E-Financial
What Next for Nigeria as Recession Stages a Comeback?
By Lukman Otunuga, Senior Research Analyst at FXTM
If the Nigerian economy needs more proof that it is wise to diversify away from a heavy dependence on the Oil industry, the latest recession and threat to government revenues ought to do the job.
The country’s ongoing battle to reach healthy growth is under threat thanks to an unprecedented Oil price crash triggered by the coronavirus pandemic back in March 2020. Africa’s largest economy has sunk into its second recession within five years, shrinking by 3.6 percent in the third quarter versus a 6.1 percent contraction in the second quarter. Oil production fell to 1.67 million barrels per day (bpd) from 1.81 million bpd in the previous quarter. The ominous signs are reminiscent of the third quarter of 2016 when the economy contracted for over a year.
The biggest vulnerability is the outsized contribution that the Oil industry makes to the state coffers. In times of strong Oil prices, the industry accounts for around 90 percent of foreign exchange earnings and a handsome 50 percent of government revenues. The plunge in oil prices – which reached sub-zero levels in the wake of the pandemic – dragged on the economy’s recovery from the contraction in 2016.
Government coffers face the prospect of cash flow drying up and the accompanying, unwelcome consequences. These include the prospect of austerity measures, job and salary cuts in the state sector, a reduction in development projects and social protection subsidies along with a heavier reliance on bail-out funds from the IMF and other international lenders.
The IMF projects a 4.3 percent contraction in Nigeria’s GDP this year, the biggest drop in nearly four decades. For the man on the street, this means the threat of unemployment, inflation and soaring food prices. Already, more than half of Nigerians are unemployed in this dire economic scenario. On top of that, a Dollar shortage negatively impacts the private sector’s imports of raw materials and equipment.
Additional vulnerabilities are apparent in the banking sector, which had a N19.54 trillion credit exposure to the weakened real economy in the third quarter, up by N290.13 billion in comparison to the end of August. When added to the state sector’s woes, the results are the triple threats of sovereign debt defaults, bank credit defaults and the state’s reduced capacity to bail out the banking sector.
There’s a chance it’s not too late to avert the worst consequences. On the brighter side, earlier this year, the Central Bank of Nigeria (CBN) took some necessary steps to unify its exchange rates and devalued the Naira by 20 percent, satisfying the World Bank and IMF and opening the door to credit lifelines from international lenders.
Equally important, several international pharmaceutical companies are poised to release their COVID-19 vaccines as early as the end of 2020. While it will take several more months for the vaccinations to progress and short-term uncertainty is expected to prevail, the light at the end of the pandemic tunnel has finally appeared.
Nigeria’s first quarter 2021 outlook is likely to remain influenced by the same themes of pandemic pressures, suppressed Oil prices, shaky demand for Oil, and economic weaknesses. The country is expected to exit the recession by the end of Q1, according to Minister of Finance, Budget and National Planning, Hajiya Zainab Ahmed.
While these are promising signs, the major question is whether the 2021 state budget can revive Africa’s largest economy and get it back on track towards healthy growth. At N13.08 trillion, the budget is over 20 percent higher than the revised 2020 budget. Nigeria plans to borrow N5.2 trillion and the Finance Ministry takes the relatively bullish position that GDP will grow by three percent. Benchmark oil prices are seen at $40 per barrel and the Oil production estimate is 1.6 million bpd. Inflation is expected to close at 11.95 percent.
In closing, Nigeria’s short-term ability to defeat the recession by the end of Q1 depends on two key factors: how quickly the COVID-19 vaccination reaches the population and how fast demand for Oil rises. In the long term, the importance of diversification cannot be underestimated for the economy to be balanced and more resilient against shocks.
Central Bank of Nigeria (CBN) has announced that it will continue enforcing the controversial cybercrime levy at 0.005 per cent on all electronic transactions under its new guidelines for the 2024-2025 fiscal year.
Yemi Cardoso, Governor, CBN
The apex bank disclosed the levy’s reintroduction it abandoned in May, in a policy document issued on dated September 17, 2024.
The cybercrime levy is mandated by the Cybercrime (Prohibition, Prevention, etc.) Act of 2015, aimed at bolstering the nation’s cyber security infrastructure.
According to CBN, the revenue from the levy would be directed to a cybersecurity fund to support efforts to safeguard electronic transactions.
