- FG Sets Aside N20bn for Export Grant Arrears
The Federal Government has set aside N20bn as tax credit to settle part of the N300bn outstanding claims of the Export Expansion Grant.
The move is part of measures aimed at discouraging imports and encouraging the development of the local economy through the provision of incentives to manufacturers.
The proposed spending is contained in the 2017 budget, which was submitted to a joint session of the National Assembly by President Muhammadu Buhari on December 14.
The N7.3tn budget has a total capital vote of N2.24tn, representing 30.7 per cent while the recurrent component stands at N2.98tn with the rest allocated for debt servicing.
The Nigerian Export Promotion Council had put the outstanding claims of manufacturers and exporters for the Export Expansion Grant at over N300bn.
The EEG is an initiative of the Federal Government meant to encourage exporters of non-oil products, including agro-commodities, in order to cushion the effects of infrastructural deficiencies and reduce overall unit cost of production.
It was introduced through the Export Incentives and Miscellaneous Provisions Act, Cap 118 of 1986 to enhance the contributions of non-oil export to the national economy.
The mechanism is such that a financial credit is applied on the value of exports of products from Nigeria, ranging from five per cent to 30 per cent.
The financial credit is not cash-funded, but provided as Negotiable Duty Credit Certificate, which can be applied against import duties on other items, according to the system.
Some manufacturing companies operating in the country had raised the alarm over what they described as lopsidedness in the payment of the EEG.
The Federal Government had to suspend the scheme for review owing to the allegations of regularities in its implementation by manufacturers.
Just last month, the Minister of Industry, Trade and Investment, Dr Okechukwu Enelamah, said the government had held a meeting with exporters on the need to resume the scheme.
He explained that the scheme had been reviewed to prevent it from being abused by exporters.
The minister said under the new arrangement, the backlog of exporters’ claims would be settled with a tax credit rather than import credit.
An analysis of the 2017 budget of the ministry revealed that the sum of N20bn had been allocated for tax credit to exporters under the EEG scheme.
Apart from the N20bn EEG tax credit, the ministry proposes to spend N240m to develop clusters for priority products; N100.2m for implementation of Nigeria agro-industry development initiative; and N40m for implementation of trade facilitation agreements.
In the same vein, the sum of N500m was allocated for enabling environment for industry, trade and investment; N50m for implementation of multilateral agreements with Nigeria’s trading partners; N35m for promotion of made-in-Nigeria products; and N80m for international investment engagement initiatives.
Similarly, the sum of N35m was budgeted for domestic trade regulatory activities; N144m for development of policy framework for the industry; N25m for development of sector policy for iron and steel; and N20m for establishment of trade resource centres.
The Executive Director/Chief Executive, NEPC, Mr. Olusegun Awolowo, had said if the huge EEG claim of over N300bn was not addressed, it would affect the efforts of the government to diversify the economy owing to the near absence of incentives to encourage exports.
FG Paying N1.1 Billion Per Day as Subsidy
The recent jumped in crude oil prices means landing cost of Premium Motor Spirit (PMS), popularly known as Petrol, has increased but the Federal Government has maintained the old pump price of N161 – N165 per litre.
In a series of reports, the Petroleum Products Pricing Regulatory Agency (PPPRA) open market price, the price fuel marketers are expected to sell, is N183 per litre as of yesterday. A break down showed N160 is the landing cost per litre while the additional N23 is the Petroleum Products Pricing Regulatory Agency (PPPRA) pricing template.
Therefore, with the payment of additional N23 as stipulated in the PPPRA pricing template and the national petrol per day consumption figure at 50 million litres, the Buhari led administration is offsetting about N1.1 billion on petrol consumption daily.
The Nigerian National Petroleum Corporation (NNPC) has been deducting the amount before remitting balance of oil sales to the Federation Account, according to a Businessday report.
An anonymous person in the oil marketing industry said: “We are back to the era of subsidy and Nigeria is bleeding badly because of this.”
“With deregulation, the current price of petrol should not be less than N181, so who is funding subsidy of the product for Nigeria to buy at the current fixed price?“.
Another oil marketers said, “the government does not have the boldness to allow full deregulation of petrol because of the spiral effects on Nigerians, and bearing in mind that Nigerians are in very hard times.”
Alao Abiodun, the Head of Energy Research, New Nigeria Foundation, explained that “Because of the loans from the IMF and World Bank that they got with the condition that petrol should be deregulated, I believe the government is trying to manage the problem.”
