Nigeria makes World Bank’s top-three IDA debtors’ list

credit support of $2.586bn confirms poverty level …trails Ethiopia, Bangladesh

The  says it is helping Nigeria to fight extreme poverty and improve the living standards of her citizens with International Development Association (IDA) credits of about $2.586 billion (N790bn) as at end of 2018.
Nigeria is third in the list of IDA top country borrowers, the World Bank said in its annual report for 2018 available to BusinessDay. Nigeria trails behind Ethiopia, which is the first with IDA credit of $3.122 billion, and Bangladesh (second) with IDA credit of $2.991 billion. IDA is one of the largest sources of assistance for the world’s 75 poorest countries, 39 of which are in Africa, and is the single-largest source of donor funds for basic social services in these countries.
Nigeria overtook India last year as the country with the largest number of people living in extreme poverty, according to report by the World Poverty Clock, which noted that extreme poverty in Nigeria was growing by six people every minute, the highest number in the world. At the end of May 2018, the survey showed that Nigeria had an estimated 87 million people in extreme poverty, compared to India’s 73 million.
The International Development Association (IDA) is the part of the World Bank that helps the world’s poorest countries. Overseen by 173 shareholder nations, IDA aims to reduce poverty by providing loans (called “credits”) and grants for programmes that boost economic growth, reduce inequalities, and improve people’s living conditions.
Traditionally, IDA has been funded largely by contributions from high- and middle-income partner countries. Additional financing comes from transfers from International Bank for Reconstruction and Development (IBRD) net income, grants from International Finance Corporation (IFC), and borrowers’ repayments of earlier IDA credits.
Other top country borrowers and their IDA credits as at fiscal year 2018 are Pakistan ($1.948bn); Kenya ($1.280bn); Côte d’Ivoire ($987m); Tanzania ($955m); Uzbekistan ($740m); Nepal ($706m), and Uganda ($640m).
“In fiscal 2018, our combined commitments for the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA) totalled more than $47 billion,” said Kristalina Georgieva, chief executive officer of IBRD and IDA. “But these impressive numbers stand for something much bigger. They represent our ability to confront the world’s toughest challenges and to step in when our clients need us the most.”
The World Bank Group’s risk officers monitor the global political and economic impacts that could affect the institution’s finances. In fiscal 2018, economic growth in advanced economies reaccelerated, while activity in developing countries also rebounded. Policy uncertainty in some advanced and larger developing economies continues to present an overarching risk, and there is a significant chance that economic activity could diverge from the forecast of continued strengthening of global activity, the World Bank said in the annual report, adding that “geopolitical tensions remain elevated, with potential impacts on financial market confidence and volatility”.
Every three years, the World Bank Group development partners meet to review IDA’s policies, assess its financial capacity, agree on the amount of financing for the next replenishment period, and commit to additional contributions of equity that are required to meet IDA’s objectives and development goals.
Going forward, IDA said it will continue to grow its borrowing programme to raise funds that complement donor contributions, enabling it to expand its life changing investments in the poorest countries.
“We exceeded our targets for climate change, with one-third of total World Bank lending, or nearly $16 billion, going to development activities that address climate change. This was also a successful and innovative year for IDA, including the highest-ever first year of commitments – $24 billion – to support the world’s poorest countries,” Georgieva said.
In April 2018, IDA made its debut in the global capital markets for the first time in its nearly 60-year history, leveraging its strong financial position and triple-A rating. IDA’s inaugural bond – a $1.5 billion, five-year US-dollar benchmark issue – received strong reception in the market, with total orders reaching $4.6 billion from around the world.
The World Bank is a leader in mobilising private investment for development through the capital markets. Since issuing the first IBRD bond in 1947, the Bank has been a key promoter of unique capital market instruments that give the private sector the opportunity to engage in global development priorities.
The World Bank is one of the largest issuers of green bonds, for example, which tap capital markets to support climate-related projects. Since issuing the first labelled green bond in 2008, the Bank has issued $11 billion equivalent through more than 140 transactions in 19 currencies. In April 2018, the Bank issued its first green bond denominated in Hong Kong dollars (HK$ 1 billion). The World Bank also supports country efforts to build green bond markets. Through this work, the Bank helps clients demonstrate leadership on sustainability and climate action, while offering investors an opportunity to support development solutions that address climate change.
“This year (2018), the World Bank Group committed nearly $67 billion in financing, investments, and guarantees. The International Bank for Reconstruction and Development (IBRD) continues to see strong demand from clients for its services, with commitments rising to $23 billion in fiscal 2018. Meanwhile, the International Development Association (IDA) provided $24 billion to help the poorest countries – the largest year of IDA commitments on record,” Jim Yong Kim, President of the World Bank Group and Chairman of the Board of Executive Directors, said.
“This year, we leveraged IDA’s strong capital base and launched the inaugural IDA bond. Investor demand for the $1.5 billion bond reached more than $4 billion. By combining IDA’s traditional donor funding with funds raised in the capital markets, this financial innovation will expand IDA’s ability to support the world’s poorest countries, including efforts to prevent conflict. “The International Finance Corporation (IFC) provided more than $23 billion in financing for private sector development this past year, including $11.7 billion mobilized from investment partners. Of this, nearly $6.8 billion went to IDA countries, and more than $3.7 billion was invested in areas affected by fragility, conflict, and violence.
“Marking its 30th year of operation, the Multilateral Investment Guarantee Agency (MIGA) has become the third leading institution among the MDBs in terms of mobilizing direct private capital to low- and middle-income countries. This year, MIGA issued a record $5.3 billion in political risk insurance and credit enhancement guarantees, helping finance $17.9 billion worth of projects in developing countries. New issuances and gross outstanding exposure – at $21.2 billion this year – almost doubled as compared to fiscal 2013,” Kim stated in the annual report.

