CAPITALDIGEST DAILY NEWS, 11/4/2023

FUEL SUBSIDY REMOVAL: FG SECURES $800M WORLD BANK FACILITY FOR PALLIATIVES The federal government has disclosed that it has secured a World Bank facility worth $800 million to attend to a segment of post-petroleum subsidy palliatives requirement in the country. This was just as it stated that discussions are also on between the present administration and the in-coming government on modalities for the removal of fuel subsidy by middle of this year. Speaking with newsmen yesterday, after the weekly Federal Executive Council (FEC) meeting presided over by President Muhammadu Buhari, at the State House, Abuja, Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, disclosed that the $800 million was first tranche of palliatives to be disbursed through cash transfers to about 50 million Nigerians, who belong to the most vulnerable category of society. According to her: “When we were working on the 2023 Medium Term Expenditure Framework and the Appropriation Act, we made that provision to enable us exit fuel subsidy by June 2023. We’re on course, we’re having different stakeholders’ engagements, we’ve secured some funding from the World Bank, that is the first tranche of palliatives that will enable us give cash transfers to the most vulnerable in our society that have now been registered in a national social register. “Today that register has a list of 10 million households. Ten million households is equivalent to about 50 million Nigerians.” The federal government has disclosed that it has secured a World Bank facility worth $800 million to attend to a segment of post-petroleum subsidy palliatives requirement in the country. This was just as it stated that discussions are also on between the present administration and the in-coming government on modalities for the removal of fuel subsidy by middle of this year. FG BORROWS $800M FOR MASS TRANSIT, CASH TRANSFERS The Federal Government has secured $800m from the International Bank for Reconstruction and Development (World Bank) to provide post-petroleum subsidy palliatives for over 50 million Nigerians ahead of June 2023. The Minister of Finance, Budget and National Planning, Zainab Ahmed, revealed this to State House correspondents on Wednesday, after this week’s Federal Executive Council chaired by the President, Major General Muhammadu Buhari (retd.) at the Aso Rock Villa, Abuja. According to Ahmed, the $800m forms the first tranche of palliatives ready to be disbursed to 10 million households in form of cash. She said, “There’s a provision (of the Petroleum Industry Act) that says 18 months after the effectiveness of the PIA that all petroleum products must be deregulated. That 18 months takes us to June 2023. “Also, when we were working on the 2023 Medium Term Expenditure Framework and the Appropriation Act, we made that provision to enable us exit fuel subsidy by June 2023. “We’re on course, we’re having different stakeholder engagements, we’ve secured some funding from the World Bank, that is the first tranche of palliatives that will enable us give cash transfers to the most vulnerable in our society that have now been registered in a national social register. “Today, that register has a list of 10 million households. 10 million households are equivalent to about 50 million Nigerians.” When asked how much funding the FG received from the World Bank, the minister said, “$800m for the scale-up of the National Social Investment Programme at the World Bank. And it’s been secured, it’s ready for disbursement”. However, she noted that the FG must raise more resources to enable it to do more than cash transfers. NAIRA LOST 10% VALUE IN 2022, SAYS WORLD BANK The naira lost 10.2 per cent of its value in 2022, according to the World Bank. This came as rising food and fuel prices were responsible for high inflation in the country in 2022. The global bank revealed this in its latest Africa’s Pulse report for April 2023. It explained that the worst-performing currency in the Sub-Saharan African region was the Ghanaian cedi in 2022, which lost 40 per cent of its value in the year. It stated that the currency has already lost 20 per cent of its value so far in 2023. Commenting on the naira, the bank said, “Other currencies with significant losses last year include those of Sudan (23.6 per cent), Malawi (20.7 per cent), The Gambia (14.6 per cent), and Nigeria (10.2 per cent).” It stressed, “Rising food and fuel prices, as well