The United States (U.S.) Ambassador to Nigeria, Mr Stuart Symington has attributed poor social infrastructure development in Nigeria to the weak system of tax collection in the Country.
Symington made this known on Tuesday, while speaking at the 10th anniversary colloquium of the Nigerian Development Finance Forum, organised by Financial Nigeria Magazine in Abuja.
He blamed the Federal Government’s inability to discontinue subsidy and allow market forces determine electricity tariffs for Nigeria poor social service delivery system.
The U.S. ambassador said that the inability of government to eliminate subsidy on petroleum products and failure to hands off the fixing of electricity tariffs was hampering the provision of critical social infrastructure in the country.
He also attributed the low investment in the social services sector by government at all levels on low revenue from taxes and inefficient tax system.
According to him, the decision of the country to continue to transfer public funds to keep petrol pump price at lower levels, as well as electricity rates below cost-recovery levels, means that less funds were available to fund education, healthcare and other social sector services.
“One proximate cause of poor health, education and nutrition standards is low public expenditures. This in turn is related to very low public revenues due in fact to low tax rates and weak systems for tax collections.
“Low social spending is also as a result of transfers from government to petroleum and power sectors because fuel and electricity tariffs are below cost recovery levels.
“Fiscal, trade and other micro-economic policies tend to act as breaks on private sector initiatives on economic growth. Weak governance due to inadequate capacities or lacks of checks and balances also slows social and economic development.” He said
Symington was represented by Country Mission Director of the US Agency for International Development, USAID, Mr Stephen Haykin.
In his remarks, the former Minister of State for Health, Dr Muhammed Pate, berated Nigeria’s political class for failing to make decisions that would attract the much-needed investments in critical sectors of the economy.
According to him, the country’s leaders have consistently made choices that were not in the interest of the country but themselves.
He added that these choices had denied the country investments in the education and growth of its children.
Pate noted that Nigeria had wasted financial resources on frivolous expenditures adding that much had not been done to change the situation.
He said: “After extracting almost a trillion dollars’ worth of oil since our national independence, we have a situation where poverty is going on.
“We have effectively squandered an opportunity to utilise the natural resources that we obtain purely by chance, not by hard work.
“Instead of investing to uplift our people’s lives, our political elites by commission or omission chose the path of short-term comfort and purchase of loyalty through economically unwise or corruption riddled national expenditure at the expense of economically sound investments in both human and physical aspects to transform our nations.”
He further stated that a country seeking to realise its demographic dividends, must first undergo demographic transition, meaning a shift from high fertility and high child mortality to relatively lower fertility and child mortality.
“Nigeria’s demographic transition is slow, variable and achieving the dividend from the population is not guaranteed. Childhood development is going in the wrong direction particularly in northern Nigeria.
“Some areas in the security challenged north east, stunting is more than 60 per cent among children under-five while over more than 40 per cent of Nigeria’s children under-five are stunted,” Pate added. (NAN)
Fast-track urbanization to spur growth, shelter Afrique urges African Countries
Shelter Afrique Head of Policy, Research and Partnerships Dr. Muhammad Gambo leading a panel discussion on financing Urban development at the 9th Africities Conference in Kisumu. With him are (from left to right) Dr. Kamal Ben Amara, Mayor of Bizerta, Tunisia; Hashting Chikoko Regional Director, Africa at C40 Cities; and Kevin Ouko, Director of Corporate Banking at Ecobank. (Photo: Supplied).
Pan- African housing and urban development financier, Shelter Afrique has urged African countries to fast-track urbanization to stimulate economic development across the continent.
Speaking at the 9th Africities Conference held in Kisumu, Kenya between 17-21 May, 2022 and attended by over 11,000 people, including 8,000 official delegates from across Africa and globally, Shelter Afrique’s Head of Policy, Research and Partnerships Dr. Muhammad Gambo said urbanization could play a major role in economic and social progress, if well managed.
“No country has grown to middle income without industrializing and urbanizing and none has grown to high income without vibrant cities. China, for instance, is widely held up as an example of how urbanization can fuel industrialization and transform living standards. This is why we strongly believe African countries should put more emphasis on effective urbanization if they intend to lift their people out of mass poverty, and doing so, fast,” Dr. Gambo said.
