The Nation Newspaper

Tag: Gross Domestic Product

  • Crackdown on illegal mining

    From the Villa

    With over 1,000 illegal mining sites in the country, the illicit activity remains a major challenge.

    Nigeria, which is abundantly blessed with various solid minerals, has not been able to properly harness them for the benefit of the nation.

    The sector has not been able to make any significant contribution to the Gross Domestic Product (GDP), but that is not the only worry. Illegal mining also continuously funnels huge resources abroad.

    As a result, Nigeria was said to be losing $1.54 billion annually to illegal miners of gold alone.

    For the years 2014 and 2015, Nigeria was said to have lost $9 billion to illegal gold exports from the country.

    Apart from the monetary loss to Nigeria, the activities of the illegal miners have also caused death of many Nigerians including children.

    Zamfara State in 2010, for instance, recorded series of lead poisoning which led to the deaths of at least 163 people, including 111 children.

    Health Ministry had at that time confirmed the discovery of 355 cases, with 46 percent proving fatal.

    Many moves by the various governments in the past to stop the activities of the illegal miners had not achieved much success.

    But the current administration is having a try at it again under its efforts to diversify the Nigerian economy and boost revenue from the sector to the government coffers.

    The Federal Executive Council meeting chaired by President Muhammadu Buhari has approved new measures to sanitise the sector.

    The Minister of Mines and Steel Development, Kayode Fayemi said: “The memo presented to Council has to do with contribution of mining to the GDP. In the latest figure of GDP,  there is significant improvement industrial contribution after agriculture to that report as was released by the National Bureau for Statistics (NBS) states that 8.97 percent increase has happened and the bulk of the contribution from the industry is from mining and quarry activities.

    “But the primary reason for this memo is the fact that mining could still do a lot more in terms of its contribution.

    “NEITI has just released its report and that report made it clear that in 2014 and 2015, what we lost to illegal mining operation was somewhere in the region of about  $9 billion particularly from gold illegal exportation. There were other things that were illegally taken out,  lead,  zinc, tin and coal.

    “You recall that in the roadmap the Federal Executive Council approved last year, there is the establishment of the Special Mines Surveillance Task Force.

    “This memo that went to Council requested from Council the approval of the procurement of 50 Hilux Vehicles for the Special Mines Surveillance Task Force to capacitate them in their work to monitor and curb illegal mining activities in all the 36 states of the federation and the Federal Capital Territory and then to support the collaboration between the state and Federal Governments via the Mineral Resources and Environmental Committees that the Mining Act has allowed to set up in all the states.

    “So this memo went to Council for the procurement of 50 Toyota Hilux Vans for the sum of N987 million at a set piece of about N19.3 million per a vehicle.

    “But it just forms part of an overarching framework because Council also underscores the fact that this one vehicle per state cannot solve all the problems but in order to begin to tackle the issues, we need to start from somewhere and ultimately the goal is to ensure that we deploy technology to monitor the illegal activities across the length and breadth of the country and through that capacitate the security services.

    “The Special Mines Surveillance Task Force is made up of all security agencies. The DSS,  the Police, the Civil Defence, EFCC and the National Security Adviser’s Office.

    “You may be aware that over the course of last year, the Police have established Mines Police and we now have a Commissioner of Police in-charge of Mines Police. We have a Commandant from the Civil Defence also exclusively deployed for mines activities.

    “If we can stop the spate of illegal activities, not just by Nigerians but by Nigerians in collaboration with some foreigners, we will significantly improve the revenue that comes from that sector, increase the contributions to GDP, increase the royalty to government and also provide more jobs for our people.

    “This is just the monitoring and curbing side of that work. The other side of reducing illegal and informal activities is the formalisation of small scale miners and artisan miners and you may all be aware that recently we placed N5 billion in the Bank of Industry to support the activities of Artisanal and small scale miners to formalise their operations, form into cooperatives and then get more capacitated by government,” he stated.

    It is definitely the prayer of all well-meaning Nigerians that government succeed in these new measures to boost income from the mining sector.

    While this is going on, it will be good for the government to also extend these measures to other areas of the economy where the country is losing money to illegal activities.

