15 Takeaways from Cardoso, Edun’s Meeting with Foreign Investors in Washington DC

Nigeria’s Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, and Governor of Central Bank of Nigeria (CBN), Mr. Olayemi Cardoso, during the week met with groups of foreign investors on the sidelines of the ongoing IMF/World Bank Annual Meetings holding in Washington DC. The interactive session sparked notable enthusiasm among investors, who expressed readiness to explore opportunities across various sectors, while seeking insights and clarification on Nigeria’s recent reforms. Nume Ekeghe who is covering the meetings presents 15 key takeaways from a presentation by Nigeria’s economic managers during the engagement:

1)            Enhanced Monetary Policy Transmission

Nigeria’s economic managers told their audience that price stability was being restored gradually due to the tight monetary policy stance of the CBN. This is aimed at taming inflation, rebuild confidence and regain market credibility. They also stressed that the federal government has stopped quasi-fiscal intervention activities and that the central bank is adhering to statutory limits of deficit financing through ways and means advances to the government. The CBN has also adopted market -driven and orthodox frameworks to support price discovery in the financial markets.

2)  Building Investment Attractiveness

Edun and Cardoso also said the government has strengthened the frameworks for concessions and public-private partnerships, including working with the legislature to address legal and regulatory bottlenecks to unlock private investments in key sectors. They have also put in place measures to bolster defense and internal security. Additionally, they have equipped security forces and introduced new operational strategies to enhance law enforcement capabilities and safeguard lives, properties, and investments across the country.

3)  Fortifying Public Finance Buffers

Also, they revealed that the government is addressing low domestic revenue mobilisation through various measures, including strengthening tax administration, and improving tax compliance, particularly in corporate income tax (CIT). they also intend to progressively increase the Value Added Tax (VAT) rate from 7.5 per cent to 15 per cent.

Edun explained: “In terms of VAT, the commitment of President Bola Tinubu is that while implementing necessary, but wide-ranging reforms, the poorest and the most vulnerable would be protected. In terms of VAT.

The bills going through the National Assembly would raise VAT for luxury goods, while at the same time seek to exempt VAT for the essentials and what the poor and vulnerable can purchase. Those items would be singled out and exempted from VAT, while hitting VAT for luxury goods.”

4)            Enhancing Financial Sector Health

Nigeria’s economic managers told their audience who are mostly asset managers, investment bankers, and investors from prominent global financial institutions such as JP Morgan and Standard Chartered, among other global firms, that Nigeria is implementing and supervising prudential guidelines to ensure the stability and resilience of the financial sector. Also, that the CBN has increased the minimum capital requirements for banks and has fully adopting the Basel 3 capital framework to address vulnerabilities in the financial system and build a stable financial system capable of supporting the economy. In addition, the central bank is also phasing out regulatory forbearance and maintaining tight supervision to mitigate emerging risks.

5)  Engaging in Governance Best Practices

According to Cardoso and Edun, Nigeria has intensified efforts to enforce public disclosure measures for contracts, licences, permits, and revenue streams. In addition, the country also aim to pass laws facilitating public access to Public Officers’ Declarations. Technical Unit on Governance and Anti-Corruption Reforms (TUGAR) issues periodic reports on governance and anti-corruption frameworks, identifying areas for improvement and guiding reform efforts. The government also conducts audits of federal institutions to assess governance practices

 6) Strengthening the Social Safety Net

They policymakers also said Nigeria is presently re-prioritising expenditures to allocate more funds for social protection and other priority spending while tackling governance concerns and plugging leakages in existing social transfer mechanisms.

7)  Restoring Investor Confidence

The CBN governor told his audience, that, “confidence has returned to the market and there is also confidence by Nigerians in their currency. Clearly, a situation where interest rate has gone up, we expect that there would be more interest in local currency instruments.

“Something else that is important in these whole adjustments in the Nigerian economy is the fact that Nigerians would be more inclined to produce locally because it is a lot cheaper for them to do so, rather than depend on imported goods.”

8)    Targeting Improved Oil Production

Edun added that a key part of the government’s economic recovery strategy includes increasing oil production to two million barrels per day, a level Nigeria last achieved in 2015.