A report by the Organization for Economic Co-operation and Development (OECD), Africa’s Urbanisation Dynamics 2020: Africapolis, Mapping a News Urban Geography”, the pace of urbanization and urban population growth in Africa has changed significantly across the continent generally as well as within its various regions.
According to the report, Africa’s urbanization rate will continue to grow among the fastest of the world regions in the coming years as its population grows, which is expected to double by the year 2050.
“We urge policymakers across the continent to enact policies that will encourage urban growth modeled around economic development and poverty eradication,” Dr. Gambo said.
Dr. Gambo, however, noted that funding urban growth still remains a formidable challenge for many countries, but believes it’s achievable.
“Shelter Afrique recently completed a debut ₦46 billion (US$110.7 million) Series 1 Fixed Rate Senior Unsecured Bond Issuance in Nigeria’s capital market under its ₦200 billion (US$481.3 million) bond issuance programme for housing and urban development in Nigeria. This issue was 60.7% oversubscribed, meaning there is an appetite for such bonds, not only in Nigeria but also in other countries like Kenya, South Africa, Morocco, etc. What African countries need is the know-how to create financial ecosystems that can support the mobilization of municipal and subnational finances for urban infrastructure development,” Dr Gambo said.
The African Development Bank estimates that the continent’s infrastructure financing needs will be as much as US$170 billion a year by 2025, with an estimated gap of around US$100 billion a year.
Africities is a Pan Africa conference that is convened by the United Cities and Local Governments of Africa’s (UCLG-A) and brings together the leadership of cities and sub-national governments and their associations for the advancement of decentralization and local governance aimed at improving the living standards of the citizens. This year’s conference discussed the role of Intermediary Cities of Africa in the Implementation of Agenda 2030 of the United Nations and the African Union Agenda 2063.
Fuel Scarcity Menace In Nigeria
Fuel scarcity has been noted to be one of the maladies of the Nigerian economy (Sunday Akpan, 2020). Nigerian economy with a rising population of about 200 million, was formally a predominant Agricultural based economy before the advent or discovery of crude oil in Oloibiri River state in 1958. Shell started exploration earlier before a merger occurred between two major companies Shell and BP. They both had a 50/50 joint venture share in 1960 which led to the establishment of the Nigerian Petroleum Refinery Company (NPRC). This pact between these companies gave birth to the first oil refinery in Rivers.
Currently, there are four oil refineries in Nigeria (Warri, Port-Hacourt, Kaduna) but they are not functional. The Nigeria crude oil is refined majorly in the United States of America, Netherlands, United Kingdom, France, and Belgium. It is also Interesting to note that Nigeria is a frontline member of the Organization of Petroleum Exporting Countries (OPEC), with 2.7 barrels of crude oil production and 445000 barrels refining capacity per day. It is said to be the largest oil producing country in Africa and the 6th in the world (Oduntan, 2015). Nigeria appears to be the only oil-producing country globally where fuel availability is a major challenge over the years (Ugwu, 2016).
Fuel Scarcity could be described as the non-availability of fuel in time of need at the approved price. In other words, fuel scarcity is not limited to the absence of fuel at the required time, but also the availability of it at a higher rate (Nnabuife etal, 2016). Fuel Scarcity usually happens when the government or petroleum marketers wants to increase the pump price so there is false scarcity then the hike is effected. Nigeria has witnessed different periods of fuel scarcity from Gen Yakubu Gowon regime in (1966-1975), it was increased from 6k to 8.45k, in 1993. During Gen Sani Abacha regime in 1996, he increased the pump price three times from N5-11N at this period the refineries where not functional and were left with the option to export our crude oil.
President Obasanjo increased pump price seven times from N20 to N75. It is important to note that only late president Shehu Musa Yar’adua that did not increase fuel price during his tenure. Dr Jonathan regime had relatively stable pump price from N75 to N147 this happened 1st January 2012 when the then president removed subsidy and the whole nation revolted before it was brought down to N97 then to N87. President Muhammadu Buhari regime has seen fuel price fluctuating from N87 to 147 now current pump price at N165 at filling stations and to as high as 500 buying from black market.
