A Week in Nigeria: 6 April

Highlights from Reuters coverage of Nigeria over the last seven days

In this week’s round-up: government tries to adjust debt profile, changes at oil firm Oando and ambitious tax plans are announced.

Total public debt stood at 24.39 trillion naira (around $79.44 billion, depending on the exchange rate you use) at the end of last year

• Nigeria will issue its first 30-year naira bond, the debt office said. The move is part of an attempt to attract long-term investors and extend the maturity profile of its debt. Nigeria has been racking up debt to boost the sluggish economy and fund infrastructure projects. Total public debt stood at 24.39 trillion naira ($79.44 billion) at the end of 2018, up from 21.7 trillion naira a year earlier. But debt servicing costs have risen. Zainab Ahmed, the finance minister, said last week the government had strategies to finance the 2019 budget of 8.83 trillion naira and would consider cheap concessionary loans to reduce costs. The new 30-year federal government bond would be attractive to long-term investors and would help in “developing the domestic capital market and reducing the re-financing risk” of the government, the debt office said in a statement.
• A day earlier, speaking after the weekly cabinet meeting, Mrs Ahmed said local banks had been appointed to issue 3.4 trillion naira of promissory notes that would go to settle a backlog of state obligations. She presented a memo to thecabinet seeking approval for the notes. The obligations to be settled by the government include pension liabilities, unpaid salaries, accrued fuel supply interest and debt owed to contractors, according to her memo seen by Reuters. The advisers include Zenith Bank, Access Bank , United Bank for Africa, and some merchant banks and law firms, she said. The government has said it found unrecorded debts of 2.2 trillion naira left over from the previous administration after an audit aimed at improving transparency.
• Late last month, 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 was the first rate cut since November 2015. But, in a statement issued this week, ratings agency Fitch said the rate cut was “ unlikely to spur substantial growth in lending to priority sectors or wean banks off investing in Nigerian Treasury-bills”. It also said: “ Bank lending remained subdued in 2018 despite a fall in three-month T-bill yields and a slight dip in average lending rates. This followed modest growth in 2017, which was largely attributable to naira devaluation inflating foreign-currency loans.”

The central bank earlier this year said growth in gross domestic product should reach 3 percent in the first quarter, buoyed by election and government spending, compared with 1.9 percent last year.

• Nigeria expects to raise around 750 billion naira from tax defaulters by the end of the first half of this year, according to tax chief Babatunde Fowler. Mr Fowler, chairman of the Federal Inland Revenue Service (FIRS), told a parliamentary committee that banking checks on tax defaulters had resulted in 23.35 billion naira being raised. He said the exercise, said to have been launched two months ago, had been extended to specifically target people with a turnover of 100 million naira and above. “We believe we should be able to go through 55,000 (tax defaulters) before the middle of this year, June 30th,” Fowler told the committee in the House of Representatives, parliament’s lower chamber. “We should be able to generate, from this exercise alone, about 750 billion naira ($2.45 billion),” he said. Not everyone was convinced by Mr Fowler’s assessment.

• Nigerian oil company Oando said it had sold its 25 percent stake in local gas and power company Axxela to majority investor Helios Investment partners for $41.5 million as it works on cutting its debt. Oando has in recent years transformed itself from a fuel retailer to an oil producer competing with multinationals such as Shell and Exxon Mobil, but its growth has been largely funded by debt. It hived off its power and gas subsidiaries in 2015, selling a 75 percent stake in the new business, Axxela, to Helios for $115.8 million in 2016. The Soros-backed private equity firm now owns 100 percent of Axxela following Oando’s divestment, Axxela said on Thursday. A day earlier, Oando’s chief executive — Adewale Tinubu — said the Nigerian oil company aimed to raise fresh capital over the next two years and cut its long-term debt after it bought Conoco Phillips’ Nigerian assets for $1.5 billion in 2013. A day earlier, he told Reuters he was confident with the capital raising initiatives and that over the next 24 months Oando would raise funds as plans were far advanced. Oando said it would use the proceeds of the Axxela stake sale to repay part of the group’s term loan.
• Still on the subject of oil, Shell said last year it experienced a sharp rise in the number of oil spills caused by pipeline theft in Nigeria. The company said the trend was the result of larger output and higher oil prices. The number of spills caused by sabotage and theft in the Niger delta rose last year to 111 from 62 in 2017, the Anglo-Dutch company said in its annual sustainability report. The volume of oil spilt as a result rose to 1,600 tonnes, or roughly 12,000 barrels, from 1,400 tonnes the previous year. “The increase can be partly explained by increased availability of our production facilities following the repair of a major export line in 2017 and the price of crude oil and refined products, which is seen as an opportunity for more illegal refining,” Shell said.
• And we reported on the surge in the number of property-focused technology firms in Nigeria aimed at helping people to find homes. The emergence of these “proptech” companies is due to the country’s rapid population growth, faster broadband speed and cheaper smartphones that have also benefited other sectors from retail to gambling in recent years. Market leader PropertyPro said its website receives around 500,000 hits each month, compared with 15,000 a month back in 2013, with around 90 percent of that traffic coming from mobile phones. Nigeria has the highest number of internet users in Africa, with approximately 107 million internet data subscribers — an increase of around 85 percent over 5 years, according to the country’s communications commission.