A Week in Nigeria: 30 March

Highlights from Reuters coverage of Nigeria over the last seven days

In this week’s round-up: the central bank announces a surprise interest rate cut, MTN returns to court and finance minister discusses borrowing plans.

The decision to cut Nigeria’s main interest rate, which remained unchanged for more than two years, was announced by Central Bank Governor Godwin Emefiele

• Nigeria’s central bank cut its benchmark interest rate to 13.5 percent from 14 percent in a surprise move that the governor, Godwin Emefiele, said was an attempt to stimulate growth in Africa’s biggest economy and signal a “new direction”. It is the first rate cut since November 2015. The rate had been held at 14 percent since July 2016 to support the naira and curb inflation. “The committee felt that given the relative stability in key macroeconomic variables there is a need to signal a new direction, in which case we are talking about being pro-growth,” said Emefiele. Six of the monetary policy committee’s 11 members who met agreed on the 50 basis point rate cut. There was widespread surprise at the cut. Most analysts polled by Reuters in January expected rates to be kept on hold through to the middle of the year at least. Doubts were also raised about the impact it would have. If you’re hungry for more details and have time to spare, watch the full announcement.

• Nigerian bond yields fell slightly the day after the rate cut announcement. And the stock market, beset with worries over low growth, dropped 0.5 percent on Wednesday as brokers said the rate cut was too little to stimulate the economy. Bloomberg speculated on the impact possibly being closer to Egypt than Ghana.

But the naira was forecast to soften against the dollar in the week to next Thursday, according to the Reuters FX Week Ahead. The naira traded at 360.50 per dollar on the over-the-counter market for investors on Thursday. “The currency might weaken slightly. An NDF matured yesterday and people want to exit. With that, demand has increased, especially as people don’t want to roll over,” a trader told Reuters on Thursday.

• It’s worth noting that the central bank governor’s announcement followed the first meeting of the monetary policy committee since President Muhammadu Buhari secured a second four-year term in February. Emefiele’s term as governor is due to end in June. Nigerian central bank governors typically serve one term but may serve a second with some suggesting that the governor is keen to stay on.
• The interest rate cut wasn’t the only story this week. “We intend to fund the 2019 budget through borrowing locally and internationally with a spread of 50:50. Our focus is on concessionary long-term loans,” Finance Minister Zainab Ahmed told the National Assembly during a budget hearing. We reported on what she told parliament. Ahmed said there were challenges generating revenue but that the 2018 budget has performed well. She said the government had put in place strategies on how to finance the 2019 budget of 8.83 trillion naira ($28.9 billion). Budgets under President Buhari have been Nigeria’s largest ever but has failed to provide the type of capital spending needed to improve infrastructure due to funding issues.

• A court hearing made clear that Nigeria’s attorney general intends to pursue MTN over $2 billion in backdated taxes the government says is owed by the South African telecoms giant. In December, MTN agreed to make a $53 million payment to resolve a separate dispute in Nigeria after the central bank ordered the company and its lenders to bring back $8.1 billion it alleged was illegally repatriated using improperly issued paperwork between 2007 and 2008. The settlement ended a four-month multi-billion dollar dividend repatriation row that had hammered its share price. But anyone who thought the attorney general would back down on the tax bill was mistaken. Lawyers representing both sides appeared in court this week. Lawyers representing the attorney general said MTN did not file its legal opposition to the demand within the required three-month timeframe whereas the team representing MTN said that was not the case. The case was adjourned until May 7.
• A Nigerian judge ordered the arrest of Biafra separatist leader Nnamdi Kanu over his failure to attend hearings nearly two years after his release on bail. The secessionist feeling has simmered in the southeast since the Biafra separatist rebellion of 1967–70 that tipped Nigeria into civil war and killed around 1 million people. Kanu, leader of the Indigenous People of Biafra (IPOB) campaign group, was arrested in October 2015 on charges of criminal conspiracy and belonging to an illegal society. He was freed on bail on medical grounds in April of that year but has not been seen in Nigeria since an army raid on his house five months later. Kanu has not attended court dates since then but images of him in Israel surfaced on social media in October last year.