Fuel scarcity is caused by different factors which are not limited to the following; Removal of subsidy as seen during the President Jonathan Ebele Goodluck administration. The then government wanted to use the subsidy money for revitalization of the economy, this was not welcomed by the Nigerian Masses. In 2014 the government decided to pursue the initiative of subsidy removal by lowering number of licenses to independent marketers and importers. But this was unsuccessful and made fuel in circulation to be reduced causing unnecessary fuel scarcity
In 2017 The scarcity was caused by rumors of increased pump prices. This rumor pushed people into panic buying. The Independent Petroleum Marketers Association of Nigeria (IPMAN) during that period withdrew their service, this worsened the situation of fuel scarcity.
The current fuel scarcity started sometimes in January in Lagos when adulterated fuel was noticed from the petrol imported from Europe. Where particles of methanol was found in about four petrol cargoes, this was only noticed when motorists who purchased fuel had problems with their cars had to report the development. The GMD OF NNPC ordered an investigation into the course of the problem.
The report of the investigation by the quality inspection officers had it that there was presence of emulsion particles in four cargoes owned by MRS, Oando, Duke Oil, Emandeb/Hyde/AY/Maikifi/Brittania-U Consortium. Since this report was established the petroleum companies have refuted such claims. The GMD of NNPC Ltd and everyone who failed to do their work has not been sanctioned and it has been over a month.
Nigerians are suffering the inaction of the Government, the multiplier effects has negatively affected manpower productivity, people spend long hours on fuel queue hoping to get PMS in other to get along with their day, transportation has sky rocked to the highest minimum. The current double digit inflation is not helping matters, food prices has gone up. There is epileptic power supply and the major option of alternative power supply used by both private individuals.
Companies and government(generator) is mostly not a better a choice due to scarcity and hike in prices. You get to some offices and you see people sleeping or telling you there is no network due to power outage. Hundreds of cars have been damaged because of the purchase of black market fuel mixed with water or any other substance for profit making, this black market fuels are sold exorbitantly. Nigerians indeed have a long span of patience, but our patience should not be taken for granted.
If it were a proper democratic government, solutions should have been implemented, persons involved should have been sacked or suspended but absolutely nothing has been done, meaning this will definitely repeat itself in the near future since there is no consequence for this action.
Written By Ojamaliya Abuh, An Economist.
Deal making slows across sub-Saharan Africa, but post-pandemic opportunities look interesting
Deal making activity in sub-Saharan Africa (SSA) dropped in the second half of 2020 (H2 2020), when compared to the second half of 2019 (H2 2019) and year-on-year, deals were also down in both volume and value compared to 2019. As the continent gears up for post-pandemic recovery in 2021, the opportunities presented by free trade across the continent, foreign investment opportunities due to new partnerships and trade relationships, as well as the post-pandemic focus on technology, healthcare and renewable energy, will be key factors in attracting valuable mergers and acquisition (M&A) activity to the region.
Further, South Africa’s deal volume and value both dropped in 2020, with the industrials and healthcare sector attracting the biggest investments. Ghana stood out as a country that attracted more and higher value M&A deals in 2020 than it did in 2019, with China being the primary inbound investor in the country. And Kenya recorded a good increase in deal value for 2020, although volume decreased, with the financial sector being the primary target for inbound investors.
According to Baker McKenzie’s analysis of Refinitiv data, M&A transactions dropped in SSA in H2 2020, down 4% compared to H2 2019, with 329 deals in the period. Deal value fell by 17% to USD8.9 billion in the second half of 2020, compared to the same period in 2019. For the full year 2020, transactions dropped by 8%, with 625 deals in 2020, and deal value dropped by 33%, with deals valued at USD17.4 billion in total for 2020.
Cross-border activity in SSA remained much the same in the second half of 2020, with 210 deals in H2 2020 compared to 209 in H2 2019. This was due to an uptick in outbound interregional deals, which were up 28% year-on-year. The total value of cross-border M&A deals in the second half of 2020, however, dropped by 21% to USD6.5 billion when compared to H2 2019. For the full year 2020 (FY 2020), the number of cross-border deals dropped by 8% and deal value by 27% compared to 2019. United States-based Mylan NV’s acquisition of the Aspen Pharmacare-Thrombosis business in South Africa for USD759 million was the biggest cross-border deal in the period.
