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Revenue Shortfall: FG Borrows N600bn in Six Months

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The Federal Government borrowed a total of N600bn between January and June this year to augment the shortfall in revenue caused by various challenges affecting oil and non-oil receipts.

The amount, which was borrowed from the domestic market, was contained in a presentation made by the Minister of Budget and National Planning, Senator Udo Udoma, to civil society groups on the proposed Medium Term Expenditure Framework 2017-2019.

The MTEF, which is expected to be submitted to the National Assembly in October, provides the basis for annual budget planning and consists of a macroeconomic framework that indicates fiscal targets, estimates, revenues and expenditure,  including government’s financial obligations in the medium term.

The document, prepared by the Ministry of Budget and National Planning, also sets out the underlying assumptions for these projections, provides an evaluation and analysis of the previous budget, and presents an overview of the consolidated debt and potential fiscal risks.

The N600bn borrowed in the first six months of this year, according to the document, is about 33 per cent of the N1.8tn approved borrowing in the 2016 budget.

The minister stated in the presentation that the 2016 budget performance was reflective of the low revenue output attributable to the global and domestic development.

For instance, Udoma said oil revenue fell significantly in the second quarter of this year compared to the first quarter as a result of increased pipeline vandalism and production shut-ins.

The minister stated, “Non-oil revenues declined compared with forecasts in the budget due to slow-down in economic activities and the acute shortage of foreign exchange.

“The shortfall was augmented by domestic borrowing amounting to N600bn, about 33 per cent of approved borrowing of N1.81tn.”

Since the beginning of this year, gross revenue into the Federation Account has been experiencing a huge decline owing to the shutdown of production for repairs of critical infrastructure.

For instance, there had been explosions at the Escravos oil export terminal, while force majeure was declared at the Brass terminal in January and February as a result of attacks on oil facilities.

The 2016 budget, which was signed by President Muhammadu Buhari on May 6 this year, had projected daily oil production output of 2.2 million barrels, with the budgeted oil benchmark price of $38 per barrel.

Based on the budget, the Federal Government had projected a total revenue of N3.86tn where oil-related revenues were expected to contribute N820bn.

In the same vein, non-oil revenues comprising Companies Income Tax, Value Added Tax, Customs and Excise duties and Federation Account levies are expected to contribute N1.45tn, while N1.51tn is projected to be earned as independent revenues from the Ministries, Departments and Agencies of government through strict compliance with the Fiscal Responsibility Act, 2007.

Speaking on the borrowing, financial analysts blamed the development on the inability of the country to effectively diversify its sources of revenue away from oil.

They said that with diversification, the government would be able to generate enough revenue to fund its operations.

Those who spoke on the issue in separate telephone interviews with our correspondent are a former Acting Managing Director, Unity Bank Plc, Mr. Muhammed Rislanudeen; and President, Institute of Fiscal Studies of Nigeria, Mr. Godwin Ighedosa.

Ighedosa said, “We have a high fiscal deficit, which can only be funded through borrowing. When you borrow for investment, it improves the position on your balance sheet; and when you borrow for consumption, it can cause problems for the economy as it will affect the level of confidence in the economy from investors, because they will assume we can’t manage our economy.

“We already have a debt overhang, and as it is, we are building that up and so there is a need to reduce the rate of borrowing.”

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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FG Has Paid Fuel marketers N74B in Seven Months — NMDPRA

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petrol

The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) on Wednesday disclosed that the federal government has paid oil marketers N74 billion as bridging claims in last seven months..

The agency said it was reacting to claims by the Independent Petroleum Marketers Association Nigeria (IPMAN), Suleja branch, that continuing fuel scarcity was caused by non-payment of bridging claims.

The agency said it paid N71.2 billion bridging claims and another N2.7 billion freight differentials to the marketers as of June 6.

In May, IPMAN said the government owed its members half a trillion naira being the cost of transporting petrol across the country.

However, at the time NMDPRA had claimed to have paid oil marketers bridging claims of about N59 billion in five months.

In recent months, fuel scarcity has worsened in Abuja and several other cities across the country.

Marketers had listed the high cost of buying petrol at the depots and the high cost of diesel to truck them as the major factors responsible for the recent queue.

On Monday, the government announced that the nation’s capital petroleum deliveries were up nearly 100 per cent after the government offered additional N10 freight reimbursements to marketers.

The statement by the NMDPRA reads: “The attention of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) has been drawn to allegations made by the Independent Petroleum Marketers Association Nigeria (IPMAN Suleja Branch) on product scarcity as a result of non-payment of bridging claims.

“The authority chief executive of the NMDPRA, at a meeting held on 17th May 2022 with IPMAN bridging payment was discussed extensively and the processes were explained and agreed upon by IPMAN.

