Economy

Fiscal Stability – A Need for States to Look Inward

By Popoola AkintayoPosted on February 18, 2022Posted in EconomyTagged FGN, Fiscal Policy, Lagos State, Nigeria, Revenue, States7 Comments

The existing revenue-sharing structure of the government stifles innovation and prevents the state from looking inward to improve revenue since the Federal Allocation remains intact. The major source of revenue for most States is the funding from FAAC, with many contributing little to the pool. Oil revenues which make up more than 42% of government income are generated from activities in oil-producing states, mainly in the South-South region, a fraction of the nation.

The Upsurge in Cooking Gas Prices – Views and Prospects

By Olayinka LamidiPosted on February 18, 2022Posted in EconomyTagged Cooking gas, COVID-19, FX, Nigeria, NLNG, Pandemic2 Comments

Nigeria’s large infrastructure gap has made it difficult to improve the production and distribution of LPG locally. Therefore, the country resorted to importing LPG of about 65%, while 35% of consumers’ demand is locally supplied. Even though the LPG is precluded from Value Added Tax (VAT) according to section 38 of the Value Added Tax Act, the imported LPG is not free from the 7.5% VAT charges.

Nigeria’s Quest to Start Local Oil Refining and its Implications

By Bakare NoahPosted on February 9, 2022Posted in EconomyNo Comments

Without subsidy payments, the decline in the expected open market price of PMS will be marginal with the full operation of the Dangote refinery. This is given that coastal cost and freight charges only constitute about 7% of the open market prices.

Maintaining PMS Subsidy Payments to Put more Pressure on Nigeria’s Fiscal Burden

By Temiloluwa BabatundePosted on January 30, 2022Posted in EconomyTagged Nigeria, PMS1 Comment

The cost of the PMS subsidy rose from 4 percent of Federation oil and gas revenue captured by the NNPC in 2020 to 35 percent in 2021, an untenable fiscal burden for a country with Nigeria’s enormous infrastructure deficit and vast underserved population. Moreover, the PMS subsidy distorts efficiency incentives, promoting its nonessential or inefficient use. The subsidy also creates a very large price differential between Nigeria and neighboring countries that encourages smuggling, benefitting criminal syndicates at the expense of the public.

Why Has the Subsidy Removal Policy Failed?

By Fawaz AyobamiPosted on April 26, 2021Posted in EconomyTagged credibility, forex, Inflation, Oil, Petrol, SubsidyNo Comments

At the moment, there seems to be a consensus among intellectuals and institutional bodies like the IMF and the World Bank on the potential positive impact of the removal of subsidy on the economy. Their arguments are pretty broad and far-reaching. They submit that subsidy payment continues to widen the inequality gap in the country since petroleum subsidy is an implicit subsidy (financing consumption), and the wealthy who consume more than the poor citizens whom the government seeks to protect from the high fuel price also benefit from the regulated price. At the same time, their taxes have not increased commensurately.

Nigeria: A Frail Giant?

By Fawaz AyobamiPosted on April 8, 2021Posted in EconomyTagged Bond, Debt, Debt Profile, Devaluation, Exchange Rate, External Reserves, FDI, forex, Ghana, Nigeria, World BankNo Comments

Since President Muhammadu Buhari’s re-election in 2019, the country has faced a myriad of social and economic challenges. Inflation had surged from 11.40% in May 2019 to 17.33% last month; the Naira has been devalued three times, losing 33% of its value, insecurity has increased, and the general investment climate has waned. All these have happened while Nigerians have not seen any meaningful increase in their economic welfare: the country slumped into a second recession in five years. Many states have found it challenging to implement the new minimum wage signed into law in 2019. We also note that even if all the states had implemented the new minimum wage, the total number of civil servants to the entire labour force is considerably low. To sum it, you would still be worse off if you hold 2X the same Naira note you had in 2010 today.

The Unholy Union Between the Naira and Devaluation

By Fawaz AyobamiPosted on February 28, 2021Posted in EconomyTagged Balance of Payment, cbn, Devaluation, Exchange Rate, FDI, FPI, naira, Oil Price, Trade Balance4 Comments

In 2020, the Naira lost 25% and 27% of its value at the NAFEX and parallel exchanges, respectively. This quickly disrupted my plans, as I had planned to upskill and purchase some courses priced in dollars at the onset of the year. My disappointment prompted me to visit the CBN’s website in search of its policy stance per the Naira. The website says the apex bank’s exchange rate policy is managed floating – a market-friendly term adopted by developing countries who operate some form of pegged regime. I murmured, why did the Naira not appreciate, and why is it always under severe downward pressure?

A Beginner’s Guide to CBN’s Ways and Means to the Federal Government of Nigeria

By Abdulazeez KurangaPosted on January 26, 2021Posted in EconomyTagged Borrowing, cbn, Deficit, Expenditure, FGN, Fiscal Policy, Fiscal Revenue, Ways and Means2 Comments

CBN’s financing of the FGN deficits seems to be a structural one and not a one-off event. This is because historical data has shown that the CBN has been financing a huge part of the FGN deficits even when there was no economic downturn. For example, out of the total fiscal deficit of N3.64 trillion in 2018, the CBN financed 52.2%. In 2019, the total fiscal deficit was N4.23 trillion and the CBN financed 78.3% or N3.31 trillion of that amount. There was no downturn during those periods, hence it goes against economic theory for the CBN to be printing money to finance significant proportions of the FGN’s fiscal deficit.

Policy Trilemma and Interest Rate Behaviour in Nigeria

By Joshua OlorunsaiyePosted on November 18, 2020Posted in EconomyTagged cbn, Exchange Rate, Interest Rate, Monetary Policy TrilemmaNo Comments

Policy makers face trade-off in dealing with exchange rate management, monetary independence and concerns about capital mobility simultaneously. This
study empirically examines the effects of Nigeria’s trilemma policy path on
interest rate using data spanning from 1997:Q1 to 2017:Q3. It equally incorporates the role of external reserves in buffering these effects.

The Economics of Big Brother Naija (BBN)

By Abdulazeez KurangaPosted on October 2, 2020Posted in Economy5 Comments

A huge part of the revenue from SMS goes to the telecoms operators. Specifically, MTN rakes in 70% of the revenue, Glo rakes in 80% while Airtel rakes in 75%. Withholding tax of 10% is also charged and the value-added service provider (the shortcode- 32052) receives 5%. By taking the average, we estimate that Multichoice only receives 15% of the SMS revenue.

Hence, It is not as rosy as you might have been thinking especially when it comes to revenue from the SMS voting platform. Multichoice gets more revenue from sponsorships than from the voting platforms.