Companies in the materials sector remained the top target for investors in sub-Saharan Africa, with 29 deals in H2 2020, though the biggest value deals came from the energy and power sector, with deals amounting to USD1.7 billion in H2 2020.
The United Kingdom was the most active investor in the SSA region for the second straight year, with 29 deals announced in the second half of 2020. There were also 29 deals from the UK for the full year 2020.
For outbound transactions from SSA, the primary target companies for African investors were in the industrial sector, which announced seven deals for H2 2020 and 17 in total for the full year. The high technology sector announced 12 deals in H2 2020, and 17 deals altogether in FY 2020. Further, India was the primary target for African outbound investors in the region, with 11 deals in H2 2020 and 20 for the full year 2020.
Wildu du Plessis, Head of Africa for Baker McKenzie, noted, “While deal making has slowed across Africa, all is not lost and there are still plenty of opportunities to benefit from good deals on the continent. For the next while, we believe that deal activity across Africa in general will mostly be in the form of take-private transactions, distressed M&A opportunities, restructurings, disposals; and corporates looking for investment opportunities in offshore markets.
“Usually viable businesses are experiencing continued challenges due to the pandemic, leading them to turn to M&A as a way to raise funds. However, the lack of available capital and acquisition finance, as well as the difficulty in pricing deals in an uncertain market, are proving to be big issues for investors and this is slowing down the pace of deal making. For those who have capital, there are plenty of bargains to be had in Africa in the next few years, particularly in those sectors that have been badly affected by the pandemic, as well as in those industries where demand has dramatically increased,” he notes.
“Sectors in SSA that have clearly flourished during the pandemic include healthcare, technology media and telecommunications (TMT) and renewable energy, with the materials and the financial sectors also attracting interest. Industries such as aviation, retail, oil and gas, and tourism/hospitality will take longer to recover and are more likely to result in distressed M&A activity,” du Plessis says.
Du Plessis says that the good news is that the start of trading for numerous member states of the African Continental Free Trade Area (AfCFTA) is expected to provide a huge boost in investment in post-pandemic Africa. The AfCFTA has done a great deal to bolster investor interest in the region and dealmakers are taking notice of the agreement’s first movers. After Brexit, big African investors in the United Kingdom and countries in the European Union will continue to target African sectors, hoping to capitalise on new economic partnership agreements, and the launch of free trade in Africa. Investors from the United States will also continue to be strong M&A players in key African countries, with a Biden administration expected to further encourage investment and trade between the US and African countries.
“We can also expect to see heightened scrutiny of environmental, social and governance issues, with companies that have sound ESG strategies leading the pack in terms of investment and growth on the continent.”
M&A activity in South Africa decreased as a result of the COVID-19 pandemic. The number of transactions dropped by 6% to 186 deals in H2 2020, and the value of the deals shrunk by 36%, down to USD4.9 billion from H2 2019. The full year 2020 activity was down 6% to 337 deals, while deal value fell by 46% year-on-year to USD8.5 billion. Monthly figures rebounded in H2 2020 and were more comparable to those in 2019.
Cross-border transactions dropped 2% year-on-year to 164, with deal value dropping by 47% to USD4.3 billion. The industrial sector was the primary target for inbound deals with 14 transactions in 2020, up 133% year-on-year. However, these deals were small in value, yielding a total for 2020 of USD37 million. The largest inbound deal completed in 2020 was in the healthcare sector, with Aspen Pharmacare-Thrombosis acquired by Mylan NV (US) for USD759 million.
The United Kingdom remained one of the primary investors for South African companies, with 25 deals, up 25% year-on-year. However, the biggest deals were brought in by US investors, with total deal value amounting to USD871 million. This was largely driven by the Aspen Pharmacare-Thrombosis acquisition.
Morne van der Merwe, Managing Partner and Head of the Corporate M&A Practice at Baker McKenzie, says, “The pandemic has clearly affected both the volume and value of deals announced in the country in 2020. However, South Africa remains attractive to foreign investors who have long considered the country a key gateway into Africa, even more so now that AfCFTA trading has begun, and the country has been singled out as one of the early beneficiaries of intra-African free trade.
