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Nigeria’s Economic Crisis May Spill to W’Africa – IMF

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  • Nigeria’s Economic Crisis May Spill to West Africa 

The International Monetary Fund has warned that the current economic crisis in Nigeria may spill over to the rest of West Africa with negative consequences.

It also raised the alarm that Nigeria was spending too much of her revenue to service debts, noting that this was not sustainable.

The Assistant Director and Head of Fiscal Policy and Surveillance Division, Fiscal Affairs Department, IMF, Catherine Pattillo; and the Director, Fiscal Affairs Department, IMF, Vitor Gaspar, said this on Wednesday at a press conference on the IMF Fiscal Monitoring Report as part of the World Bank/IMF Annual Meetings in Washington DC, United States.

They insisted that the fact that about 45 per cent of the Federal Government’s revenue was being paid as interest on the nation’s debt was a worrying development.

Pattillo said, “The slump in oil production and slow growth have created challenges for Nigeria. But one statistic that is quite striking to me is that the debt profile is weakening and the interest account payment is more than 45 per cent of the Federal Government’s revenue. The priority is a big challenge.

“On the fiscal side, the important priority should be in safeguarding fiscal sustainability, which means, importantly to increase non-oil revenues and implement an independent price-setting mechanism that minimises fuel subsidy. So, these are two priorities, while also of course, improving public service delivery so that citizens can see the benefits of good governance and services financed by the government.

“So, these are the challenges. As you know, Nigeria is a very important economy in the African region and its success has positive spill over for the region, particularly in West Africa, and its challenges create difficulties for its neighbours.”

On his part, Gaspar said, “Message number one is that if you look at the global debt and deficit landscape in the world, you’ll see that the countries that have the highest public sector deficit are oil exporters; Nigeria is in debt and it is a country much hit by very low oil prices.

“That is a general message because it applies to oil exporters in general; the group of oil exporters have shared some characteristics.

“The most important point, in my view, is that for countries in sub-Saharan Africa to deliver on the SDGs, the key challenge is the building up of revenue mobilisation capacity through tax capacity building; that’s a key priority.”

He added, “These countries must improve their capacities to raise revenue, and why is that so? Because there is such need in term of public infrastructure, there is such need in terms of public education; there is such need in terms of health.

“For these group of countries, public finance/fiscal policy is part of the overall development strategy, and in that, tax capacity is a fundamental cornerstone.”

Meanwhile, the Minister of Finance, Mrs. Kemi Adeosun, has condemned multilateral funding agencies and Western nations for blocking an attempt by Nigeria to generate electricity from coal on the excuse that the project is not ‘green’.

She said this at the ongoing annual meetings of the World Bank/International Monetary Fund in Washington DC, United States of America on Wednesday.

According to her, it is hypocritical to block the project at a time Nigeria needs power most.

Although Adeosun did not give details of the project, she said it was blocked because of its likely contribution to carbon emission, but noted that most developed countries still relied on coal as a means of generating electricity.

The minister, who spoke on infrastructure funding for Africa, said, “I think there is a need for consistency around bankable projects that can attract investments. Yes, we do need macroeconomic stability. We also do need consistency of policies by the multilateral institutions and Western countries.

“Let me give you an example. In Nigeria, we have coal and there is power inadequacy. It doesn’t take a genius to work out what it will take to get coal-fired power. Yet, we are being blocked. I think there is some hypocrisy in that. We have an entire Western industrialisation that was built on coal-fired energy and that is the competitive advantage that has been used to develop Britain, where I grew up. Now, Africa wants to do it, and they are saying it’s not green, we can’t do it and that we should go and do solar and wind, which are the most expensive power projects in the world.

“Yes, we are going to have the narrative around infrastructure; we must invest in infrastructure, but we must also make sure the playing field is level. The West, after polluting the atmosphere for 100 years, and when Africa wants to explore its resources, they say no.

“Yes, we would come up with bankable projects and we would behave ourselves, but I think we also need to be firm.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Economy

Electricity Consumers Get 611,231 Meters Under MAP Scheme

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Electricity Consumers Get 611,231 Meters Under MAP Scheme

A total of 611,231 meters have been deployed as at January 31, 2021 under the Meter Asset Provider initiative since its full operation despite the COVID-19 pandemic and other extraneous factors, the Nigerian Electricity Regulatory Commission has said.

NERC disclosed this in a consultation paper on the review of the MAP Regulations.

The proposed review of the MAP scheme is coming nearly four months after the Federal Government launched a new initiative called National Mass Metering Programme aimed at distributing six million meters to consumers free of charge.

“The existence of a huge metering gap and the need to ensure successful implementation of the MYTO 2020 Service-Based Tariff resulted in the approval of the NMMP, a policy of the Federal Government anchored on the provision of long-term low interest financing to the Discos,” NERC said.

The commission had in March 2018 approved the MAP Regulations with the aim of fast-tracking the closure of the metering gap in the sector through the engagement of third-party investors (called meter asset providers) for the financing, procurement, supply, installation and maintenance of meters.

It set a target of providing meters to all customers within three years, and directed the Discos and the approved MAPs to commence the rollout of meters not later than May 1, 2019.

But in February 2020, NERC said several constraints, including changes in fiscal policy and the limited availability of long-term funding, had led to limited success in meter rollout.

