August 26, 2019/InvestmentOne Report

Please click to view our full report: Setting the Pace for the Next 4 Years

THE LONG AWAITED MINISTERS HAVE ARRIVED…what next?

Following the inauguration of the 43 Federal Ministers on Wednesday, we take a look at some crucial policy initiatives (sectorized) that we believe the FG should pursue within the next four years.  

Here are some highlights of the report  

·         The retention of the (previously acting) Finance Minister, Zainab Ahmed suggests the plans for fiscal continuity of what she began within her 9months of appointment in conjunction with hopes to achieve the ERGP targets by the set date, 2020.

·         With a lot of question marks arising as to how the government would fund the recently approved minimum wage increase from N18,000 to N30,000 in April 2019, we believe the impending VAT increment (from 5% to 7.5%) and the recent cost reflective electricity tariff hike, by an estimated N10 to N41/KWH (average figures) by 2020 across discos, with subsequent reviews set to take place, should provide some buffer for states in meeting their recurrent obligations.

·         In our opinion, the long term solution lies in furthering fund mobilization as tax to GDP remains abysmally low (just under 8% in 2018), especially when compared to our peers (SA and Ghana: 25.8% and 13.1%)

·         Without doubt the nation’s number 1 revenue source, much is expected of the Petroleum sector in the next 4 years.

·         In our opinion, these objectives may be deemed infeasible particularly if the Petroleum Industry Bill (PIB) is not signed in the near term.

·         Regarding the downstream sector, PMS prices are expected to remain flat (at N145/litre); at least until the Dangote oil refinery is functional enough to meet the growing energy demands of the country.

·         With Nigeria currently ranked 171st out of the 190 countries surveyed in ‘Getting Electricity’ within the broader Ease of Doing Business Index compiled by the World Bank, we highlight the importance of revamping the power sector urgently.

·         Overall, we may not see a significant improvement in policy implementation in the next 3 and half years.

·         With that being said, we are hopeful for a substantial level of functionality from the Ministerial heads given the major challenges the nation is facing at this critical period.