The week ahead – Contrasting fortunes

The Senate approved Nigeria’s 2025 medium-term expenditure framework and fiscal strategy paper (MTEF/FSP), outlining ₦47.9 trillion in spending and a ₦9.22 trillion borrowing plan, with an exchange rate of ₦1,400/$1 and oil benchmarks of $75, $76.2, and $75.3 per barrel and daily oil production output of 2.06 million, 2.10 million and 2.35 million barrels for 2025 to 2027 respectively. Meanwhile, Nigeria returned to the international bond market after two years, issuing oversubscribed Eurobonds totalling $2.2 billion to finance the 2024 fiscal deficit. The issuance included $700 million in 6.5-year bonds at 9.625% and $1.5 billion in 10-year bonds at 10.375%, attracting over $9 billion in subscriptions.

A decade ago, many Nigerians believed that their country’s natural wealth, if shielded from corruption, could guarantee widespread prosperity. This conviction was rooted in the country’s vast resources—oil, gas, minerals, and a large, youthful population. However, the harsh realities of the present economic landscape have shattered this illusion, revealing a more profound crisis of mismanagement, inefficiency and unproductivity. Nigeria’s economy presents a stark paradox: a resource-rich country grappling with widespread poverty, inadequate infrastructure and a significant fiscal deficit. As is now usual with the MTEF, the assumptions it presents are divorced from reality. For a document meant to provide the long-term horizon for the country’s fiscal planning, it is hard to see how it provides a realistic framework for budgeting beyond meeting the legal requirements that it must be sent as a precursor to the budget. For context, the proposed ₦47.9 trillion expenditure for 2025, when converted using the Federal Government’s exchange rate of ₦1,400/$, amounts to $34.2 billion. This figure is alarmingly tiny for a country of Nigeria’s size and potential. To put it in perspective, Kenya—a nation with half the GDP and a quarter of Nigeria’s population—has proposed a budget of nearly the same size. This stark comparison highlights Nigeria’s fiscal inefficiencies and underscores the need for urgent reforms to diversify revenue sources, improve productivity and prioritise investments in critical sectors. Nigeria’s economic challenges are not merely a function of global factors but also the result of decades of policy missteps and over-reliance on oil revenue. Despite being one of Africa’s largest economies, the country has struggled to translate its resources into equitable development, widespread employment or sustainable infrastructure. While sometimes necessary, the dependence on borrowing to plug fiscal gaps underscores the urgent need for long-term solutions such as tax reform, industrialisation and digital transformation. On a more optimistic note, the recent success of Nigeria’s Eurobond issuance signals a potential turning point. Although the coupon rates are significantly higher than those of its West African neighbours—Benin Republic secured $750 million for 12 years at a 7.96% rate, while Côte d’Ivoire raised $2.6 billion with 9- and 13-year maturities at 6.3% and 6.85% respectively—the outcome reflects growing investor confidence in Nigeria’s economic reforms. The bond’s pricing—9.625% for 6.5 years and 10.375% for 10 years—indicates that while borrowing costs remain high, the global financial community sees promise in Nigeria’s reform trajectory. Endorsements from the IMF and World Bank have undoubtedly played a role in bolstering this confidence. If these reforms are sustained and deepened, Nigeria could see a reduction in borrowing costs in the future, enabling the government to allocate more resources to critical sectors. However, relying solely on external debt is neither sustainable nor sufficient. The government must address systemic inefficiencies that drain public resources. For instance, reforming the tax system to ensure equitable contributions from all sectors and individuals is long overdue. Nigeria’s current tax-to-GDP ratio remains among the lowest globally, limiting the government’s capacity to invest in public goods and services. Expanding the tax base, combating tax evasion and simplifying tax compliance are essential to fiscal sustainability. In addition, boosting productivity across key sectors such as agriculture, manufacturing, and technology is crucial. Nigeria’s vast youth population remains a largely untapped resource. By investing in education, vocational training, and technology, the government can create an environment where innovation and entrepreneurship thrive. This, in turn, can reduce unemployment, improve living standards and increase the tax base. While the successful Eurobond issuance is a positive signal, it should not overshadow the urgency of addressing Nigeria’s structural economic weaknesses. Borrowed funds must be judiciously deployed to projects that deliver measurable impacts, such as energy infrastructure, transport systems and social services. The focus should be on creating a multiplier effect that stimulates economic growth and sustains revenue to service debts. In summary, Nigeria stands at a critical juncture. The reforms initiated are steps in the right direction, but their success depends on consistent implementation, transparent governance and a clear focus on improving the lives of ordinary Nigerians. As the country navigates its fiscal challenges, it must balance short-term measures like borrowing with long-term strategies to build a productive, inclusive, resilient economy.