Aliko Dangote Remains Africa’s No:1 Billionaires

Nigeria

Alhaji Aliko Dangote still maintains his spot as Africa’s richest man according to Forbes Magazine. The magazine disclosed that as at January 11, 2019, the 61-year-old was worth $9.9 billion.

Forbes listed him as the number one on Africa’s list of billionaires for the year 2019. The Kano State indigene has held the richest man tag for the past few years.

He was ranked the 100th richest man in the world in 2018 and number 66 on the Powerful People 2018 list – both released by Forbes.

Forbes put much of Dangote’s wealth to his cement business – the continent’s largest producer straddling most sub-Saharan African countries.

“Dangote Cement produces 44 million metric tons annually and plans to increase its output 33% by 2020. Dangote also owns stakes in publicly-traded salt, sugar and flour manufacturing companies,” Forbes added.

Other billionaires listed: 

Behind Dangote is Nigerian oil magnate Mike Adenuga whose wealth was estimated at $9.2 billion. South African Nicky Oppenheimer, Egyptian Nassef Sawiris and Johan Rupert completed the top five list with $7.3bn, $6.3 bn and $5.3bn respectively.

The eighth slot had five persons with one of them being Isabel dos Santos, Africa’s richest woman whose wealth is estimated at $2.3 billion.

She is daughter to former Angolan president Jose Eduardo dos Santos and was at a point during her father’s reign head of state oil company. She was fired by new President Joao Lourenco on allegations of financial impropriety – she flatly denies all the allegations.

Others on the eight slot of the list are Zimbabwean telecoms tycoon Strive Masiwiya and South African mining magnate Patrice Motsepe.

Ethiopian Airline to inaugurates 5⭐️hotel

Addis Ababa

The Ethiopian Skylight Hotel, a five-star hotel by Ethiopian airlines will be officially inaugurated on January 28 in Addis Ababa, reports News-aero, an aeronautical website citing the Ethiopian press.

Ethiopian Skylight Hotel is located five minutes from Addis Ababa Bole International Airport. It covers 42,000 m2 and has 373 rooms.

The construction of this edifice cost $ 65 million. Ethiopian airlines provided 35% financing while EXIM Bank of China provided 65% of the project’s financing, the website added.

