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Nigerian Economy Drops Further into Freefall

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Reality for Nigerians comes harder by the day. Investors told Kemi Adeosun, finance minister in London this week that in the current climate even a high-yielding sovereign bond would be a tough sell so long as currency controls remain in place, according to Financial Times.

International airlines, meanwhile, are grumbling about $1bn in earnings trapped in Nigeria as a result of foreign exchange restrictions brought in last year as an unorthodox response to the collapsing oil price.

Two airlines — United, which ran weekly from Houston, and Iberia — have suspended flights partly as a result.

The main companies connecting Africa’s largest economy and leading oil producer to the outside world, among them British Airways, Emirates and Virgin Atlantic, have no immediate intention of following suit.

There is symbolism in this nonetheless. It points to how stranded Nigerians might become if their economy veers further into freefall.

It also suggests the central bank is withholding hard currency to shield reserves, and may have much greater obligations beyond the airline industry — hardly a recipe to inspire confidence.

There is no doubt Muhammadu Buhari was dealt a terrible hand when he assumed power over the country in the wake of an unprecedented victory over incumbent president Goodluck Jonathan.

Just over a year later there is a growing sense that Mr Buhari’s government is making that bad hand worse.

This is not entirely fair. Efforts to sanitise public finances, recover looted funds, and punish offenders are bearing some fruit.

The austere former military ruler arrived to a collapsing oil price after a bonanza of corruption and conspicuous consumption had bled the country of savings. For all the boom years, the giant infrastructure deficit remained largely unaddressed. Festering sores within society were still festering.

Nigeria: Running on empty
A worker rings a bell during a protest demanding that the government reinstate prices of fuel at 86.50 naira ($0.43, 0.38 euros) per litre in Lagos, on May 18, 2016.

Nigeria’s government on May 18 warned against “illegal strike action” after some union members vowed to press ahead with a national strike over petrol price rises despite a court injunction. #

Critics say President Buhari’s policies are adding to its worst economic crisis in generations

Now fresh tensions are beginning to boil over, notably in the long-neglected Niger delta where much of Nigeria’s oil is produced.

As a result of uncertainty over the country’s ability to deliver cargoes in the wake of renewed attacks on oil infrastructure by Niger delta militants, refineries are cancelling orders for Nigerian oil. So, on top of everything else, the price Nigeria commands for its oil has also been hit.

A back-of-envelope calculation highlights the scale of the resulting crisis in public finances. Strip out the approximately 700,000 barrels per day of oil lost to recent sabotage, all of it from onshore joint ventures where the state reaps a much higher proportion of earnings than from offshore production contracts in which oil companies gain the greater rewards.

Then factor in the amount of crude oil that Nigeria uses to secure swaps for fuel imports to meet domestic demand, because its own refineries are barely functioning.

The combined losses suggest the Nigerian state, which depends on oil typically for around two-thirds of revenues, is operating with a quarter or less of what it had two years ago.

It is unclear which multilateral or bilateral finance institutions will come to the rescue. It looks unlikely now to be bond markets.

In these circumstances it is clear that Africa’s largest economy will have to accommodate further shocks and that, ultimately, this will have to be recognised in the official value of the currency. Nigeria masquerades — when oil prices are high — as a rich country. For now it is looking poor.


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AfriLabs, Korea-Africa Foundation in Strategic Partnership to Boost African Innovation

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African hubs network AfriLabs has signed a memorandum of understanding (MOU) with the Korea-Africa Foundation for a strategic partnership aimed at driving innovation and economic growth across the continent.

AfriLabs is a network organisation that is committed to driving innovation and entrepreneurship on the continent by bringing together technology hubs, startups, investors, and other key stakeholders in the ecosystem.

Having recently announced the admission of 16 new hubs, AfriLabs now has a network of 478 hubs across 260 cities in 53 African nations.

The Korea-Africa Foundation, meanwhile, aims to serve as a platform for collaboration between the private and public sectors, and to strengthen exchange and cooperation with African countries.

The collaboration between the two aims to bridge the gap between Korean and African startups by leveraging each other’s expertise and resources. This will be achieved through the exchange of insights on youth development, the launch of joint research initiatives, and the fostering of a dynamic ecosystem that cultivates talent and entrepreneurial spirit in both regions.

“At AfriLabs, we are dedicated to unlocking Africa’s full potential and generating wealth through strategic alliances. This partnership with the Korea-Africa Foundation unlocks a treasure trove of opportunities for startups, granting them access to a global network, invaluable resources, and unparalleled industry knowledge.

“Together, we will empower the next generation of African innovators and entrepreneurs, paving the way for sustainable development and a thriving economy,” said Anna Ekeledo, executive director of AfriLabs.


