The Nation Newspaper

Tag: Analyst

  • Budget 2018 implementation: Sectors to prioritise, by analyst

    A development analyst, Dr Otive Igbuzor, has advised the Federal Government to give priority to four sectors in the implementation of Budget 2018  to transform the lives of citizens and enhance sustainable development.

    Igbuzor, who is the executive director of the African Centre for Leadership Strategy and Development, said people were worried that health and education were not among the top three priorities in the budget.

    “We have always consistently advocated that if you want to budget to impact life of ordinary citizens, you must give priority to four sectors – infrastructure, agriculture, education and health.

    “You have seen from the 2018 budget presentation, the only one that comes top is infrastructure; there is higher allocation to security, understandably because without peace there cannot be development.

    “I think there is still room for improvement in terms of increase budgetary allocation to education and health,’’ he said in Abuja.

    Igbuzor, however, commended the National Assembly for putting over N55 billion for the implementation of the National Health Act, which is an increased allocation to the sector.

    He continued: “We have to do the percentage allocated to health later but the percentage of allocation to education, for instance is not up to 10 per cent. There are countries in the world like Ethiopia that budgets about 30 per cent for education. If you look at the level of education in Nigeria, it is clear that there is a need for improved allocation to education and health,’’ he said.

    He expressed concern over the consistent delay in the passage of budget over the past three years.

    According to him, the way to deal with it is by legislation, adding that that was why part of the constitutional amendment was to make it clear.

    Igbuzor advised that the way to go is to make it clear that the President must submit the budget before September and the legislators must approve before December.

    He added that once the law comes into force, then everybody must work within its ambit.

    On the way forward, he said the delay in the budget was because there was no law to address it.

    According to him, once there is no rule, then there is no offence.

    “They have not breached any law, so when that amendment passes through, then we will revert to January to December calendar,’’ he advised.

  • How Buhari will run economy, by analyst

    How Buhari will run economy, by analyst

    how will the incoming Buhari administration manager the economy in the face of fallen oil price? It is by instituting tighter fiscal measures to boost revenue, says Olubunmi Ashaolu, the analyst at FBN Capital, an investment and research firm.

    In an emailed note to investors titled: Welcome recovery in auction bid, he said in the absence of higher oil price to support public finance, the incoming government may go for tighter fiscal managements.

    Ashaolu listed tax exemptions, duty waivers, oil revenue inflows, officials’ allowances and ineffective ministries, departments and agencies (MDAs), as areas where fiscal management could be tightened to boost investors’ confidence.

    If there is to be fiscal transformation, it will come in stages, he said, adding: “Members of the circle around the president-elect have sought to manage expectations and indicated that Nigerians may not see sizeable changes until October. The 2015 budget process, almost concluded, limits their room for maneuver,” he said.

    The economist said investors’ rising confidence in the economy is reflected in improvement in bond auctions done by the Debt Management Office (DMO) after the elections.

    The DMO held its latest monthly auction of Federal Government of Nigeria (FGN) bonds last week and raised its target of N70 billion. The total bid of N186 billion was the highest since July last year and a sharp increase on the previous month’s N116 billion.

    “Local institutional buying picked up on the positive momentum generated by the elections. The offshore community also made an appearance: some players may have re-entered the market, having seen the theory of a third devaluation after the elections overtaken by events. The cut-off point (stop rate) for the same three debt issues was about 200 basis points lower along the curve than at the auction in March,” he said.

    Last Friday, yields (bid) on the Feb ‘20s and Mar ‘24s were just below 14.0 per cent. “We do not see many more legs to this current rally: it is based on a recovery in the naira exchange rate (for foreign investors) and a fiscal story which the administration due to take office in late May would like to talk down,” he said.

    Besides, portfolio inflows to the country jumped since last month’s presidential election, easing pressure on the naira, the Central Bank of Nigeria (CBN) has said.

    CBN Director, Financial Markets, Emmanuel Ukeje, said: “There is more confidence that the economy will grow as the outlook of foreign investors is very upbeat.

    “It is expected that the pressure on the naira will abate following the peaceful conclusion of elections. Although other contending factors like low oil prices in the international market still affect the availability of foreign exchange, the pressure should now reduce.”