    It’s really high time for all bleeding points of the Nigerian economy to be blocked and sealed for the benefit of all Nigerians.

     

    Safeguarding stolen loot 

     

    The President Muhammadu Buhari administration has taken  steps to safeguard recovered stolen assets and what will be recovered in the future.

    The President is trying to ensure that what was recovered from the deep throats of thieves do not end up in the pockets of another set of thieves masquerading as saints.

    Not only has he ordered audit of all the recovered stolen assets, the President also put in place measures to ensure accountability of funds to be recovered in the future.

    The three-member committees, whose shoulders the responsibilities lie, include Mr. Olufemi Lijadu, Mrs. Gloria Chinyere Bibigha and Mr. Mohammed Nami.

    Charging the audit committee on recovered assets to do thorough job, the President said: “The gains of our initiatives over the past two and a half years have been very obvious to all Nigerians. This is clear from the level of investigation, prosecution and forfeitures involving both public and private sector officials in the country.

    “The message has therefore been passed loud and clear that never again as a nation are we going to allow the wanton diversion and embezzlement of public funds to private pockets.

    “Nigerians will further recall that pursuant to requisite directives, recovered assets are progressively being returned to designated accounts by the anti-graft agencies and other agencies of Government involved with the process.

    “In the course of implementing this exercise and given the number of agencies who are concurrently pursuing specialized initiatives and making recoveries for Government, it has become obvious that fundamental gaps still exist in ensuring that the recovered assets are accounted for, and managed in an accurate, transparent and logical manner,” he said.

    He went on: ”It was in realisation of this and due to our determination to ensure that in pursuing the anti-graft war, we do not create new room for dishonorable conduct by any individual or agency that I directed, earlier in the year, that all agencies should send in detailed reports of all their recovered assets as at March, 2017.

    “The decision to inaugurate this Audit Committee on the Recovery and Management of Stolen Assets within and outside Nigeria today is therefore the next step in ensuring that all returns filed by the various agencies are accurate and consistent with actual recoveries made.” he said

    It is expected that the committee will be above board and carry out a thorough job.

    The committee should also not hesitate to expose any fraud it may discover in the process of carrying out the assignment.

    The interest and development of Nigeria should be paramount in their hearts.

  • N200b online payment revenue vista for MSMEs

    N200b online payment revenue vista for MSMEs

    A fresh window of opportunity may have come the way of Nigeria’s estimated 37 million Micro, Small and Medium Enterprises (MSMEs). Small businesses and startups willing to adopt online payment solutions stand to benefit from a projected N200 billion online payment revenue this year. Assistant Editor OKWY IROEGBU-CHIKEZIE writes on how MSMEs can leverage online payment solutions to grow their businesses and create jobs.

    Small businesses and startups are acknowledged globally as the life blood of any economy. This is because of their immense capacity to grow the Gross Domestic Product (GDP) and also create jobs. But in Nigeria and, indeed, other developing economies across the world, one of the major challenges of MSMEs is how to receive payments from their customers through cash and bank payments.

    Although, Nigeria, according to experts, boasts an estimated 37 million MSMEs, electronic payment remains relatively a new phenomenon. Most transactions in the country are done with cash, which remains the preferred medium for payment in the country. Factors such as poor awareness of e-payment solutions, ignorance, poor banking culture, lack of trust, illiteracy and the love for the status quo have been identified as being responsible for the high volume of cash transactions in Nigeria.

    However, the situation is changing. This was in the wake of the adoption of the “cashless” initiative by the monetary authorities in Nigeria, for instance. In 2016 alone, about N132 billion worth of goods and services were said to have been purchased via the Internet. This, according to financial experts, made online payment a veritable market for MSMEs to tap into to grow their businesses.

    The thinking is that MSMEs are perhaps, the most viable sector to drive growth as well as engage the highest number of employees in any economy. Their capacity to do so, according to experts, put them on a vantage position to turn around the fortunes of its operators as well as the country’s. Besides, viable MSMEs drive industrialisation. And this must have been why operators and stakeholders in the sector believe that the adoption of online payment solution remained the way to go for MSMEs.

