…says it could pose debts sustainability problem
Nigeria’s increasing fuel subsidy could pose debt sustainability issue for the country, the World Bank has said.
The bank made the observation in its latest ‘Africa’s Pulse’ report, a biannual analysis of the near-term regional macroeconomic outlook.
The National Assembly on Thursday approved the request of President Muhammadu Buhari of N4 trillion for petrol subsidy.
But the World Bank noted the rising cost of subsidies could also weaken the country’s public finance.
“Risk remains high on increasing fuel subsidies, which could weigh heavily on public finance and pose debt sustainability concerns,” the report said.
“Nevertheless, public debt as a percentage of GDP is currently moderate.”
The Washington-based institution added that the country’s soaring military spending and debt servicing costs could prey on the country’s debt sustainability level.
“Persistent fuel subsidies, increasing military spending for security purposes, and rising debt servicing costs weigh heavily on public finance to keep public debt at a sustainable level in Nigeria,” the report added.
“The fiscal balance deteriorated considerably in several Sub-Saharan African countries as governments scaled-up spending to mitigate the prolonged effects of the pandemic on firms and vulnerable households.”
On sub-Saharan Africa’s recovery, the bank noted that it is multi-speed, with wide variation across countries.
“The recovery of the three largest economies in the region — Nigeria, South Africa, and Angola — will continue to be sluggish,” it said.
“High oil prices will support growth in Nigeria and Angola.
“Excluding Angola, Nigeria, and South Africa, growth is projected at 4.1 per cent in 2022—higher than the growth of the region as a whole.
“Non-resource-rich countries are projected to be adversely affected by rising commodity prices, dragging down growth in the region.
“The opposite occurs with resource-rich countries whose growth would be propelled by favourable terms of trade.”
The bank further said the war in Ukraine would further improve the economic performance of resource-rich countries (especially their extractive sector) and decelerate the economic activity of non-resource-rich countries as their import bills soar.
“Given limited trade exposure, the impacts of the Russia-Ukraine conflict are expected to be negligible,” the bank added.
It projected a 2.7 per cent growth for Nigeria in 2022.
“Of the region’s three largest economies, South Africa’s growth is expected to decline by 2.8 percentage points in 2022, dragged by persistent structural constraints, while Angola and Nigeria are projected to continue with the momentum of 2021, up by 2.7 and 0.2 percentage points, respectively, thanks partly to elevated oil prices and good performance of the non-oil sector,” the bank said.
According to World Bank, growth in Nigeria is forecast to increase to 3.8 per cent in 2022 and stabilise at 4 per cent from 2023 to 2024.
It stated, “Real GDP growth was revised up by 1.2 percentage points for both periods compared with the previous forecast. Nigeria’s economy is still dependent on the oil sector.
“Oil-related revenue contributes 40 to 60 per cent of fiscal revenue, while oil and gas account for 80 to 90 per cent of total exports. Weak oil production, below the OPEC quota, held back the recovery process.
“Although at a slower pace than the average 7 per cent during the boom period, growth prospects for the Nigerian economy are somewhat bright thanks to high oil prices coupled with reforms initiated by the passing of the Petroleum Industry Act and the completion of the Dangote refinery expected in 2023.”
Just in: Reps halt CBN’s cash withdrawal policy, summon Emefiele
The House of Representatives has asked the Central Bank of Nigeria (CBN) not to implement the new cash withdrawal policy slated for January 9, 2023 pending compliance with the provisions of the Act establishing the bank.
The House also summoned CBN Governor Godwin Emiefele to brief the Chamber on several policies of the bank in recent times.
The lawmakers on Thursday condemned the new cash withdrawal policy, saying it would grossly affect small businesses and the economy especially those in the rural communities who do not have access to banks.
And following a point of order raised by Mark Gbillah on the provisions of the Central Bank Act, the House directed the CBN Governor to appear before the House on Thursday, December 15, 2022 to brief the House on why the policy should be allowed to stand.
Magaji Da’u Aliyu, who sponsored the motion, said the new policy by the CBN, which limits daily cash withdrawal to N20,000 daily should not be allowed to stand as it would adversely affect the Nigerian people, especially those running small-scale businesses.
He said while the country was trying to come to terms with the decision to redesign the currency, the CBN was coming up with yet another policy that will adversely affect the masses without proper advocacy.