“South Africa’s infrastructure, automotive, healthcare and renewable energy sectors have seen large investments in recent years, and this looks set to continue, despite short-term pandemic lows. Government policy has focused on boosting investor interest in these sectors and the country’s special economic zones (SEZs) have been successful in facilitating foreign investment inflows. SEZs are areas in the country that are set aside for specific economic activities. For example the Tshwane Automotive SEZ was launched to attract automotive component manufacturing companies and related services, boost investment in the sector and support black economic empowerment initiatives.
“However, the uncertainty in the country with regards to onerous policy and legislation, junk status announcements by rating agencies, currency volatility, social unrest, electricity and water challenges, skills shortages, the performance of state-owned enterprises, the security of property rights, and serious governance issues in both the public and private sector, continues to make investors nervous.
“To address these challenges, the South African government announced its Economic Reconstruction and Recovery plan in 2020, which outlined deliverables such as energy security, job creation and a trillion rand infrastructure plan. The National Economic Development and Labour Council (Nedlac) also outlined its Plan of Action last year and provided more detail on the infrastructure and energy plan, the creation of a more enabling regulatory framework and a commitment to fighting corruption.
“Despite recent challenges, foreign investors in the UK, Europe and the US have long been valuable M&A investors in South Africa, and this is likely to be further boosted by South Africa being able to maximise the benefits of AfCFTA, due to strong connections across the continent and well-established manufacturing base,” adds van der Merwe.
Ethiopia recorded eight M&A deals in 2020, totaling USD1 million. Of the eight deals in 2020, two of them happened during the second half of the year. The majority of the deals were inbound and cross-border in nature, with seven deals in total in 2020, six of which were announced during the first half of 2020. The country did not announce any outbound transactions in 2020.
The retail sector has the highest number of inbound transactions in Ethiopia, two in all. Eritrea made most investments into the country, with two transactions in 2020.Tigray Ethiopia’s acquisition by Yanchang Petroleum of Hong Kong for USD1 million was the sole transaction with a disclosed deal value.
“Deal making in Ethiopia slowed due to the pandemic in 2020, exacerbated by foreign exchange shortages, electricity supply issues and security concerns, among other things. The country’s industrial parks have attracted the interest of foreign investors and look set to assist the country in its post-pandemic recovery. The parks are providing a boost to Ethiopia’s manufacturing sector and will assist in the creation of jobs,” says du Plessis.
Ghana exhibited a solid M&A performance, despite the slow pace of dealmaking in H1 2020. It recorded 10 deals in H2 2020, representing 100% growth from H1 2020, and 14 deals in total for the full year, reflecting a growth of 17% year-on-year. Total deal value soared by 11607% to USD818 million and 3369% to USD832 million in the second half of 2020 and the full year, respectively.
Cross-border transactions contributed a huge portion of M&A activity in Ghana, recording a total deal value of USD793 million for both H2 2020 (seven deals) and the full year 2020 (nine deals).
The materials sector was the top target for inbound and outbound deals in H2 2020 and FY 2020. China was the primary investor in the country, with two inbound deals worth USD214 million for both H2 and FY 2020. For outbound transactions, Australia was the key target with two deals totaling USD 440 million, and one transaction worth USD439 million in H2 and FY 2020, respectively.
China’s acquisition of the Bibiani Gold Mining Project via Chifeng Jilong Gold Mining Co for USD 109 million was the largest inbound deal in H2 and FY 2020. Conversely, Engineers & Planners Co Ltd’s acquisition of Cardinal Resources Ltd in Australia for USD 439 million was the top outbound transaction for H2 and FY 2020.
“Ghana, despite some ups and downs, appears to be getting it right in terms of striking the right balance between encouraging investment and protecting the rights of the country and its people. It has also been singled out as one of the countries that is ready to benefit early on from AfCFTA. This is due to existing favourable conditions in the country, such as having an open economy, good infrastructure, a supportive business environment and the ability to quickly ramp up its intracontinental exports. All this bodes well for Ghana’s future economic position in Africa,” says du Plessis.
