E-Financial
Expert causions Nigeria on Adherence to its Oil Cap
Lukman Otunuga, senior research analyst at FXTM, an award-winning international forex broker has described Nigeria’s 2020 revenue targets as highly optimistic if the country could maintain its projected oil production cap of 2.8 million barrels per day.
Otunuga described some of the revenue targets set by the executive arm of government as ‘quite ambitious’, while noting also that the revenue targets of the budget would expose the country to external risks.
He made these remarks while speaking with journalists in Lagos, referring to the last time Nigeria consistently produced more than two million barrels of oil per day was 2013, hence setting the budget target at 2.18 million barrels per day was ‘overly optimistic’.
In his words: “When we look at the 2020 budget, looking at the numbers, government expenditure is going to be N10.33 trillion, revenue target N8.155 trillion, that leaves a deficit of N2.18 trillion, already, that alone, Nigeria will have to finance that debt domestically or externally — that’s the first weight on the economy,” he said.
“Secondly, I feel the major talking point is oil because if you look at the numbers, Nigeria is projecting $57 oil in 2020 average and to pump 2.18million barrels a day, if you look at the oil market, you will know that it is very difficult for oil to push high due to demands side dynamics.
“Concerns of slowing global growth, rise in production from US shale, rise in crude oil inventories in the United States, you know when you put all of these together, 57 is quite ambitious for oil.
“At the same time, if you look at Nigeria’s oil production, in August, Nigeria produced about 1.86 million barrels roughly, but Nigeria pledged OPEC to keep oil production down around roughly 1.7 million barrels per day and if you look deeper, the last time Nigeria was able to produce over two million barrels a day according to OPEC was back in 2013.
“We haven’t seen over two million barrels a day for almost six years, so how are we going to get that amount in 2020. So when you look at the figures, oil revenue accounts for N2.6 trillion, already if you are unable to meet the revenue, it is going to impact the implementation of the budget.”
Otunuga spoke passionately about the diversification of the economy. This, according to him, is one sure way the government can meet up with it buoyant economic pursuit.
He said, “On diversification, it is so bad that even IMF is telling Nigeria that they need to do more with it; the fact that 90 percent of foreign exchange is still from oil and 70 percent of government’s expenditure is still from oil.
“So where is the diversification? I think when we start seeing less foreign exchange earnings coming from oil and government being less reliant on oil, then we can say diversification is kicking in.
“The budget itself on paper has the ability to elevate Nigeria’s economy but meeting those spending targets is the question. If Nigeria is able to meet the targets, the outlook is positive.
“But let me say the repeat of 2019 budget, where even recent reports have shown that government’s spending target is only about 58 percent, it is still going to be the same; we have a budget and it is not reflecting on the economy.”
The Senior Research Analyst at FXTM however, extolled the Executive and the legislative arms of Government for seeking to reset the budget cycle to run from January to December 2020, away from the irregular budget cycles of the past.
The World Bank has predicted that Nigeria may likely see a rise in the levels of poverty over the next two years despite a moderate economic growth forecast.
The multilateral lender noted that while non-resource-rich countries are expected to continue reducing poverty and grow faster, resource-rich countries like Nigeria may drag due to declining oil prices.
”Resource-rich countries are expected to see less progress in terms of poverty reduction,” the World Bank said in its Africa Pulse report titled ‘Improving Governance and Delivering for People in Africa’.
“Importantly, poverty in resource-rich, fragile countries (which include large countries like the Democratic Republic of Congo and Nigeria) is expected to increase by 3.6 percentage points over 2022–27,” it added.
The Nigerian government has in the past two years provided various safety nets to ease the burden of the citizens, but these, on their own, may not be enough to lift millions off the poverty line.
The reforms which were implemented some 20 months ago, though came with a plethora of gains such as allowing the economy to be market-driven rather than artificial pegging, it’s nonetheless exacerbated poverty with the numbers rising from 104 million to 129 million people in a year.
According to the World Bank, Nigeria accounts for 19 percent of the share of poverty in Sub-Saharan Africa, followed by Congo, Ethiopia and Sudan with 14 percent, 9 percent and 6 percent respectively.
But despite the growing poverty, the Washington-based lender expects Africa’s most populous nation annual GDP to increase 3.6 percent in 2025 and 3.8 percent in two years. “Economic growth is expected to remain moderate in Nigeria,” the World Bank said.