Cash withdrawal limits will send us out of business – POS Terminal operators
The new directive on cash withdrawal by the Central Bank of Nigeria (CBN) on Tuesday is generating heated comments and reactions from Nigerians, especially point of sale (PoS) terminal operators who largely depend on cash to run their business.
FIJ interviewed some operators at Agric and Isawo bus-stops in Ikorodu on Wednesday and they spoke on how the policy would impact their means of livelihood.
A tricycle operator who identified as Kamoli Abayomi explained that the policy would not sit down well with the unbanked and uneducated population, citing an instance of a tricycle dealer in Agric, who doesn’t operate a bank account because he lacks confidence in the banks.
“I heard about the regulations yesterday in a news report. I am concerned about uneducated people and those who do not patronise banks,” Abayomi told FIJ.
“A couple of weeks ago, one old man selling tricycle here (Agric) sold a tricycle for ₦650,000 and he had to acquire the bank information of one of his fellow tenants at their complex to receive the payment.
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“Ordinarily, he prefers customers to pay in cash. If the money is huge, he would quickly take it home for safe-keeping. For people like this, how would they fare under this new banking rules?”
Tobi Martins has a PoS stand at the entrance of RSA Street, close to Isawo. He told FIJ the policy would not favour his business.
“I read the news yesterday on social media and became affected. I thought of how this would reduce my business patronage and even inconvenient some customers who come here to withdraw large sums,” he said.
“However, I think they have their reasons and we too will find a way to accommodate the new reality.”
IT COULD KILL OUR BUSINESS
Agbaje Mary, an indigene of Osun State, said she was not aware of the development.
“I didn’t know anything about this policy until you told me. It is not going to affect my business positively. I’m an admission seeker and I started this business to make myself productive while hoping to go get an admission,” she explained.
“What this means to me is that I may end up closing this business by the time my customer base diminishes as a result of this policy. I remember I started with ₦10,000 a year ago and the capital has multiplied now. In a day, I could trade with ₦200,000 and even more.
“But now, if I cannot withdraw more than ₦50,000 for my business over the counter in a day, the implication is that my business could die gradually.”
When this reporter approached Ajibola Janet for comments, she said she was not aware of such regulations. After reading out the letter to her, she also expressed her worry over the development, saying “it will definitely tell on our business”.
“Such policy is unfair. Our business is cash-dependent and limiting how much people withdraw daily and how much we also can withdraw to use for business, will bring severe impacts on our operations,” he said.
“At any rate, this is not my only line of business. I will rather concentrate my attention on other lines for my survival and follow the trend.”
As this reporter approached Adebisi Adejumoh and Mosun Akanji, what came to their minds was that he wanted to withdraw money. Upon initiating a conversation with them, they realised his purpose was entirely different.
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Adejumoh said, “This policy is too harsh. People withdraw various amounts from me daily. Sometimes, some people come here to withdraw ₦100,000 at once.”
“The higher the amount an individual withdraws at a go, the higher my own charges. So, if it now becomes impossible for one person to withdraw above ₦20,000 in a day, I am confused, as we would be making adequate profits and receive my pay at the end of the month from my employer.”
On her own part, Akanji dismissed the policy as untrue. She said it was doubtful the apex bank would release such regulations when POS business had kept many productive.
“I don’t want to believe what you are saying is true. Why will they (CBN) pronounce a policy like that? It does not have human face. Looking at the number of people in this business, there may be a problem if the policy becomes effective and people can no longer make ends meet,” Akanji explained to FIJ.
At another shop on a one-storey building situated at Isawo junction, a man who identified as Emmanuel Houston, told FIJ that the policy would affect everybody to different extents.
According to Houston, POS machines have created jobs for thousands of Nigerians and ensured relative peace in some communities.
“In Isawo alone,” Houston said, “unless there is an official register of POS terminals here, you might not be able to count the number of people doing the business.
“Some people don’t take it as their full line of business while some do not have any other business. I believe the regulations have the potential to bite everybody regardless.”
With the new CBN regulations, ATMs will only dispense ₦200 notes and below.
The revised cash withdrawal limits contained in a letter with reference number BSD/DIR/PUB/LAB/015/069 becomes effective on January 9, 2023.
Senate cautions CBN over cash withdrawal limits
The Senate on Wednesday asked the Central Bank of Nigeria (CBN) to exercise restraint on its latest policy on cash withdrawals.
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