A Week in Nigeria: 13 April

Highlights from Reuters coverage of Nigeria over the last seven days

In this week’s round-up: World Bank and IMF cut growth forecasts, parliament recommends luxury tax rise and a twin town mystery.

The World Bank said the cut in its growth forecast for Sub-Saharan Africa reflects lower growth in Nigeria, as well as Angola and South Africa
  • The World Bank cut its growth forecast for Sub-Saharan Africa this year to 2.8 percent from an initial 3.3 percent. The commodity price slump of 2015 cut short a decade of rapid growth for the region, and the bank said growth would take longer to recover as a decline in industrial production and a trade dispute between China and the United States take their toll. “This downward revision reflects slower growth in Nigeria and Angola, due to challenges in the oil sector, and subdued investment growth in South Africa, due to low business confidence,” it said. The bank’s 2019 forecast means economic growth will lag population growth for the fourth year in a row and it will remain stuck below 3 percent, which it slipped to in 2015.
  • The International Monetary Fund also cut its 2019 economic growth projection for the region this year. However, its forecast was more optimistic than that of the World Bank with a prediction of 3.5 percent growth, down from 3.8 percent last October.
  • Our oil desk in London reported that the rising tide of light U.S. shale oil has largely swept away comparable grades of Nigerian oil from American shores and is putting them under pressure in Europe. However, our team also found that steady Indian and Indonesian demand has helped lift price indications for two of Nigeria’s top grades to near five-year highs, according to traders and shipping data. “It’s only because India’s economy has been growing, and to a lesser extent Indonesia, that there remains decent demand for Nigerian crude. Without those two countries, the European buyers would have dragged the market much lower,” one seller said.
  • Nigeria’s parliament has asked the government to consider increasing taxes on luxury goods to boost revenues, it said while considering the country’s spending plan for 2019. Nigeria, which has one of the lowest tax rates on the continent, has been trying to raise government revenues in the face of lower oil prices after recovering from a recession that slashed public finances, weakened its currency and cut spending on capital projects. In the past the government has mulled the idea of raising taxes on luxury goods to 15 percent from the current rate of 5 percent, to boost its tax to GDP ratio to 15 percent from 6 percent between 2017 and 2020. However, collection has been a major challenge in a country where many small business are not registered. Also, economists say the timing of a tax hike would be closely watched as companies and consumers face cost pressures in a time of slow growth.
  • We also reported that a committee in parliament’s upper house that is considering the government’s spending plans said President Muhammadu Buhari’s administration proposed a deficit of 1.86 trillion naira ($6.1 bln) in 2019 to be funded by borrowing, privatisation proceeds and loans secured for specific projects. It expected the country to generate 172.47 billion naira ($564 mln) from privatisation proceeds. Lawmakers did not identify the assets for sale. Last month, the government said it planned to cut its stake in oil joint ventures this year. Nigeria is budgeting 8.83 trillion naira of expenditure for 2019, based on oil output of 2.3 million barrel per day production at assumed benchmark price of $60 per barrel. The plan is under consideration by parliament. The government has said it would borrow 1.649 trillion naira to help fund the budget, half of which is targeted to come from offshore sources.
  • Reuters correspondents in South Africa and Kenya reported on efforts by the automotive industry to break into Africa, the world’s last great untapped market. However, there’s an entrenched lobby of used car importers and dealers standing in the way. Volkswagen, BMW, Toyota, Nissan and others have joined forces to lobby governments for steps that would reduce the imports that have made sub-Saharan Africa notoriously difficult terrain and allow local production to flourish. They reported that, under the Association of African Automotive Manufacturers (AAAM), Nigeria and Ghana are preparing to offer automakers tax holidays of up to 10 years and duty-free imports of parts and components used in local assembly. Nigeria also plans to double the levy on new, fully-built imported vehicles to 70 percent to boost demand for locally produced cars, though the policy’s approval has been delayed. The AAAM identified Kenya, Nigeria and Ghana as potential manufacturing hubs and helped draft legislation setting up standards and incentives.
  • The United Nations said Nigerian troops forced the entire population of a town of 10,000 people in northeastern Borno state to relocate without warning. In a statement it said soldiers moved the people of Jakana to a camp in the city of Maiduguri about 40 km (25 miles) away, some arriving with “nothing, not even shoes on their feet”. The armed forces were conducting an operation to flush out Islamist Boko Haram insurgents, Abdulmalik Bulama Biu, a commanding officer in the northeast, said without elaborating.
  • We visited Igbo Ora, the town in southwestern Oyo state where a banner welcomes visitors to the “twins capital of the world”. Even in southwest Nigeria, where one study found that around 50 sets of twins were born out of every 1,000 births, the town stands out for the high proportion of twins in the populace. We looked for reasons behind the population quirk.
  • The government announced a target to double its manufacturing output to 20 percent of GDP within six years and said it will set up production hubs across the country in partnership with regional aid banks. Nigeria has sought to maintain a strong currency to ensure it can keep imports pouring in, with a growing proportion coming from China. The government has set up Nigeria SEZ Investment Company, which will finance industrial parks in special economic zones in the commercial capital of Lagos, southeastern state of Abia and northern state of Katsina. The government is currently raising capital of $250 million for Nigeria SEZ Investment Company. It plans to double its equity to $500 million over four years, the ministry said. “Project MINE’s (Made in Nigeria for Export) strategic objectives are to increase (the) manufacturing sector’s contribution to GDP to 20 percent … and generate over $30 billion annually by 2025,” the ministry of industry, trade and investment said in a statement.
  • Looking ahead, the naira is expected to be stable at around the 360 level over the next week to Thursday as ample dollar liquidity from foreign investors and exporters provides support for the currency, traders said.
  • And, even further ahead, preparations for the 2019 Africa Cup of Nations finals gathered pace after the completion of the draw on Friday. The expanded 24-team tournament will be held in Egypt and run from June 21 to July 19. Nigeria will face Guinea in Group B, as well as first-time qualifiers Madagascar and Burundi. The Super Eagles will be favourites to finish top of their group.

Here’s the draw:

Group A: Egypt, Democratic Republic of Congo, Uganda, Zimbabwe

Group B: Nigeria, Guinea, Madagascar, Burundi

Group C: Senegal, Algeria, Kenya, Tanzania

Group D: Morocco, Ivory Coast, South Africa, Namibia

Group E: Tunisia, Mali, Mauritania, Angola

Group F: Cameroon, Ghana, Benin, Guinea-Bissau