It said that in the immediate future, the hotel will generate 400 jobs.

In addition to promoting Ethiopian tourism, this hotel will also welcome passengers during transits, stopovers or technical delays, according to the Ethiopian Airlines.

Africa’s most thriving airlines is said to be considering construction of a second hotel that should be operational in 2021.

FIRS hits N5.2 trillion tax revenue, gets N8tr target in 2019

Nigeria


[File] Mr Babatunde Fowler, FTAX Chairman. PHOTO/TWITTER/FIRS
The Federal Inland Revenue Service has recorded an all-time high tax revenue collection of N5.23 trillion in 2018, with Value Added Tax (VAT) at N1.11 trillion for the first time.
Prior to 2018, the highest revenue figure ever attained by FIRS was N5.07 trillion, in 2012, when oil price hovered around $100-$120 per barrel, but now remarkable, given that it was achieved at a period when oil prices averaged $70 per barrel.
Besides, the Service will be expanding its dragnet and tightening noose against tax evaders, as there are indications that it would be given an N8trillion target this year.
The Chairman of FIRS, Dr. Babatunde Fowler, who made the disclosure during the 2019 Management and Stakeholders Retreat, in Lagos, yesterday, said the N8 trillion target is being finalised, but assured of the readiness of the agency to take it as a challenge.
Fowler, who reiterated the need for increased compliance to tax laws, said there would not be any serious discussion on diversification of the economy without reviewing the country’s tax regime for optimal performance.
The Chairman, House of Representatives Committee on Finance, Babangida Ibrahim, while commending the Service on the feat achieved, pledged the lawmakers’ support for every initiative that would lead to efficient tax system in the country.
“The taxation of any economy and growth of policies of government depends largely on the revenue generated by the tax authorities. We agree that to achieve effective taxation, the support of the parliament cannot be over-emphasised,” he said.
Meanwhile, he affirmed that the Stamp Duty Account domiciled at the Central Bank of Nigeria is still accumulating revenue, but said he is not sure whether the accumulation is in trillions as claimed by people.
The taxation strategist noted that the revenue had remained untouched because of the legal dispute over who is the rightful owner, between the Federal Government and other stakeholders involved.
He said that FIRS worked hard in ensuring that taxes are collected and remitted for the benefits of the nation by targeting non oil revenue, despite the dwindling oil prices and economic restrain in 2018.
At the retreat with the theme: “Parliamentary Support for Effective Taxation of the Digital Economy,” Fowler said FIRS has adopted initiatives that ensure a robust tax administration that is agile and beneficial to all stakeholders.
According to him, with the deployment of various digital innovations, cost of collections in non-oil sector has improved from four per cent per N85.99 billion and N100.3 billion in 2016 and 2017 respectively, to N114.1 billion in 2018.
“While we have been steadily increasing revenue collection over the years, our cost of collection has actually been going down. In 2016, we collected N3, 307 trillion; in 2017, we collected N4, 027 trillion and in 2018, we collected N5, 320 trillion. Meanwhile, the cost of collection as a percentage of actual taxes collected has been reducing. In 2016, it was 2.6 per cent. In 2017, it was 2.49 per cent, while in 2018 it was 2.14 per cent,” he said.
Of the total tax collected, oil-related taxes amounted to N2.47 trillion, while the non-oil-related taxes totaled N2.85 trillion, against N1.52 trillion and N2.51 trillion respectively in 2017.
In the period under review, the automation of VAT collection in key sectors facilitates reduction in compliance cost in the long term; created system to system integration between banks and FIRS; and resulted to 31 per cent increase year on year in VAT collection in the banks, as well as N25 billion so far in 2019.
The FIRS also collected N212,792 billion exclusively from audit, a figure that arose from 2,278 cases, and with a huge reduction in audit