“He assured IPMAN of NMDPRA’s willingness to continue making payments of outstanding claims to promote seamless operations.

“Pursuant to the meeting, the NMDPRA went ahead to make an additional payment of N10 billion in June and sought for an upward review of the freight rate which was approved by President Muhammadu Buhari and is currently being implemented.

“The Authority wishes to reiterate that bridging payment is an ongoing process which is carried out after due verification exercise by the Authority and Marketers.

“So far, the Authority paid N71,233,712,991 bridging claims and another N2,736,179,950.84 freight differentials to the Marketers as at 6th June 2022.

“A breakdown of payment made to Marketers is as follows: Major Marketers (MOMAN) received N9,958,777,487.24, IPMAN members were paid N42,301,923,616.96, NNPC Retails N6,661,459,118.61 while DAPPMAN members were paid N12,303,195,651.57, these translate to a total of N73,969,892,941.84.

“It is disheartening that despite these payments and increase of N10 bridging cost, which was approved by President Muhammadu Buhari two weeks ago, IPMAN could turn around to accuse the NMDPRA of insensitivity,” the statement said.

It said NMDPRA remains committed to ensuring a safe, efficient, and effective conduct of midstream and downstream petroleum operations.

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Nigeria-Cameroon Link Bridge up for Inauguration this June – Fashola

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The Minister of Works and Housing, Babatunde Fashola (SAN), has stated that the Nigeria-Cameroon link bridge will be inaugurated this June.

Speaking at the 16th inter-ministerial meeting of the group in Abuja, Fashola who doubles as the Chairman of the five regional ministerial steering committees, explained that the largely funded bridge by the African Development Bank (AfDB) is completed and in hopes that ECOWAS would deliver support for the inauguration.

“We have completed a new link bridge that links Nigeria to Cameroon, and it was funded largely by the AfDB and we are hoping that the ECOWAS commission will give us the necessary support to ensure the formal opening of that bridge sometime in the month of June,” he said.

The commitment to the piece of infrastructure, according to the minister, is to transform the road network into a first-class six-lane motorway, emphasizing that while speed is important, quality must not be lost.

“We’re trying to deliver a better life for five countries and over 40 million people who use that corridor, almost on a daily basis.

“The future is bright, this is an important investment for the people of Africa to achieve the objective of the Africa Union (AU) to create a trans-African highway,” he stated.

Lydie Ehouman, AfDB’s Chief Transport Economist and Project Task Manager, also spoke at the event, stating that the bank had been able to acquire an additional €3.5 million for the road project.

Investors King gathered that the total sum available for the initial financing of the project’s strategic research has increased to $41 million.

“The agreement for the on-lending of this additional grant by the bank to ECOWAS is currently being finalised. Thus, in addition to its substantial contribution of $25 million, the bank will have mobilised €12.63 million in the form of a grant from the European Union.

“This brings the total amount available for the financing of this highly strategic study to the equivalent of about US$ 41 million,” she stated.

She did, however, point out that specialists in member countries’ claims of delays were untrue, because the arrangement was that labor should persist while any differences were aired and rectified.

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UNDP, DPGA to Promote Global Digital Goods 

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digital

The United Nations Development Programme (UNDP), Digital Public Goods Alliance (DPGA), the government of Norway, and Sierra Leone have agreed to promote inclusive digital public infrastructure in countries across the world.  

On Wednesday, Investors King gathered that world leaders, development organisations and philanthropic funders are set to invest in a “large-scale technology sharing, funding, and commitment to supporting the international cooperation agenda.”

In its published statement, UNDP stated that the agreement is to improve governance frameworks, which are critical to building a resilient future for countries. 

At the event, global leaders committed their efforts to funding and the implementation of digital public infrastructure through a newly established Digital Public Goods Charter (DPG), which serves as a framework to increase international cooperation on this plan.

With its DPG Charter, co-led by the DPGA and the Digital Impact Alliance (DIAL), the UNDP outlines a clear vision for a coordinated global approach to building a safe, trusted, and inclusive digital public infrastructure using DPGs. 

“Doing so can enable countries – regardless of income levels – to transform services and service delivery for people and communities everywhere,” the statement read. 

The DPG Charter, and the commitments made by global leaders, are especially relevant given the devastating socio-economic impacts of the COVID-19 pandemic and mounting climate disruption. 

These challenges, compounded with the unprecedented food, energy, and financial crisis added by the war in Ukraine, are creating an urgent need for global action. 

Digital Public Goods are open-source solutions used to build digital public infrastructure (DPI), enabling countries to provide better services and foster inclusive economic growth. 

While the Digital Public Infrastructure (DPI) involves digital systems like cash transfers, digital identification, and data exchange that enable the adequate provision of essential society-wide functions. It also allows the building of resilient crisis recovery. 

 

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