Amnesty International said in a report on Thursday that Nigerian police used excessive force and shot protesters while cracking down on demonstrations in August over a cost of living crisis, killing at least 24 people n Kano, Katsina, Jigawa, Kaduna, Niger, and Borno states and arresting 1,200 protesters. On 3 August, police denied killing protesters but said seven people died, attributing four deaths to an explosive device planted by suspected Boko Haram militants, two deaths to a car accident and one to a local vigilante who was trying to loot a shop. The report stated that the police fired live ammunition at protesters at close range.

Amnesty’s report only confirms what many Nigerians saw on social media and, in some cases, on live television. As we highlighted in our appraisal of the protests, the federal government’s heightened rhetoric and activity to scuttle the protests in the lead-up opened up the space for a clampdown. In much of Nigeria’s history, such clampdowns were usually the military’s pastime, especially the army, whose imprints litter much of the country’s record of mass atrocities. However, recent events ranging from military over-engagement in internal security to the growing public disillusionment, even within its own ranks, have seen the police take on a more public role in ‘keeping the peace’. The heavy-handed response to the protests confirmed the shrinking of Nigeria’s civic space and underscored the eroding trust between the government and its people. As Nigeria’s elites continue to preach endurance to citizens while living comfortably, the foundation for trust in government—an essential element of nation-building—grows ever thinner. The police’s alternative version of events further cements the gaslighting policy that has tainted the official government response to civil protests. This is compounded by the regime-protection mentality that still lingers in security agencies, perhaps an after-effect of colonial rule. Consequently, agencies like the police and military are often seen protecting political elites at the expense of ordinary citizens despite being funded by public resources. The 2020 EndSARS protests emboldened security officials, who now know that, as long as they have the backing of politicians, there are no consequences for their actions. This sets a dangerous precedent where Nigerians continue to face harassment and violence at the hands of those meant to protect them. It also fosters an environment where the police, for a few thousand nairas, are willing to harass citizens or demand bribes at security checkpoints. The poor management of large gatherings has serious consequences—it not only detracts from the legitimacy of the protesters’ demands but also establishes the conditions for future confrontations, which will likely continue to undermine national stability. While these issues may seem small, they are far from insignificant. They play a key role in the risk assessments that foreign investors and businesses conduct when evaluating the Nigerian market. May the souls of the departed rest in peace.

The Federal High Court, Abuja, has nullified section 2(10)(b) of the National Broadcasting Code (6th Edition, 2016), which required broadcasters to pay 2.5% of their gross annual income as an annual levy. In a suit by MultiChoice Nigeria Limited and Details Nigeria Limited (GOTv), Justice James Omotosho ruled that the levy must be based on net annual income instead. The court also barred the National Broadcasting Commission (NBC) from demanding the plaintiffs’ VAT records, FIRS reports, bank statements, audit adjustment journals, trial balances, and general ledgers for income computation, limiting the NBC to relying on annual audited accounts.