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$750m World Bank Loan:  FG May Reintroduce Telcoms, Gambling Taxes

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Federal government may reintroduce the controversial telecom tax and other fiscal measures to fulfill one of the conditions for The World Bank’s fresh $750 million loan to Nigeria.

$750m World Bank Loan:  FG May Reintroduce Telcoms, Gambling Taxes

Experts have however strongly opposed new taxes, calling them harmful to the sector’s survival and the larger economy.

But The World Bank in programme appraisal document, dated May 17, 2024, on the loan disbursement to Nigeria, said that $750 million loan to Nigeria will support the federal government’s policy reforms.

A copy of the plan’s document posted on the World Bank website indicated that the government might reintroduce the excises on telecom services, and EMT levy on electronic money transfers through the Nigerian Banking System among other taxes.

Recall that on June 13, Wale Edun, minister of finance and coordinating minister of the economy, announced the approval of two financial support packages by the World Bank valued at $2.25 billion.

The loan consists of $1.5 billion for Nigeria’s reforms for economic stabilisation to enable transformation (RESET) development policy financing program (DPF) and $750 million for Nigeria’s accelerating resource mobilisation reforms (ARMOR) program-for-results (PforR).

In the programme appraisal document, the World Bank said the ARMOR programme contains revenue policy measures such as raising pro-health taxes on tobacco, and alcohol.

The Bretton Woods institution also said the programme contains the introduction of taxes on online betting and gambling, as well as new excise on telecommunication services.

Experts have however warned that these taxes would have severe consequences for investment and the operational viability of telecom companies.

According to them, higher taxes would hinder digitalization efforts, which are crucial for economic growth.

The proposed tax measures, according to the industry, are not only damaging to the telecom sector but also to the broader economy.

 

 


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EFCC, Flutterwave to Establish Cybercrime Centre for Security of Transactions

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Economic and Financial Crimes Commission (EFCC) and Flutterwave, unicorn payments technology company have signed a Memorandum of Understanding (MoU), to establish and a state-of-the-art Cybercrime Research Centre.

EFCC, Flutterwave to Establish Cybercrime Centre for Security of Transactions

Areas of focus of the centre include advanced fraud detection and prevention, policy development, as well as youth empowerment.

The fintech company with fortunes worth over $1bn headquartered in San Francisco with footprints in Nigeria and other African countries said the centre would also provide a “sustainable lifeline to youths across the country”.

To this effect, the Silicon Valley-based company signed a Memorandum of Understanding with the anti-graft agency in Abuja.

Ola Olukoyede, chairman, EFCC; Olugbenga Agboola, founder, Flutterwave; Christopher Gray, director of Federal Bureau of Investigations (FBI); and other senior officials from both the EFCC and the FBI witnessed the signing of the MoU

Specifically, the MoU was signed by Mohammadu Hammajoda, secretary, EFCC and Agboolaof Flutterwave.

Olukoyede said, “This partnership marks a significant leap forward in our efforts to combat financial crimes and ensure a secure financial landscape for Nigerians. The Cybercrime Research Centre will significantly enhance our capabilities to prevent, detect, and prosecute financial crimes.”

On his part, Agboola said, “This initiative underscores our commitment to creating a fraud-free financial ecosystem and leading the charge in safeguarding transactions across Africa.

“We applaud the EFCC’s relentless efforts to combat internet fraud and other illicit activities in the financial sector.”

The Cybercrime Research Centre, to be established at the new EFCC Academy in Abuja, would serve as a hub for advanced research, training, and capacity building in the fight against financial crimes.

Areas of focus of the centre include advanced fraud detection and prevention, collaborative research and policy development, youth empowerment and capacity building, technological advancement and resource enablement, among other key areas.

“Advanced Fraud Detection and Prevention: Developing and implementing cutting-edge technologies to detect and prevent financial fraud. The centre will offer comprehensive training for law enforcement and industry professionals to combat modern financial crimes effectively.

“Collaborative Research and Policy Development: Engaging in joint research initiatives and policy formulation to enhance the understanding and regulation of financial crime. The centre will provide a platform for the exchange of ideas and best practices between the public and private sectors.

“Youth Empowerment and Capacity Building: Providing high-end training and research opportunities for 500 youths, equipping them with the skills needed to navigate and excel in the digital economy.

“Technological Advancement and Resource Enablement: Creating a repository of advanced tools, technologies, and resources to support financial crime investigations, including protocols for addressing emerging threats such as cryptocurrency-related crimes,” the statement concluded.

Birthed in 2016 by Agboola, fondly referred to as GB, Flutterwave, with its corporate headquarters in San Francisco and operational head office in Lagos State, grew within a short time, penetrating the African market with customisable payments applications through its unique Application Programming Interface.

 

 


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