    Already, PayU Nigeria, an online payment platform, appears poised to push an aggressive uptake of online payment solutions by MSMEs. Based on the firm’s findings, MSMEs stand to benefit from a projected N200 billion revenue that may accrue to the sector from online payments in the current year.

    PayU Nigeria Country Manager, Ms Juliet Nwanguma, also said that by adopting online payment systems, small business owners can enjoy the associated benefits of credibility and reliability, especially as it has proven to be more secure and credible than receiving cash or cheque payments.

    Nwanguma added that it also has the advantage of instant receipt of money with no risk of bounced cheques and the fees associated with it. She explained that businesses that have online payment platforms are considered more reliable and this encourages customers to do business with them, while for the consumer, it offers fraud protection, thereby securing their money.

    The online payment expert therefore, urged MSMEs in the country to leverage on online payment as it will open up their businesses to more customers far beyond their locality, considering that a large population of people now rely on and use the Internet to purchase goods and services.

    Nwanguma stated that setting up online payment is also quick and easy, as some of the payment platforms offer affordable plans with zero set-up fees and low transaction rates. She also revealed that MSMEs can use online platform to drive their export capabilities.

    At moment, the MSME sector is said to account for a paltry seven per cent of the country’s total export, a figure considered low when compared to the over 37 million MSMEs operators in Nigeria.

    To increase the capacity of MSMEs to contribute more to the country’s total export, Nwanguma told The Nation that her firm offers easy and instant online payment solutions for small businesses.

    Giving more insight to the available solutions, she said the PayU Easy product, for instance, is a quick, easy and hassle free way to start selling online. According to her, the solution is flexible and ideal for businesses without an online merchant account.

    She explained that PayU Easy comes with the assurance of her firm’s global expertise across 16 markets where they offer over 250 payment options.

    “PayU Easy is designed for businesses with less than 500 transactions weekly. It offers the advantage of minimum documentation, weekly settlement, security of transactions (PCI DSS SSL and 3D secure), and zero set-fee,” she said.

    That is not all. Nwanguma also said it offers the benefit of customised payment web page designed to ensure a consistent look and feel. “With PayU Easy, businesses can accept all major payments including Visa, MasterCard and bank transfers.

    “The online market offers huge potential to start-ups and the 37 million SMEs in Nigeria to grow their sales. PayU Easy was designed to help them tap into this potential,” Nwanguma explained.

    Explaining how it works, the PayU Nigeria boss said: “Customers simply click a link on their website and are transferred to a secure payments page where we handle the entire process. When they’re finished, we deliver them back to your site. The payment goes into an account with us, and we pay all the money owed to you at an agreed interval.”

    She assured that customers do not need to worry about card security; all they need to do is sign up and get selling. “Customers simply complete their purchase and you get confirmation that a transaction has taken place. The money from the sale goes into an account at PayU.

    “Usually every week, we add up your total, subtract our fees, and pay the balance into your account. You also get a statement. The whole process is automated, making it easy and effortless for you,” she explained.

    On the significance of PayU Nigeria to small businesses, Nwanguma stated that while MSMEs in Nigeria may have to wait for government’s intervention to address the various challenges confronting them including lack of access to low cost funds and poor infrastructure, they do not necessarily have to wait for such intervention to overcome the challenge of limited access to market.

    She stated that with the fast and easy online payment products offered by PayU Nigeria, MSMEs have the immediate opportunity to sell to more people in and around Nigeria, reduce the cost and risk of accepting payments, and as a result boost revenue and their contributions to the nation’s GDP.

    While noting that migrating business online might pose some challenges to some MSMEs regarding some accounting and inventory functions, she assured that her organisation has taken this into consideration and has taken it upon itself to automate online without the need for additional business intelligence tools.

    Operators’ reactions

    For the Managing Director of Black & Empress, an upscale clothing line on Broad Street, Lagos, Mrs. Evelyn Egboka, the adoption of online payment methods by MSMEs has become imperative. She noted that online payments aid faster sales, expand and increase patronage opportunities.