Yen's surge is a red flag for world markets

LONDON (Reuters) – A gradual rise by the Japanese yen in recent weeks culminated in a dramatic overnight surge — firing a warning shot for world markets and the global economy in 2019.
Historically, outsized yen gains in short periods, such as the Russian default in 1998 and the global market meltdown in 2008, are a harbinger of stress for global markets. Market watchers say the yen’s latest ascent is a sign that the global economy is set for a rocky ride ahead.
Signs are growing that the global economy is headed for a slowdown. In an environment like that, the yen tends to thrive. Japan’s large current account surplus means global markets consider it a safe haven.
Global surveys this week showed activity in European and Chinese factories are slowing. And falling demand forced Apple () to issue a rare cut in its sales forecast, sending tremors through global markets.
The yen’s roaring higher was a sign of just how widespread concern over the health of the global economy had become, said Ulrich Leuchtmann, head of FX research at Commerzbank.
Japanese investors tend to invest a large portion of their savings overseas, then bring the money home during extreme market stress, driving the yen higher.
That outward investment pressure has only surged in recent years. According to Morgan Stanley, foreign investments in U.S. assets has nearly doubled over the last decade to $1.25 trillion — a sign of the magnitude of the flows that could head back into the yen.
The dollar collapsed to as little as 104.10 yen , its lowest reading since March 2018 in early Asian trading, before recouping some losses to stand at 107.64 yen. The yen strengthened at least 1 percent against all its G10 peers
At session lows, the Japanese currency has gained more than 6.5 percent in the last five trading sessions and is the best performing major currency since early December.
But even as evidence mounts that the global economy is struggling, central banks, led by the United States, are signalling more interest rate increases are coming. That is raising fears they may be tightening policy too much into an economic slowdown.
“It tells you there is a lot of anxiety and nervousness and concern about a more material slowdown in the economy,” said Bob Michele, chief investment officer and head of fixed income at JP Morgan Asset Management.
Real U.S. interest rates adjusted for inflation are at their highest in nearly three years. Nominal interest rates are greater than dividend yields in U.S., China and Japan.
“U.S. real yields are too high, productivity problems are emerging in China and the glut of global surpluses is falling, exposing structural flaws in developed markets,” said Hans Redeker, global head of FX strategy at Morgan Stanley in London.
GRAPHIC: Japan Portfolio investments – 

SAFER SAFE HAVEN

Unusually though, this time around, the surge in the yen has occurred a few months after a selloff in emerging markets last summer. That suggests the bulk of Japanese investment is concentrated in developed markets such as the United States.
Between late March and early October, U.S. stocks rose by 13 percent and the dollar gained more than 9 percent against the yen as rate increases in the United States and trade tensions boosted the U.S. currency.
Sam Lynton-Brown, a currency strategist at BNP Paribas in London, said Japanese investors typically held much of their investments in developed markets and the widening cracks in developed markets resulted in the yen’s strongly exhibiting its safe-haven characteristics only in recent weeks.
Morgan Stanley strategists said Japanese investors have stepped up buying of riskier U.S. assets such as equities and credit in recent weeks to capture higher yields. Since 2010, they have added more than $400 billion in U.S. assets, most of it in equities, they said.
China-U.S. trade talks boost Asia, Europe shares
With Japan’s financial market still closed for new year’s holidays, the latest moves have been credited to retail investors. Those investors generally behaved like the rest of the FX market bar exceptional circumstances, said Commerzbank’s Leuchtmann.
GRAPHIC: JPY valuations – 

PAINFUL DISLOCATIONS

Emerging-market currencies such as Turkey’s lira and South Africa’s rand felt the biggest pain.
The lira TRYUSD=R tumbled more than 7 percent overnight against the yen. The rand ZARJPY=R dropped nearly 4 percent. Investors have been nervous about both countries, which rely heavily on foreign investors to plug their gaping current account deficits.
“These dislocations demonstrate the impact of unwinding QE on market structures and it means that the truly more vulnerable markets out there need to watch their back, so to speak,” said Koon Chow at UBP.
GRAPHIC: Lira, Rand vs Yen – 
Japanese investors, who had cut back on their protection against currency moves, are also expected to take advantage of reduced hedging costs and protect their overseas portfolios from further losses — a move that market watchers say may be the catalyst for further gains.
“Even if the yen consolidates around these levels in the near term, we think it will continue to strengthen on balance in 2019,” said BNP Paribas’s Lynton-Brown, who expects the dollar to weaken to 100 yen by the end of the year.
For Jane Foley, a currency strategist at Rabobank, dollar/yen at 100 is an indicator of a U.S. economy in recession.

