure challenges

According to a world bank report, capital expenditure involves spending on transport, information technology, power and utilities, defense, etc.

  • A recent Moody’s report indicates Nigeria needs to spend about $3.3 trillion in capital expenditure over the next 30 years or $1.1 trillion a decade to close its infrastructure deficit.
  • This amounts to $100 billion (N40 trillion) per annum or 28% of Nigeria’s GDP of N144 trillion, a tall task considering where the country is at the moment.
  • Nigeria is far from this goal and may not meet this target if it continues to spend more on recurrent expenditure compared to capital expenditure.

Also, the government will also need to explore new revenue sources other than oil to boost its revenues while relying less on budget deficits.

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  • Doing this will require massive tax reforms that target the informal sector, block leakages and reduce wasteful incentives.
  • Unfortunately, the covid-19 pandemic has pushed back any immediate plans to aggressively tax revenue.
  • For example, in its 2021 budget, the government is projecting a tax revenue of N1.4 trillion down from N1.6 trillion a year earlier.

The Private Sector way

Another possible area of increasing achieving Nigeria’s infrastructure goals is via the private sector. But to do this, Nigeria will need to improve its capital formation policies that enable the private sector to invest in public infrastructure while delivering a legal path to recovering its investments and profits.

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  • There is also the public-private partnership initiative pursued by the federal government towards funding infrastructure development in the country.
  • Just recently, the president approved the setting up of a $39.4 billion Infrastructure Company, wholly focused on critical infrastructural investments in Nigeria.

According to the president, “this Infrastructure company will raise funding from Central bank of Nigeria, Nigeria Sovereign Investment Authority, Pension funds, and local and foreign private sector development financiers.”

Upshots: Nigeria plans to spend N5.6 trillion on recurrent non-debt expenditure in 2021. The increase is coming from the following;

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  • Personal cost for MDA’s rising from N2.8 billion (as per 2020 budget) to N3 billion in 2021 budget.
  • Personal cost for government-owned enterprises (GOEs) will more than triple from N218 billion to N701 billion.
  • Overheads also increased considerably during the year.
  • In addition, debt servicing for 2021 is budgeted at N3.1 trillion up from N2.6 trillion in 2020.

 

 

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