    “Customers can pay for goods and services from the comfort of their homes or wherever they are located. Currently, we accept payment easily and directly into our accounts, thus saving the time and resources for collecting and banking money collected via cash or cheque,” Egboka said.

    The budding entrepreneur admitted that for many operators in her line of business, this has greatly reduced the vulnerability of MSMEs to risk of cash theft and associated vices.

    Egboka, however, cautioned that the choice of the channel or online payment gateway a business decides on determines how cost effective it will be in the long run. She said she has watched her business grow beyond sending and receiving payments.

    Also reacting to the issue of safety of online payment, an Information Technology (IT) Manager with Crystal Park Integrated Solutions, Mr. Stephen Oluwasegun, said that for any payment system to be able to replace cash or at least compete with it, it must win the trust of its users in the economy.

    He said: “For this to happen there must be a way for merchants to verify the validity of the purchase. The payment solution must also be easily convertible to cash or as good as cash. Since most merchants in Nigeria are in business on subsistence basis, there must be a way to use the money they made for the day-to-buy what they need for the day or for the following day.”

     

  • Nigeria needs N20tr investment to drive growth, says report

    Nigeria requires at least an investment of 20 per cent of the Gross Domestic Product (GDP) per annum, far above the investment level of 12.6 per cent of GDP this year, to drive growth. This translates to an investment of $55 billion, or N20 trillion, reflecting that the country would have to nearly double its current investment level.

    These findings are contained in an economic paper recently released by PwC Nigeria, titled: Boosting Investments: Nigeria’s Path to Growth, which estimated the size of investment needed to drive growth. It was authored by PwC’s Partner & Chief Economist Dr. Andrew S Nevin, and its Senior Manager & Economist, Adedayo Akinbiyi.

    To reach its conclusions, the paper conducted an extensive review of economic literature, and analysed a panel data of 13 emerging economies between 1991 and 2016. The analysis revealed that investment is the most fundamental driver of growth.

    According to PwC, growth in Nigeria has been relatively strong at an average of 5.6 per cent per annum over the past decade. It however, said that this has been fuelled by the oil boom and population expansion, rather than investments.

    Nigeria is projected to be third largest populated country in the world by 2050, with 399 million people. But PwC projected that Nigeria could emerge the 14th largest economy in the world by 2050, with GDP in Market Exchange Rate (MER) terms at $3.3 trillion.

    “To deliver sustainable growth with per capita gains, Nigeria will need to aggressively boost domestic and foreign investments over the next decade,” the report, which was made available to The Nation, said.

    The report observed that at moment, Nigeria’s investment rate ranks below peers. For instance, between 2007 and 2016, Nigeria’s investment share of GDP declined from 18.7 per cent to 12.6 per cent, reaching the lowest level in the past two decades.

    “In comparison to peers, Nigeria’s investment rate lags the average of 23.3 per cent recorded for sub Saharan African countries, and 28.9 per cent for the BRICS (Brazil, Russia, India, China, and South Africa),” PwC said.

    PwC Nigeria, which delivers quality in assurance, advisory and tax services, added that academic literature suggested a strong nexus exists between the level of investment and economic growth, citing China and India as examples of economies that have successfully attained investment-led growth.

    The firm noted that the foreign exchange regime remained key to stimulating investment and restoring growth. It stated, for instance, that if Nigeria’s N2.2 trillion capital budget for 2017 is channeled towards investments, it would only meet 11 per cent of the estimated funding to bring investment as a share of GDP to 20 per cent.

    The report said: “In Nigeria’s Economic Recovery and Growth Plan (ERGP), which aims to attain important infrastructure targets within the next three years, the government acknowledges its limits and emphasises the need for private investment to drive infrastructure development.

    Our report, which examined the ERGP, identified two critical factors for unlocking private investment namely, improving the business environment, and having a sustainable foreign exchange regime.

    “We note that the country has made some progress towards improving the business environment through several reforms, including a 60-day action plan implemented over the past six months.

    “However, more needs to be done, in particular, with respect to paying taxes, getting access to electricity and other infrastructure, which are critical to bolster investment.”