as the depreciation of the exchange rate, were the main drivers of inflationary pressures in the region—and, particularly, in countries like Ghana, Sudan, and Malawi.” The Washington-based bank noted that the hiking of monetary policy, with Nigeria increasing rates by 650 basis points, has not translated to a reduction in inflation rate. It stated that the reduced effectiveness of monetary policy can be attributed, among other factors, to persistent supply shocks driving inflation (say, commodity prices and climatic shocks), lack of central bank autonomy, foreign exchange distortions that widened parallel exchange rate market premia, and fiscal dominance. The bank says it expects 25 per cent of countries in the Sub-Saharan African region to suffer from two-digit inflation rates in 2023. In February, headline inflation in Nigeria rose to 21.91 per cent according to data from the National Bureau of Statistics. DEBT SERVICING ROSE BY 14.68% IN 2022 – DMO Nigeria’s debt servicing bill went up by 14.68 per cent to N3.36trn in 2022, data from the Debt Management Office has shown. According to DMO, N2.93tn was spent on external and domestic debt servicing payments in 2021. Recall that the DMO had earlier reported that Nigeria’s total debt stock stood at N46.25 trillion as of December 2022. An analysis of DMO showed that the country spent $2.4bn which was equivalent to N1.07 trillion using the current exchange rate of $/N460 to service its external debt last year. Domestic debt servicing gulped N2.56tn in 2022, with the highest expenditures of N529.88 billion recorded in April. SUNDAY PUNCH reports that debt servicing under the President Major General Muhammadu Buhari (retd.) regime has maintained an upward trend since 2016. In 2016, a total of N1.23tn was spent to service the country’s domestic debts. The figure for domestic debt servicing rose to N1.48tn in 2017. In 2018, the country’s domestic debt servicing bill rose to N1.8tn while the cost of domestic debt servicing came down a bit in 2019 to N1.69tn. In 2020, debt servicing rose again to N1.85tn. By 2021, domestic debt servicing rose to N2.05tn On the other hand, external debt servicing gulped $353.09m in 2016. It went up to $464.05m in 2017 and jumped up to $1.47bn in 2018. In 2019, the country spent $1.33bn on external debt servicing. In 2020, external debt servicing gulped $1.56bn. By 2021, it became N2.93tn. The amount spent on external debt servicing was calculated using the CBN’s exchange rate for the year. For instance, the naira-dollar average exchange rates for 2016 and 2017 were N197 and N305 respectively. It was N305 in 2018 and N360 in 2019. It closed at N380 and N420 in 2020 and 2021 respectively. INVESTORS LOSE N674BN IN FOUR-DAY BEARISH TRADING Investors on the Nigerian Exchange Limited last week lost N674bn after four days of trading. The market opened for four trading days last week as the Federal Government of Nigeria declared Friday and Monday (today) as Public Holidays to mark the Easter celebration. The All-Share index and the market capitalisation also depreciated by 2.28 per cent in the week shedding 1238.21 base points and N674bn respectively. While the ASI started the week at 54, 232,34 points, it closed at 52, 994.13. The market cap which started the week at N29.543 tn closed at N28.869 tn. Similarly, all other indices finished lower except for NGX Insurance which appreciated by 2.19 per cent while the NGX ASeM and NGX Growth indices closed flat A total turnover of 1.054 bn shares worth N10.050 bn in 16,155 deals was traded this week by investors on the floor of the Exchange, in contrast to a total of 2.071 bn shares valued at N17.562 bn that exchanged hands last week in 17,917 deals. The financial services industry (measured by volume) led the activity chart with 630.378m shares valued at N5.438 bn traded in 7,705 deals; thus contributing 59.83 per cent and 54.11 per cent to the total equity turnover volume and value respectively. The conglomerates industry followed with 248.074m shares worth N394.370m in 812 deals. The third place was the Oil and Gas Industry, with a turnover of 70.921m shares worth N1.345 bn in 1,452 deals. Trading in the top three stocks; Transnational Corporation Plc, United Bank for Africa Plc and Fidelity Bank Plc, (measured by volume) accounted for 498.527m shares worth N2.118 bn in 1,862 deals, contributing 47.32 per cent and 21.07 per cent to the total equity turnover volume and value respectively.