“It is expected to increase from 3.4 percent in 2024 to 3.6 percent in 2025, and slightly increase to 3.8 percent in 2026–2027.”
According to the World Bank, the gradual recovery of the Nigerian economy along the forecast horizon is driven primarily by the service sector—specifically, finance, information and communications technology services, and transportation—and, to a lesser extent, a rebound in oil production that converges to its OPEC+ quota.
The World Bank’s projection is relatively higher than the International Monetary Fund (IMF) revised forecast for the nation.
IMF cuts Nigeria’s 2025 economic growth forecast downward to 3.0 percent from the earlier projection of 3.4 percent in 2024, citing weakening oil supply and escalating global trade tensions.
The two projections are however largely lower than Nigeria’s ambitious projected annual GDP growth of 4.6 percent outlined in the 2025 budget.
According to Adetilewa Adebajo, investment banker and economist Nigeria must intensify efforts towards economic diversification, infrastructure development, and asset optimisation to stimulate economic growth and attract global investments
“Sale of oil and gas JV assets to optimise equity within the FGN capital structure and balance sheet are crucial for Nigeria’s path towards sustainable development.
“Deliberate Investment projects such as the Agro Airport development and Olokola deep sea port, in Ogun State, major infrastructure projects led by companies like Arise and Dangote, need to be replicated nationwide,” Adebajo said.
Securities and Exchange Commission (SEC) has urged Nigerians to report any suspected illegal investment schemes to the commission for proper investigation and necessary action.
This is in the light of the recent collapse of Crypto Bridge Exchange (CBEX).
The Commission issued a notice on Thursday to the investing public, warning that Ponzi investment schemes pose a significant danger to the growth of the capital market.
In its latest advisory, the Commission highlighted the growing threats and risks posed by Ponzi schemes, illegal investment operations, and unregistered digital asset platforms.
It explained that fraudulent entities and individuals continue to exploit unsuspecting investors with deceptive promises of high returns, often leveraging the allure of digital assets to create a false sense of legitimacy.
“The public is strongly advised to be wary of investment opportunities that promise guaranteed or unusually high returns with little or no risk.
“These include unregistered platforms offering cryptocurrency investments, forex trading, or blockchain-based schemes, without undergoing the prescribed processes to obtain prior approval from the SEC.
“The SEC reiterates in this regard that, ‘If it sounds too good to be true, it likely is.’”
The Commission urged potential investors to conduct thorough due diligence before investing and to verify the registration status of the company or individual offering the investment through the SEC’s website.
The Commission explained that Section 196(3) of the Investments and Securities Act, 2025, criminalizes the promotion and operation of prohibited or unregistered schemes.
“This violation is punishable, upon conviction, by a fine of not less than ₦20 million or a prison term of 10 years, or both,” the Commission warned.
The SEC stated that it is fully committed to identifying and prosecuting offenders to the full extent of the law.
“We encourage the public to partner with the SEC to safeguard the integrity of the investment environment in Nigeria by promptly reporting suspected illegal investment schemes to the SEC,” the notice concluded.
The Nigerian federal government announced that the Electronic Money Transfer Levy (EMTL) generated $49.5 million in revenue, with fintech companies contributing $18 million.
This fund, as reported by the Federation Account Allocation Committee, is a considerable 56.80 percent increase over the $31.6 million earned during the same period in 2024.
Previously, the charge mainly affected established banking institutions. However, fintech firms have been included because they have contributed a phenomenal 2,507.94 percent growth in transaction values since 2020.
The EMTL is part of the government’s attempt to regulate the booming fintech sector, which completed transactions worth $29 billion in 2023 and $49.3 billion in 2024.
The EMTL was created by the Finance Act 2020 as an amendment to the Stamp Duty Act. It charges $0.03 (N50) for electronic transactions of $6.19 (N10,000) or more made through banks and financial institutions.
This tax seeks to capitalise on the increasing expansion of electronic payments, which will exceed $619.70 billion in total transactions by 2024.
In response to the burgeoning fintech sector, the government has increased its tax base, with annual EMTL collections expected to increase by 31.35 percent.
According to the Medium Term Fiscal Framework for 2025-2027, the federal government expects EMTL revenue to reach $142 million in 2025, up from $108 million in 2024.
However, industry experts have expressed concern about the potential impact of additional taxes on users.
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