Why Nigeria’s oil production cost of $22 per barrel is no-cheer

Nigeria

The New Year day news of Africa’s largest producing country reducing its cost of producing oil leaves little to cheer as further investigation shows it’s much cheaper to produce crude oil in war torn Iraq, Saudi Arabia and Iran than in Nigeria.
At first glance it all seems like good news when group managing director of Nigerian National Petroleum Corporation (NNPC) Maikanti Baru said in 2018 Nigeria has been able to reduce production cost from $27 barrel to $22 barrel while listing milestones achieved by his team in 2018.
However at second glance, Nigeria’s cost of producing oil of $22 is still far higher than Iran and Iraq and OPEC’s kingpin Saudi Arabia.
According to data from energy industry consultant Rystad Energy, on average it cost Saudi Arabia less than $9 to produce a barrel of oil last year while other OPEC countries like Iran and Iraq can produce for around $10 per barrel.
Drilling down into what makes Saudi oil so cheap; Rystad Energy explained that Saudi Arabia only spends $3.50 in capital to pull a barrel of oil out of the ground. This amount includes money invested in drilling new wells as well as the associated equipment while production cost and administrative and transport cost stood at $3 and $2.49 respectively.
Luqman Agboola, head of energy and Infrastructure at Sofidam Capital said after making much money from crude oil in the past Nigeria got carried away with corruption, inefficiency and security challenges while other countries were consciously reducing cost of production.
“One major factor affecting Nigeria’s situation is the Niger Delta security condition which naturally increases cost of producing a barrel by nothing less than $5,” Agboola told BusinessDay by phone. “If we become very efficient Nigeria should be having a cost of production of between $12 and $15.”
Agboola explained that the second factor affecting cost of production is the Terrain.
“The likes of Iran, Saudi Arabia and Iraq produce in the desert which is naturally cheaper so they don’t need elaborate preparations to drill a well.”
An oil expert who pleaded anonymity told BusinessDay that the main problem facing Nigeria are issues concerning multiple taxes, government policies and insecurity. “Even Ghana and Tunisia are producing at $15 and $10 respectively.”
“Government needs to put the right fiscal policies in place and stop playing politics with the implementation just like the PIGB,” the expert told BusinessDay. “Until we get this out of the way we would not get a favourable pricing mechanism.”
Rystad Energy explained that Saudi Arabia also has low capital costs due to the fact that the country’s oil is located near the surface of the desert and pooled in vast fields, so it doesn’t need to invest that much in drawing it out of the ground. Contrast this with countries that have large offshore production bases like Nigeria, Norway and the United Kingdom, which incur significantly higher CAPEX costs of  around $13.76 to $22.67, respectively, due to the need to build large offshore production platforms.
Agboola admitted that it’s a bit complex when calculating cost of production because factors such as production per day or capacity to produce per day are always considered, while the size of a country’s oil reserves cannot also be taken into isolation.
“This is why we can easily see that a country with higher oil reserves have cheaper production costs,” Agboola said.
Rystad Energy looked at four data points when figuring out a nation’s average cash cost to produce a barrel of oil: Capital spending, production costs, administrative and transportation costs, and gross taxes.
Apart from Saudi Arabia, OPEC’s two top crude producers, Iraq and Iran have not only boosted oil production but have also run efficient systems to reduce cost of production, increase reserves and develop more oil wells while Nigeria continues to dillydally.
“The removal of US sanction on Iran in 2015 led to the acceleration in the rate of investments in the country’s oil and gas sector while Iraq has not experienced any major crisis in recent times as the relative peace in the country has led to the smooth running of the country’s oil and gas sector, thereby creating room for steady increase in the rate of investments in that sector,” Emmanuel Afimia, energy economist and CEO of Afimia Consulting Limited said.
In Iraq, the passing of a new constitution and the election of a democratic government, continued civil unrest, sectarian violence, together with a lack of political cohesion between the central and regional governments were major challenges the industry had to overcome to restore its output to pre-war levels and even higher.
Similarly, Iraq’s oil industry has demonstrated remarkable resilience in the face of destruction due to Gulf War II, which ended in 2003.
 Iraq had two roads to travel as it sought to reform its oil industry; nationalize and scare away foreign capital by self-financed development through the Iraqi National Oil Company (INOC), or reform to attract new funds into its oil and gas industry.
Iraq chose the second option based on an economic analysis report, in 2004, by the Iraqi Trade and Information Centre (ITIC), which recommended the need for the oil sector to be more efficient and attract foreign investment into an expansionary plan to boost oil output to five million bpd.
For Nigeria, the storyline is different. Africa’s biggest crude oil producer’s ambition seems bleak as the fiscal and regulatory regimes that would activate this ambition experienced a major setback because President Muhammadu Buhari withheld assent to the Petroleum Industry Governance Bill (PIGB).
Abayomi Fawehinmi an expert in a Lagos based oil firm said Nigeria’s inability to attract investment to its oil fields is obstructing growth and efficiency in the sector.