    The CBN has been trying to bolster the currency since last year by limiting foreign-exchange trading and selling down its foreign reserves. The foreign exchange reserves stood at $29.6 billion on April 9, CBN data show. That’s the lowest in at least a decade, according to HSBC Holdings Plc.

     

  • States groan under N18,000 minimum wage, says analyst

    States groan under N18,000 minimum wage, says analyst

    The 36 states are finding it dif-ficult to fulfill their obliga-  tions because of what has been described as the “burdensome” N18,000 minimum wage.

    Citing the Debt Management Office (DMO) 2014 report, which puts states’ domestic debts, excluding bonds, at N1.71 trillion, FBN capital, an investment and research firm, said the minimum wage, which was approved in 2011, remains a strain on states’ budgets.

    FBN Capital’s Head of Markets Olubunmi Ashaolu, urged states to boost their revenue internally to be able to cope.

    He noted that Lagos State “has steadily generated over half of its revenue internally,” adding that the oil price crash has reinforced the need for state, to up their internally generated revenue (IGR).

    In a report titled: “Urgent need to bolster states’ IGR’’Ashaolu said some states are owing salaries because of a drop in their Federal Allocation.

    States, he said, may consider diversifying their revenue base by encouraging economic activities in sectors, such as, solid minerals and fisheries.

    The analyst said the Central Bank of Nigeria (CBN) data for 2013 revealed that IGR provided 15.3 per cent of the total revenue of the 36 states and the Federal Capital Territory, as was the case in 2012.

    He said the aggregate IGR grew by seven per cent to N586 billion from N548 billion in 2012. Again, Lagos emerged as the leading state achieving an IGR/total revenue ratio of 53 per cent; Kano, Ogun and Rivers achieved 35 per cent, 31 per cent and 26 per cent. “We stick with the CBN series for ease of comparison although it is dated and several individual states show different (generally higher) percentages,” he said.

    He said states’ successful efforts to boost IGR leave them better placed to pursue their capital programmes without overdependence on the oil-driven monthly distributions from the FAAC, and to tap the domestic bond market.

    Meanwhile, the Finance Minister Ngozi Okonjo-Iweala has said domestic debt is expected rise this year as it borrows more to meet a shortfall in revenue caused by the plunge in the price of oil, its main export, said.

    “‘Our income is still coming from a source that is not diversified. Because of the drop in oil prices we will have a difficult year. The additional domestic debt will go toward paying the salaries of government employees. You cannot throw people out on the streets,’’ Okonjo-Iweala said.

    Nigeria depends on crude exports for 70 per cent of government revenue and more than 90 percent of foreign income, making it vulnerable as prices plummeted more than 50 percent since last year’s peak in June. Pressure has mounted on the naira, which has weakened 7.5 percent this year, the most among 24 African currencies tracked by Bloomberg.

    ‘‘A year ago before the fall in prices we said that we should save but we were not listened to,” Okonjo-Iweala said, referring to lawmakers who had opposed her moves to use a lower oil price for budgeting and save the rest. “Today they’re saying we didn’t save.”

     

  • Analyst seeks improved risk-based supervision

    Regulators of the financial market need to improve on their oversight functions, especially in carrying out risk-based supervision in financial services operations, the Head of Markets, Sterling Capital, Sewa Wusu, has said.

    Speaking at a forum in Lagos, he said the challenges facing the insurance sector of the economy were because operators used mostly margin loans to invest in the capital market, adding that some of such funds have been lost.

    He said improved regulatory supervision would have averted the challenges and prevented the implications of such actions on investors.

    The expert said the banking sub-sector is recovering fast, with attractive valuations, adding that the recent regulatory intervention and reforms has led to increased stability and attractive growth prospects going forward.

    The building material subsector has also been tipped to benefit from increased infrastructure spending.

    He, however, stressed the need for the completion of on-going projects by the government and other key industries in 2013. This, he said, is expected to continue to raise demand and support strong growth in the sector.

    For the breweries sub-sector, Wusu said the threat of increased competition has spurred major companies (NB & Guinness) to make defensive acquisitions of smaller regional breweries coupled with aggressive expansion drive to sustain market share.

    ”The demand for beer is expected to continue to grow in line with increased economic activities, expanding population, improvement in product quality, and improving distribution network systems. Key success factors for the industry include; strong brand identity, extensive distribution network and strong advertising campaign,” he said.