Walle Smith Profile picture
Sep 22, 2018 7 tweets 2 min read Twitter logo Read on Twitter
#Nigeria the Budget Office put out 2017 fiscal accounts which showed that FY deficit came in at NGN3.8tr (3.3% of nom GDP) and above the 3% fiscal responsibility act. As usual revenues missed thanks to usual over-optimistic non-oil rev assumptions and higher JV payments
But interestingly, capex spending came in a record NGN1.44tr (1.3% of GDP and around 66% of target) with overall budget execution at 87% suggesting some credibility in implementation despite the costs driven by higher drawdowns by Works, Power and Housing
Debt service/revenues printed at 69% (adjusted for sinking fund payments to retire debt 60%) but up from the 47% in 2016. Overall debt tracked higher due to increasingly more expensive borrowings over the last three years - a derivative of CBN tightening.
Though oil revenues look set to provide support, the current track of trying to push capex spending over NGN1tr is unsustainable as it will require a larger NGN devaluation to work as revenues seem to have hit a brickwall (without PIGB no FIDs, and non-oil is a long term game)
Nigeria needs a new plan: one which involves less fiscal involvement in capex and opening up new sectors to growth. ST is to pass PIGB to get FIDs up and running. medium term is to open up new growth sectors (logistics, agro-allied manufacturing and utilities) to private capital
We need to restructure our banking sector: this whole game of using an ignorance arbitrage to fund high yield position on govt securities needs to go. Interest rates need to come down and the defacto NGN stability policy of the CBN needs to go.
We need a finance minister to rationalise govt spending and shift growth to the private sector. We need a CBN governor ready to restructure the banking system away from T-bills yield speculation. In 2021-22 another oil shock is coming. We need to be ready. brace yourselves

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More from @walesmit

Sep 5, 2018
Last week, NBS reported a soft GDP growth print of 1.5% y/y weaker than most analysts myself included expected. Main drag stemmed from oil which contracted and agriculture which grew at its slowest pace since 1987 and trade which remained in recession. Telecomms rose 11.5%
Telecomms GDP growth is strongly correlated with growth in subscriber numbers (~90%) and the key driver there was a jump in MTN subscribers (+25% y/y). If one holds the MTN number flat from June 2017, Telecomms GDP would likely have grown by 4.4% which puts Q2 2018 GDP at 0.8%
So when the CBN and the AGF start making unreasonable demands for immediate payment of $10bn from a key growth contributing non-oil company in Nigeria you wonder what is driving this kamikaze regulatory brinkmanship? CBN posture is quite irritating when you consider that in 2018
Read 7 tweets
Jul 24, 2018
CBN seems to have boxed itself into a corner. Inflation at 11.4% is below long run level of 12%. FX: you have the reserves to deal with anything even better you've converged most segments (NIFEX closed today at N349/$) GDP Growth is weak, credit growth even weaker what to do?
Cut MPR? Na we need to impress some people who interpret our policy position via MPR when in actual fact we have cut real policy rate (OMO) down to 12.15% from 18-22% in 2017. But banks are not lending? Try interventions? Banks are bogged down with IFRS 9, low CAR and NPL issues
But credit growth is now negative and cutting rates further risks putting pressure on FX. We really need to do something else growth starts to fall-off and we get into a bind to cut the MPR which we dont really want to cos we need it to impress to FPI guys.
Read 9 tweets

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