According to press reports last week, the Federal Government of Nigeria (FGN), via the Minister of Communications and Digital Economy, issued a directive to the regulator of the telecommunications sector, the Nigerian Communications Commission (NCC), to revise the policy on SIM card registration and usage. The Minister stated that the policy update was based on the need to combat the spate of insecurity in Nigeria. In our view, this will have a neutral effect on telecoms companies (telcos) earnings in the near-term.
Nigeria’s legacy of inaction in passing urgent reforms is perhaps best captured by the Petroleum Industry Bill (PIB). The Bill is over a decade in waiting since the original version was put forward by the Executive in 2008. The most recent update was the split of the comprehensive Bill into four parts in 2015 to ease passage. The new versions are the Petroleum Industry Governance Bill (PIGB), Petroleum Host and Impacted Community Bill (PHICB), Petroleum Industry Administration Bill (PIAB) and Petroleum Industry Fiscal Bill (PIFB).
The Nigerian economy suffered mixed fortunes in the past decade. In the first half of the decade, an average growth of 6.1% drove unemployment to a low of 5.1%. This was on the back of peak oil prices and stable oil production, which supported oil revenues and a strong exchange rate. In turn, inflation was relatively low, averaging 10.7%, due to a strong currency. However, fiscal and structural reforms were on the backburner while fiscal buffers meant to smoothen budget spending during harsh times were emptied.
Following the updated Multi-Year Tariff Order (MYTO) as at year-end 2019, the Nigerian Electricity Regulatory Commission (NERC) approved an upward review (starting January 1, 2020) of electricity tariffs paid by consumers across the country. The adjustment was in line with the bi-annual review provided in the MYTO 2015 (as amended). The new update covers an estimated tariff shortfall of ₦534.4bn for 2020, which the government would cover. Hence, implementing the recommended tariff change would ease the burden of electricity subsidies on government’s finances.
The global economy faces more turmoil in 2020, but we remain largely optimistic in our outlook, given the continued attempts to find a lasting resolution to the Sino-US trade war. More so, supportive fiscal and monetary policies across major economies, together with structural realignments, should steer the global economy away from a recession, and thus bolster investors' appetite for risk assets.
Nigeria suffered an outlook downgrade from stable to negative by Moody’s. Increasing fragility in public finances and sluggish growth prospects, which pose great risks to government's fiscal strength and external position were the main concerns. However, the rating agency affirmed the B2 long-term local and foreign currency issuer ratings, the B2 foreign currency senior unsecured ratings, and the (P) B2 foreign currency senior unsecured MTN programme rating.
The Q3:2019 GDP report published by the National Bureau of Statistics (NBS) revealed soft recovery in economic growth at 2.3% Y-o-Y (vs 2.1% Q2:2019 as revised); the highest since Q4:2018, driven by a slow but increasing growth in the non-oil sector. Growth in the oil sector slowed at 6.5% Y-o-Y in Q3:2019 (vs 7.2% Q2:2019). We attribute this to a weak base given a 5.2% Y-o-Y increase in oil production to 2.04mbpd, also higher by 1.0% on a Q-o-Q basis.
The current brouhaha rocking the Nigeria Police Force (NPF) and its Service Commission in the recruitment of 10,000 constables has somewhat shown what the real battle is all about. This is a total contrast to the cheers from the College of Policing in the United Kingdom that greeted the recent plans by Prime Minister Boris Johnson to recruit 20,000 new police officers.
The Managing Director of Wartsila Nigeria, Wale Yusuff, says it is time to question the suitability of a traditional approach to power generation that has clearly shown its limits and is no longer fitted to unleash Nigeria’s clean energy potential.
In a press statement, Mr Yusuff noted that flexible power systems will be instrumental in significantly lowering electricity costs, improving system reliability, as well as boosting the share of renewable energy in the Nigerian power mix.