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A Rough and Rocky Road Ahead for Nigeria’s Economy?

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By Lukman Otunuga, Senior Research Analyst at FXTM,

Africa’s largest economy commenced the final quarter by facing some of the biggest protests witnessed since military rule ended in 1999.

 

The protests boiled over during an already turbulent and rocky time not in the local but global economy. The cumulative effects of the COVID-19 pandemic lockdowns and other restrictions triggered a downturn together with a sharp increase in public debt. Given the resulting uncertainty from the protests, financial markets were spooked once again with the strong knock-on effects hitting Nigeria’s stock market and international bond while further clouding its economic outlook.

Before this development, the International Monetary Fund (IMF) projected a 4.3 percent contraction in GDP because of COVID-19. Depressed Oil prices enduring a prolonged lapse in demand has not helped matters with the aftermath of the protests projected to cost over N700-billion Naira in output – something that may drag on real GDP.

 

Inflation becoming a cause for concern

 

Nigeria has been scarred by three consecutive quarters of rising inflationary pressures, shaky economic fundamentals, Dollar scarcity and low Oil prices. A 24-hour curfew imposed on Lagos worsened the outlook for the already fragile economic landscape and local businesses which bore the marks of deep wounds from COVID-19. 

 

Inflation rose for 13 months straight, hitting 13.71 percent in September. Price increases were seen mainly in medical treatment, electricity, food supplies and passenger air travel but so far have not impacted the Oil industry. This is a welcome development given that Oil accounts for over 90 percent of export earnings and 70 percent of government revenues.

 

Banks clamp down on speculation

 

Focusing on the Naira, the banking system clamped down on speculation and limited foreign exchange transactions by individuals and corporations. The intention was to stabilise the currency which was at the centre of a perfect storm of low Oil prices, Dollar scarcity and a weaker economy.

 

The results of the foreign currency restrictions in the banking sector remain to be seen.

 

External pressures likely to influence outlook

 

Presidential elections in the US added to the uncertainty prevailing around Nigeria’s economic outlook, especially when it comes to Oil prices. According to national polls, Democrat challenger Joe Biden is leading the incumbent Donald Trump but electoral polls are the kind of forecast that can change last minute. Whatever the political race’s outcome, the result is critical for the US and global economy and may heavily influence the financial markets.

 

When it comes to Oil, Trump’s policy of backing the US Shale industry and ramping up US Oil production may fall by the wayside in the case that Biden wins the election. In turn, this could pressure global Oil prices and send them even lower. The downside scenario may weigh on Nigeria’s economy in spite of its efforts to diversify and reduce its reliance on the Oil industry.

 

A Trump win may increase confidence in the Oil markets in the short term but in the medium term, COVID-19 is still the main problem for Oil demand. OPEC forecasts lingering effects of COVID-19 on the Oil markets and in the long term, sees demand for the fossil fuel reduced by green and renewable energy sources like hydrogen.

 

Nonetheless, Oil will continue to have the largest share of the energy mix until 1945, according to OPEC.

In summary, Nigeria’s economy faces unprecedented headwinds in the fourth quarter and in the first quarter of 2021. The challenge is to get through the storm of a weakened economy facing internal and external threats and reach a place where there is smoother sailing. Now more than ever, it is important to keep diversifying the economy and make provisions for a calmer future where Nigeria can recover from its recent trials.


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FG Offers Nine-month Amnesty for Illegal Dollar Holdings

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Federal Government on Thursday announced a nine-month programme beginning on October 31 that allows individuals to deposit dollar bills held outside the formal banking system without scrutiny.

Wale Edun

Wale Edun

It said the new initiative aims to address the rising costs of commodities influenced by the foreign exchange rate, driven by demand and supply dynamics.

Wale Edun, finance minister and coordinating minister of the Economy, revealed this after the 144th meeting of the National Economic Council, the country’s highest economic advisory body, chaired by Vice President Kashim Shettima at the State House, Abuja.

“There will be no penalty; there will be no taxes, and there will be no questions,” he told journalists at a briefing after Thursday’s conclave.

Edun said that, under this programme, individuals can bring in U.S. dollars in cash without facing penalties, taxes, or scrutiny, provided that the funds are not linked to criminal or illicit activities.

Participants will only need to meet the standard Know-Your-Customer requirements set by banks to secure these funds, integrate them into the financial system, and make them accessible for legitimate economic activities.

He explained, “One element of the cost increase is the foreign exchange rate, which is demand and supply. There will be a programme starting today, October 31, and lasting nine months that will allow people to bring in cash outside the banking system.

“[Such cash] is unsafe, insecure and outside legal limits. They will be allowed forbearance to bring dollars cash. Let me emphasise once again: it is to bring dollars that they are holding outside the system to get them in and credit it to their bank accounts, as long as it is not proceeds of crime or illicit money.

“They should just meet the standard Know-Your-Customer criteria of banks and have an opportunity to bring in those funds, making them safe, secure, and available through regular economic activity.

Edun said his ministry will first issue guidelines for the programme, followed promptly by additional guidelines from the Central Bank.

According to the Minister, this measure offers law-abiding individuals a way to formalise their cash holdings. It also provides the financial system with additional dollar reserves, which may help to stabilise the exchange rate.

“This is an opportunity, not just for people who would normally like to comply, to be compliant with the laws and normal business practice, but of course, it allows us to bring those dollars from where they are doing nothing to where they are within the financial system, they add to our reserves, and of course can help with the exchange rate,” he added.