Nigeria’s Big Oil-Refining Revamp Gets Off To A Slow Start
A year after shutting down all of its dilapidated refineries to figure out how to fix them, Nigeria still can’t say how much it will cost to do the work or where the money will come from.
Nigerian National Petroleum Corp. said it has finished the appraisal of its largest facility, but hasn’t completed the process at two others. Refining experts said the extended halt means the plants are at risk of rotting away and unlikely to restart on time.
“Things haven’t been looking good lately,” with Nigeria’s plants probably “completely out of action for some 18 months,” said Elitsa Georgieva, Executive Director at Citac, a consultant that specializes in African refining.
The dysfunction of its domestic refineries has long put Africa’s biggest oil producer in an ironic situation. It exports large volumes of crude to plants overseas, then pays a premium to import the fuels its customers produce.
Pledges to fix the facilities have been made and broken again and again over the years. For at least a decade, NNPC’s 445,000 barrels a day of refining capacity barely processed 20% of that amount.
The latest effort to fix the refineries was supposed to be different to the failed attempts that came before. The company had totally shut all three plants down by January 2020 to do a comprehensive appraisal, and set the ambitious target of having them all back up and running at 90% of capacity by 2023.
“The refineries have been deliberately shut down to allow for a thorough diagnosis,” said Kennie Obateru, an Abuja-based NNPC spokesman. “They can be fixed based on what the diagnosis reveals.”
The appraisal of the 210,000-barrel-a day Port Harcourt refinery has been completed and NNPC has called for bids for the necessary repairs, Obateru said. The company hasn’t determined how much the work will cost.
“It is when we close the bids, everything is analyzed and presented that we will know how much we need,” he said.
The diagnosis is underway at the 125,000-barrel-a-day Warri facility and should be complete before the end of the year, he said. After that, the study of the 110,000-barrel-a-day Kaduna plant will commence.
One year into the process, refining analysts are skeptical that all this work can be done by 2023.
“I don’t think anyone has a good understanding technically of what’s wrong with those refineries,” said Alan Gelder, vice president of refining, chemicals and oil markets at Wood Mackenzie Ltd. “They’re probably corroding, which makes it a very difficult proposition.”
NNPC reaffirmed its deadline and said there’s no reason the refineries, which are at least 40 years old, can’t be restored to full operation.
“There are refineries that are over a hundred years old still running, so age is not necessarily an impediment,” Obateru said.
There are parallel efforts backed by private companies to add to Nigeria’s capacity. Aliko Dangote, Africa’s richest person, is building a state-of-the-art 650,000 barrel-a-day refinery, which Citac estimates will start production in 2023.
Bringing NNPC’s Port Harcourt refinery to the same clean-fuel standards as Dangote’s modern plant would cost about $1.3 billion for the equipment, on top of whatever other repairs are required to get the facility running, Georgieva said.
NNPC is talking to oil-trading firms about $1 billion of prepayment deals that could finance the repairs at Port Harcourt, Reuters reported last week. Obateru declined to comment on the report, but said “I don’t envisage that we will have a problem getting people to invest.”
Food Inflation Hits Record High of 19.56 Percent in December 2020
Food Index, which measures prices of food items, grew by 19.56 percent in the month of December 2020 amid herdsmen attacks and flooding.
In the latest report from the National Bureau of Statistics (NBS), increases were recorded on Bread and cereals, Potatoes, Yam and other
tubers, Meat, Fruits, Vegetable, Fish and Oils and fats.
On month on monthly basis, the food sub-index rose by 2.05 percent in December 2020, 0.01 percent from 2.04 percent recorded in November 2020.
“The average annual rate of change of the Food sub-index for the twelve-month period ending December 2020 over the previous twelve-month average was 16.17 percent, 0.42 percent points from the average annual rate of change recorded in November 2020 (15.75) percent” the report stated.
Headline inflation number increased by 15.75 percent in the month of December 2020, up from 14.89 percent.
The report noted that increases were recorded in all COICOP divisions that yielded the Headline index.
On a month-on-month basis, “the urban index rose by 1.65 percent in December 2020, same as the rate recorded in November 2020, while the rural index also rose by 1.58 percent in December 2020, up by 0.02 percent above the rate that was recorded in November 2020 (1.56 percent).”
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