Deal making in Kenya dropped 28% with only 18 deals in H2 2020, but deal value increased by 224% to USD467 million. This was mainly due to Network International Holding Plc’s USD 288 million acquisition of Direct Pay Online Ltd. Activity for the full year 2020 was down 28% in volume terms, but value increased by 52% year-on-year to USD722 million. Monthly figures seem to have peaked in July with eight transactions and tailed off over the rest of the year.
France was the top M&A partner for Kenya, with five inbound deals from this country, up 25% year-on-year. Deals from France into Kenya were worth USD36 million for FY20, up 24% year-on-year. The UK had the highest deal value for inbound transactions due to the Direct Pay Online acquisition. Volume-wise, the financial sector was the primary focus, with seven inbound deals and three outbound transactions. For inbound value, deals in the financial sector increased to USD435 million, up an incredible 1697% year-on-year.
The Deal Drivers Africa Report, published by Mergermarket, ranked Kenya among Africa’s most sought-after countries for M&A transactions. Before the pandemic, M&A activity in the East Africa region had increased significantly, with Kenyan deals dominating the market. The East African regional economy (in which Kenya has the largest economy) continues to be a key driver for sub-Saharan Africa’s growth going forward.
“Kenya has long been considered East Africa’s investment hub, attracting some high-value M&A deals in the last few years. However, the country’s post-pandemic economy will take some time to reach previous levels. The country’s TMT sector, which has a well-developed market for mobile money services, and its bustling financial sector, are the ones to watch as the country gears up for its post-pandemic recovery,” says du Plessis.
In Mozambique, deal making grew by a few deals, although the number overall was limited. There were six reported deals in H2 2020 compared with only one in H1 2019. The full year total for 2020 was 12 compared to four deals in 2019.Transactions in Mozambique were mostly inbound cross-border deals. There were six such deals in H2 2020, and 11 for the full year.
The real estate sector was the primary target for investors into Mozambique in H2 2020, with two deals announced, though for the full year, the materials sector was the most targeted, with four deals in total. The energy sector in Mozambique was the most prolific sector in terms of deal value, with USD145 million in deals announced in H2 2020. This is mainly due to the acquisition of Cetral Termica de Ressano Garcia by the UK’s Actis LLP, for the same amount.
Mauritius and Canada were the top two investors in Mozambique, with three deals each in 2020, although Canada did not make any acquisitions during the second half of the year. Two out of the three deals from Mauritius were announced in H2 2020. Mozambique announced no outbound transactions in 2020.
“Mozambique is one of the world’s largest holders of liquified natural gas, and its energy sector has been attracting global interest for some time. We expect interest in this sector to increase in future years, and possibly act as a catalyst to boost much-needed investment in other sectors in the country going forward,” notes du Plessis.
M&A activity in Nigeria in H2 2020 dropped by 25% to 24 deals compared to H2 2019.Tthe size of the deals shrunk by 68% down to just USD279 million. However, full year 2020 activity was up by 4% to 52 deals compared with 2019, but deal value was 42% lower year on year at USD 716 million.
Cross-border transactions dropped 8% year on year in 2020 to 33 deals, with deal value dropping by 36% to USD552 million. Domestic deals increased in 2020 by 36%, however, the value of the deals dropped by 57. This indicates a focus on smaller deals in the country in 2020.
The financial sector remained the primary target for both for inbound and outbound deals, with five and three deals respectively in 2020. Lagos, the capital of Nigeria, was cited in May 2020 as one of four cities in Africa to be emerging as FinTech hubs by The FinTech Times. The megacity of over 20 million inhabitants is home to the nation’s largest financial institutions such as First Bank of Nigeria (FBN), Access Bank, Ecobank and First City Monument Bank (FCMB) as well as international banks such as Citibank.
South Africa served as the primary investor for Nigerian companies with six deals in 2020. Multichoice Group Ltd.’s USD 83 million acquisition of Betking was the biggest deal in the country.
Du Plessis says, “The Nigerian economy was already impacted quite severely by the disruption in oil markets in recent years, and COVID-19 added extensive damage to the economy. The fintech and renewable energy sectors, however, look set to provide much needed investment impetus for economic recovery and the country has also stated it plans to boost its manufacturing capacity, which will enable it to take further advantage of free trade under AfCFTA.”