Macroeconomic Report & Economic Updates

Based on the recently released Corruption Perception Index (CPI) ¹, Nigeria is still perceived to be among the most corrupt nations, with a ranking of 149 out of the 180 countries assessed – a higher ranking is indicative of higher corruption. The CPI is based on a scale of 0 to 100; with zero representing extreme corruption and 100 indicating least level of corruption. Nigeria’s CPI score reduced slightly from 26 in 2019 to 25 in 2020², while its ranking worsened, falling from 146 to 149. The increase in perceived corruption may be partly attributable to the reports by civil society organisations on the hoarding and mis-management of COVID-19 palliatives and related supplies. It is therefore imperative that anti-corruption policies are enforced to boost the public trust; as this can affect domestic and foreign direct investments.

Data from the National Bureau of Statistics (NBS) shows an overall increase in tax revenues for 2020. Total revenue generated from Value Added Tax (VAT)¹ and Company Income Tax (CIT)² stood at approximately N2.94trillion, representing a 5% increase from N2.81trillion reported in prior year. However, although the net revenue showed growth, only VAT receipts increased year-on-year by 29%, whereas, CIT revenue decreased by 13%. The professional services sector was the biggest contributor to both VAT and CIT receipts, while mining and textile/garment industry generated the least VAT and CIT revenues respectively. Considering the economic circumstances during 2020, the slight growth in tax revenues is a positive indicator. It is important for tax policymakers to continue monitoring the effectiveness and impact of ongoing tax reforms on the economy.

According to data from the National Bureau of Statistics (NBS), a 0.28% month-on-month increase in the average price of Automotive Gas Oil (diesel) was recorded as the price in December 2020 increased to N224.37 from N223.74 in November 2020¹. Similarly, the average price for the refilling of a 5kg cylinder for Liquefied Petroleum Gas (Cooking Gas) has increased by 0.12% month-on-month to N1949.75 in December 2020 from N1947.47 in the previous month². The results were similar regarding the refilling of a 12.5kg cylinder with a 1.75% month-on-month increase. Contrarily, the average price paid by consumers for premium motor spirit (petrol) decreased month-on-month by -0.94% to N165.70 from N167.27 in the previous month³. Overall, in month of December 2020, gas prices rose most likely as a result of rising crude oil prices in the international market. Low-income households are less likely to be affected given that their consumption of these products is relatively lower than middle- and high-income households. However, the general decline in income due to the effect of the COVID-19 pandemic makes the increment nonetheless an economic burden.

Discussions are underway between the Nigerian National Petroleum Corporation (NNPC) and a range of foreign and Nigerian trading houses with the NNPC aiming to raise $1 billion oil prepayment towards the revamping of the Port Harcourt refinery.¹ The funds acquired are expected to be repaid through the delivery of refined products over a span of seven years. In 2019, the refineries of Nigeria lost approximately N167 billion ($439.47 million) leading to the shutting down of the refineries in April 2020 for rehabilitation. If the project is successful, Nigeria’s fuel import bill will be reduced. Additionally, it would be the country’s second oil-backed financing since the onset of the COVID-19 pandemic. Currently, a key financing source is the African Export-Import (Afrexim) Bank. Some foreign banks have stated their aversions to participating or contributing to the project due to their consideration of Nigeria as a high-risk country and low credit availability. The use of sales of refined products to finance the rehabilitation of the refinery provides the appropriate incentive for successfully completing the project. However, the use of public-private partnerships in managing the refinery should be considered in order to enhance efficiency and effectiveness.

Discussions are underway between the Nigerian National Petroleum Corporation (NNPC) and a range of foreign and Nigerian trading houses with the NNPC aiming to raise $1 billion oil prepayment towards the revamping of the Port Harcourt refinery.¹ The funds acquired are expected to be repaid through the delivery of refined products over a span of seven years. In 2019, the refineries of Nigeria lost approximately N167 billion ($439.47 million) leading to the shutting down of the refineries in April 2020 for rehabilitation. If the project is successful, Nigeria’s fuel import bill will be reduced. Additionally, it would be the country’s second oil-backed financing since the onset of the COVID-19 pandemic. Currently, a key financing source is the African Export-Import (Afrexim) Bank. Some foreign banks have stated their aversions to participating or contributing to the project due to their consideration of Nigeria as a high-risk country and low credit availability. The use of sales of refined products to finance the rehabilitation of the refinery provides the appropriate incentive for successfully completing the project. However, the use of public-private partnerships in managing the refinery should be considered in order to enhance efficiency and effectiveness.