    While also noting that foreign exchange liquidity has improved in recent times as the Central Bank of Nigeria (CBN) allowed for more flexibility in the foreign exchange market, PwC however, argued that the existence of multiple exchange rates with significant variances posed a risk to investment.

    “In our view, a market-determined exchange rate, where all rates are harmonised, is fundamental to boosting domestic and foreign investments,” the report emphasised.

    In 2016, the economy slowed markedly, falling into a recession for the first time since 1991. Real GDP contracted 1.5%y/y, a reflection of the two-and-a-half year decline in export earnings, and fall in government’s revenues, which impacted consumer spending and investments.

    Perhaps, the most evident impact of the sharp decline in the oil price was in the currency market, with the NGN/USD depreciating 35.4 per cent in the official market and 47 .3 per cent in the parallel market during the year.

    Aside the depreciation of the currency, the illiquidity in the foreign exchange market impacted the business and investment environment, with Foreign Direct Investment (FDI) declining to an 11-year low, and a collapse in investment as a share of GDP to 12.6 per cent – the lowest level in the past two decades.

  • Manufacturing: Experts canvass stakeholders’ engagement to drive growth

    For Nigeria’s Gross Domestic Product (GDP) to grow, experts and stakeholders in the manufacturing sector have called for constant engagement of the public and private sector.

    They argued that the arrangement would allow the government to  understand the needs, requirements and enablers of the manufacturing sector and, thus, provide the enabling environment for it to thrive.

    Indeed, the inability of the growing GDP to translate into steady and sustainable development over the years has been linked in part to low productivity and uncompetitive manufacturing sector.

    The Chairman of Sterling Bank, Asue Ighodalo, while speaking at the inaugural conference of the Association of Company Secretaries and Legal Advisers in the manufacturing sector (ACSLA), said a country that wanted to develop must have a GDP of about $1 trillion with at least 20 per cent contribution from the manufacturing sector.

    Worried by the nine per cent manufacturing sector’s contribution to the GDP, Ighodalo identified some of the factors that scuttled the vision envisaged in drafting the first and second national development plans to include poor implementation, bad leadership, policy flip flops, the curse of oil, corruption and a misaligned workforce.

    Speaking on the theme: “Setting a New Agenda for Sustainable Economic Growth – the Imperative of Forging a Public/Private Sector Engagement”, Ighodalo said: “The manufacturing sector’s GDP contribution of less than nine per cent is totally unacceptable.”

    He said that before manufacturers tackle government on the situation, it is important for their companies to be well governed, comply and provide the financial statements that are reliable, and then engage government.

    While admitting that the Federal Government has been doing some hard work in improving the business environment and infrastructure, Ighodalo said manufacturers must complement the Federal Government by ensuring that their companies are well run and are focused and strategic.

    He said when this is done, manufacturers will, hopefully in the next few years, begin to see remarkable improvement. “We really need to get our manufacturing sector working in all aspects as it is fundamental to our economic growth and development,” Ighodalo said, adding that there is need to encourage export and reduce bureaucracy for exporters.

    Bearing in mind that no sector can survive without effective regulations and enforcement, the Chief Executive Officer of the Nigerian Stock Exchange (NSE), Oscar Onyema, stressed the need to build a viable and legal frame work for the manufacturing sector.

    He said that it is important that the current legal and regulatory framework is reviewed to address vital areas, noting that as in-house counsel, it is pertinent to take up the challenge by undertaking an in-depth review of the current legal and regulatory framework.

    According to him, this is with a view to improving what currently entails and by pushing persistently on the doors of stakeholders that needs to implement the change.

    Onyema, who was represented by the NSE Legal Adviser/Head, Legal Department, Irene Robinson-Ayanwale, gave an analysis on how the manufacturing sector has fared in the Nigerian capital market and how to forge a workable private sector engagement in order to achieve a sustainable growth.

    Onyema said: “We must all be fully ready to act as catalyst and realise that our respective contributions towards the goal is necessary to galvanise the economic growth we all strive for.

    The benefits the exchange offers the manufacturing sector is global, diverse, nucleus and all encompassing.”