Edun equally gave an update on government economic relief measures, saying 25 million Nigerians have benefitted from federal social protection initiatives, including digital outreach, microenterprise loans, and sector-specific support for power, agriculture, manufacturing, health, and compressed natural gas initiatives.


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Wema Bank Launches Export Trade Academy to Empower Nigerian SMEs

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Wema Bank has announced the launch of the Wema Export Trade Academy, a comprehensive training programme designed to equip Nigerian Small and Medium Enterprises (SMEs) with the essential skills and tools needed to succeed in the competitive landscape of global trade.

Moruf Oseni, the Managing Director and Chief Executive Officer of the bank, this initiative represents Wema Bank’s commitment to enhancing the capacity of Nigerian businesses, supporting their ambitions to thrive on an international scale.

Oseni said the Wema Export Trade Academy is designed as a solution to these challenges faced by Nigerian SMEs when entering international markets.

The Academy is specifically structured to address each critical aspect of global trade, providing SMEs with targeted guidance on compliance, documentation, financial planning, and risk management.

Through the Wema Export Trade Academy, SMEs will benefit from expert-led sessions, mentorship from industry professionals, and practical insights into international business practices, positioning them to make significant contributions within global markets.

The programme also places emphasis on building a network of Nigerian exporters, encouraging peer support and collaboration, while fostering connections between businesses and international trade facilitators.

Oseni said: “This holistic approach to export training will enhance efficiency and productivity, empowering Nigerian businesses to become competitive players in the global economy.

“The Wema Export Trade Academy reinforces Wema Bank’s dedication to building the capacity of Nigerian businesses and supporting their evolution into formidable global competitors.

“By addressing the barriers in export trade, we are enabling Nigerian SMEs to seize new opportunities in international markets, which aligns with our vision to empower lives and support sustainable business growth.

“The Wema Export Trade Academy embodies Wema Bank’s pioneering spirit and commitment to providing SMEs with practical, impactful solutions.

“With comprehensive training on export processes and access to strategic financial products, the program stands as a testament to Wema Bank’s role as an enabler of growth for Nigerian enterprises.

“Wema Bank continues to set the standard for innovation within Nigeria’s financial services industry, supporting individuals and businesses across various sectors to achieve sustainable growth.

“The Wema Export Trade Academy represents the latest stride in Wema Bank’s mission to empower Nigerian SMEs, further strengthening its reputation.”


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MTN Foundation to Celebrate 20 Years of Impact with Anniversary Conference and Dinner

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MTN Foundation is set to celebrate a milestone—its 20th Anniversary—with a series of events designed to reflect on its contributions to communities across Nigeria.

The anniversary conference will take place on November 6, 2024, in Abuja, while the celebratory dinner is scheduled for November 14, 2024, in Lagos.

These events will bring together key stakeholders from both the public and private sectors, highlighting the Foundation’s commitment to sustainable development and community engagement.

Since its inception in 2004, the Foundation has been at the forefront of corporate social responsibility (CSR) initiatives in Nigeria. It was one of the first corporate entities in the country to establish a dedicated foundation for managing CSR activities.

The Foundation was officially commissioned in May 2005, with MTN Nigeria Communications PLC pledging to allocate up to 1% of its Profit After Tax (PAT) for funding various projects aimed at improving lives across the nation.

Over the past two decades, the Foundation has invested over NGN 24.73 billion into impactful projects that span all 36 states and the Federal Capital Territory (FCT). With more than 1,023 project sites across Nigeria, the Foundation has successfully executed 50 unique projects, reaching over 31 million people.

These initiatives have addressed critical areas such as education, health, youth empowerment, and arts and culture, making a significant difference in the lives of countless Nigerians.

As part of this celebration, the Foundation will unveil its new logo along with refreshed mission and vision statements.

This rebranding effort symbolizes a renewed commitment to its core values and goals as it looks toward the future.

Odunayo Sanya, Executive Director of MTN Foundation, expressed her enthusiasm for the upcoming celebrations and reflected on the journey thus far.

“This anniversary is both a celebration of our impact in Nigeria and a commitment to do more,” Sanya stated.

“We have always believed in the power of collaboration and community engagement to drive meaningful change.

“As we gather to reflect on our journey, we look forward to engaging with our partners and stakeholders to explore new avenues for sustainable development.”

The upcoming anniversary events aim to foster dialogue among leaders from various sectors, encouraging collaboration that can lead to innovative solutions for pressing societal challenges.

The conference will feature keynote speakers and panel discussions around national development and youth empowerment, as well as interactive sessions designed to inspire participants and share best practices in CSR and community development.

In addition to its focus areas, the Foundation has been instrumental in promoting digital literacy among Nigerian youth through various educational programs. By leveraging technology as a tool for empowerment, the Foundation has equipped thousands of young people with skills necessary for success in an increasingly digital world.

The anniversary conference and dinner are expected to be engaging experiences that will not only celebrate two decades of impact but also set the stage for future initiatives aimed at fostering community growth and resilience.

By bringing together diverse stakeholders, MTN Foundation hopes to ignite conversations that lead to actionable strategies for addressing Nigeria’s most pressing challenges.

The upcoming anniversary events promise to be an inspiring celebration of progress made while looking forward to new horizons in community development.

 


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