The ruling represents a significant victory for equity in taxation and regulatory oversight in Nigeria. The court has prioritised fairness and operational realities by rejecting the requirement for broadcasters to pay 2.5% of their gross annual income as a levy and instead mandating that the levy be based on net annual income. This decision not only provides relief to the broadcasting sector but also challenges broader issues in Nigeria’s approach to revenue generation. The now-invalidated levy, calculated on gross income, imposed a disproportionate burden on broadcasters, regardless of their profitability. It reflects a broader trend in Nigeria’s fiscal policies, where the focus appears to be on aggressive revenue collection rather than fostering an enabling environment for economic growth. While the government’s drive to increase revenue is understandable, given the country’s fiscal pressures, the methods often come at the expense of the private sector. Businesses, especially in high-cost industries like broadcasting, operate in an environment fraught with challenges, including unreliable infrastructure, stiff competition, and high operational costs. Imposing levies disconnected from a company’s financial health only exacerbates these difficulties, stifling innovation and investment. The court’s decision also underscores the importance of curbing regulatory overreach. The National Broadcasting Commission (NBC) had sought broad access to sensitive financial records, including VAT records, FIRS reports, bank statements, and general ledgers. This demand exceeded what is reasonable for calculating levies and signalled a lack of trust in businesses and established tax authorities like the Federal Inland Revenue Service (FIRS). By limiting NBC’s access to audited accounts, the court has reaffirmed the principle of due process, ensuring that regulatory agencies operate within their defined mandates. This ruling provides an opportunity to reflect on Nigeria’s broader economic policies. Revenue generation, while critical, should be tied to creating value and fostering economic expansion. Taxation and levies must be structured to reflect a company’s ability to pay, ensuring businesses are not unfairly penalised. When businesses thrive, they create jobs, invest in innovation, and expand the economy, ultimately leading to higher tax revenues in the long term. By contrast, policies prioritising short-term fiscal gains over sustainability risk undermining the sectors that drive economic growth. In the broadcasting sector, easing the levy burden and ensuring fair regulatory practices could have transformative effects. Broadcasters would be better positioned to reinvest in local content, technology, and infrastructure, enhancing the industry’s competitiveness. At the same time, reducing administrative and financial pressures could attract more investment into the sector, boosting its contribution to the economy. The Nigerian government must recognise that fostering a vibrant economy requires more than aggressive tax policies. Strengthening institutions, streamlining regulatory frameworks, and delivering value to taxpayers are essential for building trust and encouraging compliance. Revenue collection should be a byproduct of economic growth, not a deterrent to it. For instance, broadcasters paying levies should see corresponding infrastructure and industry support improvements, creating a virtuous cycle of investment and growth.

Ghana’s Jubilee oil field saw a slight production drop to 89,000 barrels per day by October 2024, down from over 90,000 barrels per day in July. The decrease was attributed to the underperformance of the J69-P well and unplanned downtime at the Ghana Gas Company. Additionally, the Government of Ghana owes $40 million for overdue gas payments. Meanwhile, cocoa buyers have made over $500 million in upfront payments to Ghana’s Cocobod to secure supplies. However, Cocobod is facing a $1 billion loss due to unfulfilled contracts from the previous season, with traders uncertain about the feasibility of meeting future obligations.

Cocoa and oil have historically been the backbone of Ghana’s economy, providing critical revenue streams and economic stability. Since the discovery of oil in 2011, the sector has enabled Ghana to access significant financing through loans on international capital markets and bilateral arrangements. However, crude oil production has declined in recent years as several exploration companies have exited the sector, citing unfavourable economic and tax regimes. The energy sector has become a financial burden, generating approximately $2 billion in annual debt, primarily from the power subsector. Ghana’s electricity generation relies heavily on thermal sources, which account for 64% of the energy mix. This dependency makes the country a significant consumer of natural gas, costing the state over $1 billion annually. Legacy debts in the gas sector are persistent, with major suppliers like Tullow Oil and the West African Gas Pipeline owed substantial arrears due to state ownership and inefficiencies. Similarly, the cocoa sector, once a stronghold of the economy, is struggling. Production levels have dropped below 500,000 tonnes, hindered by illegal mining activities, crop diseases, adverse weather conditions and rampant smuggling. Smuggling alone is estimated to divert over 150,000 tonnes of cocoa beans annually, undermining Ghana’s ability to meet supply targets. This shortfall has had ripple effects, including increased borrowing costs for cocoa-backed syndicated loans. For instance, Ghana faced higher coupon rates when attempting to secure $1.5 billion in financing this year. As a result, the government had to rely more on domestic financing and upfront payments, compounding fiscal challenges. The local currency, the cedi, heavily depends on cocoa inflows for stability. This year, the failure to meet production and export targets weakened the cedi further, causing it to depreciate against major currencies like the U.S. dollar. The combined challenges in the oil and cocoa sectors have exposed structural weaknesses in Ghana’s economy, underscoring the urgent need for policy reforms and strategic investments to revitalise these critical industries.