    The NSE boss noted that sustainable economic growth cannot be achieved without a firm handshake between the public and private sector, with both sectors leveraging on the financial infrastructure, technology and above all benefits that the exchange provides for the ease and efficiency of doing business in Nigeria.

  • Only 3m Nigerians have insurance policies, says Adeosun

    Only 3m Nigerians have insurance policies, says Adeosun

    The Minister of Finance, Mrs kemi Adeosun, on Monday said that only three million out of 180 million Nigerians possessed insurance policies to protect themselves from uncertainties.

    Adeosun, who made the disclosure at the ongoing 2017 National Insurance Conference (NIC) in Abuja, noted that insurance was playing critical roles in the economy.

    The theme of the three-day conference is: “Nigeria Open for Business.’’

    Represented by Alhaji Mammud Dutse, Permanent Secretary in the Ministry of Finance, Adeosun said that insurance was facilitating investments by reducing the amount of capital and savings needed by individuals, corporations and agencies to fight unforeseen losses.

    She said that total insurance premiums grew from N75 billion in 2005 to over N300 billion in 2016 and contributed approximately 0.7 per cent to the Gross Domestic Product.

    She said that the figure was less than the African average of 3.3 per cent and the global average of seven per cent.

    The News Agency of Nigeria (NAN) reports the 2017 event would be the third since the conception of the Insurance Industry Consultative Council (IICC) in 2015.

    IICC is an amalgamation of all the constituent arms of the insurance industry, which includes the Nigerian Insurers Association, Nigerian Council of Registered Insurance Brokers and Institute of Loss Adjusters of Nigeria.

    The minister lamented that the insurance industry was facing the challenge of low-level penetration.

    “This means insurance from writing more premiums from millions of Nigerians can provide finance for our long-term economic growth for the country’s recovery.’’

    She said that practitioners must be willing to do more to make insurance a giant industry to look up to, adding that distribution channels must be innovative and that new products should be developed to attract the populace.

    She argued that to achieve conclusive growth, insurance must be deployed to rural areas.

    “Deepening insurance penetration to the rural areas must include, improving technical capacity to meet the emerging market trends.

    “The best way to promote insurance is to incorporate both individuals and corporate entities into the insurance market,’’ Adeosun said.

    The minister said that the Federal Government would ensure that its economic reforms supported the growth of the insurance industry, adding that many foreign investors had indicated interest to invest in the sector.

    “There is also a high level of ownership of insurable assets in Nigeria, despite the economic situation.

    “We expect that industry reforms will continue to drive investments and new market entries.

    “Foreign investors have shown great interest in the Nigerian insurance sector by entering into the market and progress can be seen in the introduction of new insurance products in the growing mortgage and housing sector.

    “To concentrate on the progress being made so far, Federal Government will always play its part to ensure that government assets are properly insured,’’ she said.

    Also speaking, the Minister of Trade and Investment, Dr Okechukwu Enelamah, said the best way to move the industry forward was for the practitioners to accept responsibilities.

    “The practitioners need to work hard to ensure that many Nigerians are dragged into insurance net.

    “The practitioners cannot compare themselves to entertainers,’’ Enelamah said.

    Earlier, Alhaji Mohammed Kari, the Commissioner for Insurance, National Insurance Commission (NAICOM), commended the Federal Government for its support for the industry.

    Kari described insurance as promoter and stabiliser of economic and commercial activities.

    He said the commission had commenced the review of processes which included timelines and deadlines.

    Kari said that the growth of the industry was hindered by unripe products, religious beliefs and wrong perception.

    NAN reports that over 400 participants are taking part in the NIC conference.

  • CBN salary bailout to states hits N373.56 billion

    CBN salary bailout to states hits N373.56 billion

    To address the current economic challenges in the country, states have got N373.56 billion under the Central Bank of Nigeria (CBN) Salary Bailout Intervention Facility.

    A total of twenty-eight states have benefited from the facility between August 2015 and January 2016.

    This was contained in a copy of a paper presented to the National Economic Council (NEC) Retreat by the Minister of Budget and National Planning, Udoma Udo Udoma, obtained by our correspondent.