Zimbabwe govt warns businesses against ‘dollarising’ economy

Zimbabwe

Zimbabwe’s Industry and Commerce Minister Nqobizitha Mangaliso Ndlovu, has warned the business community in the country to stop the practice of ‘dollarising the economy’ in the wake of foreign currency shortages.

Ndlovu was reacting to a decision by Zimbabwe’s largest brewing company Delta Corporation which on Wednesday said that its beverages subsidiary will accept hard currency only from Jan. 4.

The African country adopted the use of foreign currencies, mainly the U.S. dollar, in 2009 in an effort to tame inflation, but a severe shortage of physical notes has left Zimbabweans watching the dollars in their bank accounts lose value compared with cash.

READ MORE: Mnangagwa says Zimbabwe to continue with multi currency regime

Delta’s argument

In a letter to customers of Delta Beverages posted on Twitter, the company said it did not have enough foreign currency, prompting foreign suppliers, some of which have not been paid for long periods, to cut off credit and new orders.

“Our business has been adversely affected by the prevailing shortages in hard currency, resulting in the company failing to meet your orders,” it said, adding that soft drinks had been out of stock for prolonged periods.

The decision means Delta, which is 40 percent owned by Anheuser-Busch Inbev, will no longer accept electronic dollars known as “Zollars” or a quasi-currency known as “bond notes” at its Delta Beverages subsidiary.

“To sustain its operations, the company advises wholesale and retail customers that its products will be charged in hard currency.”

Delta said it had invested $600 million in plant and equipment, vehicles and ancillary services since 2009 and that it needs to protect this investment.

“There is need for wider consultation on policy interventions to build consensus and market confidence among stakeholders to stabilise the macroeconomic environment,” it said in its letter.

Zimbabwe gov’t reacts

The move by Delta is the latest evidence of the strain the shortage of is having on businesses, with some shutting up shopand the government taking steps to ensure others remain viable.

Ndlovu said on Wednesday that Delta’s decision had breached ‘agreed principles’ and was taken in bad faith.

“We have noted with concern a proliferation in the number of companies and businesses engaging in preferential currency practices. This is not only against the spirit of fairness, but it is also an illegal practice. Government is very clear that this practice is unacceptable and has to stop forthwith and if not, the law will take it’s course.”

Most Zimbabweans earn income in bond notes or RTGS, and are likely to struggle to afford Delta’s products if they are charged in US Dollars.

The currency crunch has also caused shortages of basic goods, medicines and fuel, pushing inflation to a 10-year high in November.

The so-called bond notes had been introduced by Zimbabwe’s central bank to address the currency shortage, but the value of these has collapsed.