NERC, in the consultation paper, highlighted three proposed options for metering implementation going forward.

The first option is to allow the implementation of both the NMMP and MAP metering frameworks to run concurrently; the second is to continue with the current MAP framework with meters procured under the NMMP supplied only through MAPs (by being off-takers from the local manufacturers/assemblers).

The third option is to wind down the MAP framework and allow the Discos to procure meters directly from local manufacturers/assemblers (or as procured by the World Bank), and enter into new contracts for the installation and maintenance of such meters.

“Customers who choose not to wait to receive meters based on the deployment schedule of the NMMP shall continue to have the option of making upfront payments for meters which will be installed within a maximum period of 10 working days,” NERC said.

The regulator said such customers would be refunded by the Discos through energy credits, adding that there would be no option for meter acquisition through the payment of a monthly meter service charge.

“Where meters have already been deployed under the meter service charge option, Discos shall make one-off repayment to affected customers and associated MAPs. Such meters shall be recognised in the rate base of the Discos,” it added.

NERC urged stakeholders to provide comments, objections, and representations on the proposed amendments within 21 days of the publication of the consultation paper.

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Nigeria’s Economy Moving in Right Direction but Slow – Amina Mohammed

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Nigeria’s Economy Moving in Right Direction but Slow – Amina Mohammed

Nigeria is moving in the right direction economically but its movement is not fast, the United Nations stated on Thursday.

Deputy Secretary-General of the United Nations, Amina Mohammed, said this during a meeting at the headquarters of the Federal Ministry of Industry, Trade and Investment in Abuja.

She said the challenges in Nigeria were huge, its population large but described the country’s economy as great with lots of opportunities.

The UN scribe stated that after traveling by train and through various roads in the Northern parts of Nigeria, she discovered that the roads were motorable, although there were ongoing repairs on some of them.

Mohammed said, “This is a country that is diverse in nature, ethnicity, religious backgrounds and opportunities. But these are its strengths, not weaknesses.

“And I think the narrative for Nigeria has to change to one that is very much the reality.”

Speaking on her trips across parts of Nigeria, she said, “What I saw along the way is really a country that is growing, that is moving in the right direction economically. Is it fast enough? No. Is it in the right direction? Yes it is.

“And the challenges still remain with security, our social cohesion and social contract between government and the people. But I know that people are working on these issues.”

She said the UN recognised the reforms in Nigeria and other nations, adding that the common global agenda was the Sustainable Development Goals.

Mohammad commended Nigeria’s quick response to the COVID-19 pandemic, as she expressed hope that the arrival of vaccines would be the beginning of the end of COVID-19.

On his part, the Minister of Industry, Trade and Investment, Adeniyi Adebayo, told his guest that the Federal Government was working hard to make Nigeria the entrepreneurial hub of Africa.

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N10.7tn Spent on Fuel Subsidy in 10 Years – MOMAN

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N10.7tn Spent on Fuel Subsidy in 10 Years – MOMAN

Nigeria spent a total of N10.7tn on fuel subsidy in the last 10 years, the Chairman, Major Oil Marketers Association of Nigeria, Mr Adetunji Oyebanji, has said.

Oyebanji, who was the guest speaker at the 18th Aret Adams Lecture on Thursday, said N750bn was spent on subsidy in 2019.

He highlighted the need for a transition to a market-driven environment through policy-backed legislative and commercial frameworks, enabling the sustainability of the downstream petroleum sector.

“Total deregulation is more than just the removal of price subsidies; it is aimed at improving business operations, increasing the investments in the oil and gas sector value chain, resulting in the growth in the nation’s downstream petroleum sector as a whole,” he said.

The managing director of 11 Plc (formerly Mobil Oil Nigeria Plc) said steps had been taken, “but larger and faster leaps are now required.”

According to him, deregulation requires the creation of a competitive market environment, and will guarantee the supply of products at commercial and market prices.

“It requires unrestricted and profitable investments in infrastructure, earning reasonable returns to investors. It requires a strong regulator to enable transparency and fair competition among players, and not to regulate prices,” Oyebanji said.

He noted that MOMAN had recently called for a national debate by stakeholders to share pragmatic and realistic initiatives to ease the impact of the subsidy removal on society – especially on the most vulnerable.

He said, “A shift from crude oil production to crude oil full value realisation through deliberate investment in domestic refining and refined products distribution, creates the opportunity to transform the dynamics of the downstream sector from one of ‘net importer’ to one of ‘net exporter’, spurring the growth of the Nigerian economy.

“Effective reforms and regulations are key drivers for the growth within the refining sector. Non-functional refineries cost Nigeria over $13bn in 2019. If the NNPC refineries were operating at optimal capacity, Nigeria would have imported only 40 per cent of what it consumed in 2019.”

Full deregulation of the downstream sector remains the most glaring boost to potential investors in this space, according to Oyebanji.

He said, “As crude oil prices will fluctuate depending on the prevailing exchange rates, it will be astute to trade in naira to avoid inevitable price swings.

“There needs to be a balance between ensuring the sustainable growth of the crude oil value chain (upstream through downstream) and providing value for the Nigerian consumer and the Nigerian economy.”

He said the philosophy should be for the government to put the legislative and commercial framework in place and let the market develop by itself.

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