He explained: “There is a commitment to try and get to and the target is 2 million barrels a day. In 2015 or so, we were at 2.3 million barrels a day. So, it’s a very reachable target which the whole ecosystem, the government, and the oil sector, are committed to administering the process that has been improved and will allow speedier implementation of investments.”

9)   Reduction in Debt Service Cost

Edun also highlighted improvements in fiscal management, particularly in reducing Nigeria’s debt service cost.

“We’ve reduced debt servicing from nearly 100 per cent of revenues to about 60 per  cent in the first half of this year, though it remains high. However, by prioritising key areas, the budget deficit has decreased to 4.4 per cent of GDP, down from 6.1 per cent,” he explained.

The Finance Minister projected confidence in meeting the government’s four per cent deficit target by year-end, as part of a broader strategy to set Nigeria on a path of sustained and inclusive growth.

10)   Improvement in External Reserves

Nigeria’s foreign reserves surged to $40.2 billion in October 2024, up from $38.4 billion recorded in September, marking a significant boost in the country’s financial position. Cardoso revealed that Nigeria’s gross external reserves stood at $39.29 billion as at end of September 2024, an increase of 9.38 per cent from $35.92 billion as at the end of August 2024. This was due mainly to third party receipts, forex transactions and crude oil-related taxes. The gross external reserves position as at the end of September 2024 could provide 14.34 months of import cover for goods and services and 15.84 months of import cover for goods and services.

The ratio of reserves to short-term debt stood at 125.44 per cent, exceeding the threshold of 100 per cent and suggesting that the reserves could cover short-term external debt.

The increase in foreign reserves, Edun explained, is a direct result of the government’s decision to allow the market to determine the naira’s value instead of continuous Central Bank interventions. He noted that in the past, significant sums were spent monthly defending the naira, a practice that has now been curtailed to promote long-term economic stability. By letting the market dictate the exchange rate, Nigeria is avoiding excessive foreign exchange interventions while organically boosting reserves.

Edun said: “We’re allowing the market as much as possible to set the level for the naira, and we are building the buffers to improve that confidence and ensure that we have enough input cover.”

11) 2024 Budget Performance

That the country has recorded strong budgetary performance for 2024, despite some challenges.

Budget performance was N13.1 trillion, but actual performance stood at N12.6 trillion, resulting in a deficit of about N500 billion. However, the shortfall was just 3.6 per cent below the target, which shows that we are doing well.

12)     Balance of Payments

The country’s Current Account recorded a surplus of $5,142 million in the second quarter of 2024, relative to a $3,379 million surplus in first quarter of 2024. The Goods account surplus increased in second quarter 2024, relative to first quarter 2024. The increase in the surplus was driven by the depreciation of the naira, suppressing import of goods. The deficit in the Services account increased. Despite consistent services credits, a jump in debits from other business services led to the widening of the deficit. The Primary Income account deficit widened in second quarter 2024 as reinvested earnings by non-resident investors increased. The surplus in the Secondary Income account continues to be supported by the strong inflow of diaspora remittances. Remittances increased to $5,350 million in Q2 2024, up from $5,144 in the previous quarter and $4,899 million in Q4 2023

13)          NNPC’s Debt Repayment to Petrol Suppliers

Edun, announced that the Nigerian National Petroleum Company (NNPC) Limited has begun repaying its $6 billion debt to refined petrol suppliers. Edun expressed optimism about NNPC’s financing strategy, noting that:  “They have a route to paying down their payables, and I’m sure that in no time at all they will start. And from what I understand, they have even commenced the process of paying down their payables.

14)          Dangote Refinery as Game-changer

According to the Minister of Finance, the commencement of operation by Dangote Refinery and the ongoing rehabilitation of Port Harcourt, Warri, and Kaduna refineries would reduce import dependence, increase exports, and improve energy security.

15)          Road Ahead

The two economic managers stressed that despite headwinds, the government remains committed to the reform agenda. They noted that prioritising palliative measures to support the most vulnerable; improving sequencing of reforms; enhancing frameworks for fiscal and monetary policy coordination; raising non-oil revenue; strengthening business environment and investment climate as well as continued focus on tackling insecurity.