CBN said: “The CBN shall continue to enforce the payment of the mandatory levy of 0.005 per cent on all electronic transactions by banks and other financial institutions, by the Cybercrime (Prohibition, Prevention, etc.) Act, 2015.”
The bank restates the minimum cybersecurity baseline for banks and financial institutions.
The new guidelines also reaffirm the bank’s commitment to ensuring that banks, financial institutions, and payment service providers abide by the minimum cybersecurity standards.
CBN insist on the appointment of Chief Information Security Officers to oversee cybersecurity issues in line with the 2022 risk-based cybersecurity framework.
Central Bank of Nigeria has reconstituted the board of directors of Keystone Bank.
The move announced on Wednesday, is part of the apex bank’s strategy to ensure sustained growth for the financial institution.
According to a statement from the Keystone Bank, Lady Ada Chukwudozie has been appointed as the new board chairman, alongside five other non-executive directors. They are Abdul-Rahman Esene, Mrs. Fola Akande, Akintola Olusoji, Obijiaku Samuel, and Senator Farouk Bello.
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In addition, the CBN also named two new executive directors, Ladi Oluwole and Abubakar Bello.
Chukwudozie, a prominent figure in Nigeria’s corporate sector, brings nearly three decades of experience in business strategy, management, and administration.
Her expertise cuts across multiple industries, including De-Endy Industrial Company Limited, Dozzy Group, the Manufacturers Association of Nigeria, and Vogue Afrique Magazine.
Esene, with over 43 years of experience in banking, investment management, and corporate finance, has held leadership roles in major institutions such as Fidelity Bank, Afrinvest, and Global Arbitrage International Inc
Akande boasts over 25 years of experience in legal, compliance, and risk management, having worked with global brands like Cadbury, Stanbic Chartered Bank, and Shell.
Olusoji has a distinguished 30-year career in accounting, finance, and business development, having served at institutions such as Sterling Bank, Access Bank, and Intercontinental Bank.
Samuel, with more than 35 years of experience in banking and treasury operations, has left a significant mark on Nigeria’s financial sector, previously working with Zenith Bank and Fidelity Bank.
Bello, a seasoned banker with over 20 years of experience, has led initiatives across both the public and private sectors, including the National Assembly and Guaranty Trust Bank.
Meanwhile, the two new executive directors bring their vast expertise to the table. Oluwole, the new Executive Director of Risk Management, comes with over two decades of experience in credit and enterprise risk management, including previous roles at Bank of America. Bello, Executive Director for the Northern Directorate, has extensive experience managing corporate, retail, and public sector clients.
Read Also: Keystone Bank Upgrades Digital Banking Platform
Speaking on the appointments, Keystone Bank’s Managing Director and CEO, Hassan Imam, expressed confidence in the new board members, stating that their wealth of experience would play a crucial role in the bank’s continued repositioning and growth.
“We are pleased to welcome the new chairman, non-executive directors, and executive directors to the board of Keystone Bank.
“We are confident that their extensive experience will be invaluable as we continue to reposition the bank to seize emerging economic opportunities while maintaining strong corporate governance and providing our customers with a secure and reliable banking experience,” Imam said.
The Integrated Personal and Payroll Information System (IPPIS) database is safe and secure, Office of the Accountant General of the Federation (OAGF) assured.
The assurance is on the heels of recent insinuation of tampering and compromise of the system. Assurance of its safety and security was given in a statement issued on behalf of the Office by the Director of information, Mallam Bawa Mokwa.
The OAGF restated that the database had not been compromised assuring that employees’ personal data on the database was safe and secure.
The OAGF, which manages the IPPIS and other financial management initiatives of the Federal Government, said it was already implementing its ICT security policy that aims to ensure that its digital assets are secured in line with global best practices.
The Office explained that no data was saved on its website, adding that the IPPIS used the website to only share information and not for any transaction.
“The IPPIS is not using the OAGF website for any transaction. The website is actually the medium to share information.
Neither payroll nor payment is made through the website, therefore, no data is contained in the website,” it said. The OAGF stated that the IPPIS validation portal that was recently developed for updates of employees’ information was deployed for a period and after the exercise, the data were pulled out and the site shut down permanently.
According to the Office, “the IPPIS Validation Portal was deployed on a secure platform. A secured database and application were purchased from the popular HELIX-FONS.’
The Office acknowledged that the IPPIS was of utmost importance to Nigerian workers, thus it became imperative to assuage the fears of any loss or breach of employees personal data in the IPPIS database.
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