    The paper titled ‘Strategic Implementation Plan for the 2016 Budget of Change’ also disclosed that 23 states had their bank loans amounting to N575.52 billion restructured into 20 years FGN bonds.

    Giving an overview of the economy, the Minister noted that external reserves reduced from $37.5 billion in June 2014 to $27.8 billion as at mid-March, 2016.

    He also disclosed that the Gross Domestic Product (GDP was less than 5 percent compared to 17 percent in other emerging markets.

    According to him, the 2016 Budget is intended to reflate the economy through government expenditure-led growth strategy with emphasis on infrastructure development.

  • FAAC Q2 vote hits N3.3tr

    FAAC Q2 vote hits N3.3tr

    The Federation Account Allocation Committee (FAAC) vote between January and last month was N3.3 trillion, analysts at Standard Chartered Bank (SCB) have said.

    The figure represented an increase of 13.74 per cent against that of the same period in 2011.

    Regional Head of Research, Africa at SCB, Razia Khan said in an emailed report titled: ‘Nigeria – The political cycle and policy’ that the FAAC hike may be seen as further evidence that Nigeria’s political cycle is starting to have more of an influence. She also ruled out possibilities of carrying out Gross Domestic Product (GDP) rebasing before 2014, a process that will enhance the economy.

    She said despite the success of Nigeria’s recent Eurobond issuance and a reduced domestic issuance calendar for third quarter, concerns persist over the broader fiscal backdrop.

    “Even improved budget implementation is a source of concern. Commentators are unsure if this reflects more efficient spending, or pressure to spend more. In first quarter of 2013, government revenue was reportedly 12.6 per cent lower, while spending rose 15 per cent,” she said.

    Khan explained that increased military spending following the state of emergency in the Northeast should be met by a contingency reserve adding that further escalation may put pressure on spending plans.

    She said Nigeria’s $284 billion GDP is expected to be rebased by early 2014, a process that will lead to about 40 per cent upward revision in the country’s national income.

    The GDP is the market value of all final goods and services produced within a country, calculated using product, income and expenditure approaches. The real GDP is one that is adjusted for inflation while nominal GDP is the value of goods and services based on current market prices.

    Khan said in the near-term, Nigeria economy faces some risk which may lead to growth slipping to six per cent. She said although rebasing of the GDP will support the much needed growth and provide analysts with more accurate sectoral shares, it will not happen until 2014.

    Khan also expressed concerns about Nigeria’s political cycle and spending pressures. “There is a risk that elections, due in 2015, are brought forward, allowing for any legal disputes to election results to be settled ahead of a May 2015 transition. If this is the case, spending may rise meaningfully ahead of party primaries which would be held in early half year 2014,” she said.

    She said weaker oil output relative to ambitious budget targets risks fiscal deterioration, with Nigeria dipping into its oil savings. With only modest spending increases envisaged in 2013, a budget deficit of 2.17 per cent was initially forecast.

    However, oil production, reportedly averaging 2.1 to 2.2 million barrels per day (mbpd), has fallen short of the 2.53 mbpd assumed in the 2013 budget. In June, output may have hit a low of 1.9mbpd. This, she insisted, has necessitated more frequent augmentation of revenue from Excess Crude Account (ECA).

    “Dipping into oil savings to finance spending may result in a narrower budget deficit for 2013. Despite the success of Nigeria’s recent Eurobond and a reduced domestic issuance calendar for third quarter 2013, concerns persist over the broader fiscal backdrop,” she said.

    Khan explained that given anticipated pressure on future inflation, forecast of a 100 basis points (bps) rate hike in first quarter of 2014, followed by hikes of 50bps each in third quarter and fourth quarter 2014, with the interest rate raised to 14 per cent by end of 2014 is a possibility.

    Nigerias plans to change its GDP base year to 2008 from 1990, thereby boosting its nominal GDP. By carrying out the exercise, Nigeria will be emulating Malaysia and South Africa which rebased their GDPs from 2000 to 2005 each and Ghana from 1993 to 2006.

    The Gross National Product (GNP) measures the value of goods and services produced by a country’s citizens regardless of their location while Gross National Income (GNI) is GDP plus income receipts minus income payments from the rest of the world.