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FG’s Non-oil Revenue Projection Unrealistic



  • FG’s Non-oil Revenue Projection Unrealistic

The federal government’s non-oil revenue projections in the 2017 budget are unrealistic, when viewed in the context of past budgets, a report by the Time Economics, a research-focused firm has stated.

The Time Economics stated this in its Mid-Year Report obtained on Monday.

It pointed out that the bulk of non-oil revenue in this year’s budget was expected to come from Value Added Tax (VAT), Companies Income Tax (CIT) and Customs and Excise Duties, revenue sources which underperformed by an average of 26 per cent between 2011 and 2015.

The 2017 Appropriation Bill was signed into law on June 12th, 2017 a month after it was passed by the National Assembly, and over six months after the budget was presented to lawmakers by the President Muhammadu Buhari. The budgeted expenditure in the final version of the bill differed from that in the proposed budget by N143 billion, an increased from N7.298 trillion to N7.441 trillion.

The budget was based on a benchmark crude oil price of $44.5 per barrel, oil production of 2.2 mbpd and an average exchange rate of N305/USD. Revenue is expected to be N5.08 trillion of which N1.999 trillion will come from oil, N1.373 trillion from CIT, VAT, Customs and Excise Duties and Federation Account Levies, N807.57 billion from Independent Revenues, N565.1 billion from Recoveries and N210.9 billion from other revenue sources such as mining.

But the report stressed that in the past, the government’s revenue projections had been quite optimistic; actual federal government revenues were an average of 17 per cent below projected revenue between 2011 and 2015.

“In 2016, total half year revenues from these sources were 54 per cent below projections. Although the government reduced its expected revenue from these sources from N1.392 trillion to N1.373 trillion, its projection is still quite unrealistic.

“These revenue sources are dependent on the performance of the economy, which is projected to grow by only one per cent from its 2016 level.

Therefore, it is extremely unlikely that any increase in the actual revenues realised in 2017 – even after accounting for the growth in the economy and a higher level of tax compliance – will be enough to prevent substantial underperformance in non-oil revenue.”

At the end of 2015, GDP per capita was approximately $1900, using an exchange rate of N197/USD and a population of 182.2 million (World Bank). Full year GDP growth for 2016 was -1.58 per cent, and if assumed that Nigeria’s population grew by 2.5 per cent, and an exchange rate of N305/USD, GDP per capita fell to $1177. This decline in income over a single year was quite substantial but it was even worse when compared to GDP per capita in 2014 which was approximately $2200, a 47 per cent decline in just two years, the report added.

“If the economy grows by one per cent in 2017, and the exchange rate is unchanged at N305/USD, GDP per capita falls further to $1160, again assuming 2.5 per cent population growth. Given the significant reduction in income for the average Nigerian since 2014, and the high rate of population growth, GDP growth will have to be above 5% for a long time for Nigerians to have any chance of regaining their lost income,” it stated.

Most analysts and observers expect growth in the Nigerian economy to be about one per cent in 2017 based on expectations of higher oil prices and production. The major reasons for the recession in 2016 were lower oil production due to an insurgency in the Niger Delta region, the fall in global oil prices, and a low level of budget implementation by the government. Higher oil prices in 2017 on the back of an OPEC oil output cut agreement and higher oil production as the government begins to find a solution to the insurgency problem should be enough to see the economy return to growth in 2017.

However, the contraction of the economy in 2016 combined with population growth and the depreciation of the Naira means that the average Nigerian’s 2017 income in Dollar terms will not return to the level of 2014 /15 any time soon, even with the anticipated one per cent growth, the report argued.

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


NNPC To Resume Oil Exploration In Sokoto Basin




The Nigerian National Petroleum Corporation on Thursday announced plans to resume active oil exploration in Sokoto Basin.

A statement issued in Abuja on Thursday by NNPC spokesperson, Kennie Obateru, said the corporation’s Group Managing Director, Mele Kyari, said exploration for crude would resume in the Sokoto Basin.

The statement read in part, “Kyari also hinted of plans for the corporation to resume active exploration activities in the Sokoto Basin.”

The NNPC boss disclosed this while receiving the Governor of Kebbi State, Atiku Bagudu, who paid Kyari a courtesy visit in his office on Thursday.

In October 2019, the President, Major General Muhammadu Buhari (retd.), had during the spud-in ceremony of Kolmani River II Well on the Upper Benue Trough, Gongola Basin, in the North-East, said the government would explore for oil and gas in the frontier basins across the country.

He outlined the basins to include the Benue Trough, Chad Basin, Sokoto and Bida Basins.

Buhari had also stated that attention would be given to the Dahomey and Anambra Basins which had already witnessed oil and gas discoveries.

Kyari restated NNPC’s commitment to the partnership with Kebbi State for the production of biofuels, describing the project as viable and in tandem with the global transition to renewable energy.

He said the rice production programme in the state was a definite boost to the biofuels project.

Kyari said the linkage of the agricultural sector with the energy sector would facilitate economic growth and bring prosperity to the citizens.

He was quoted as saying, “We will go ahead and renew the Memorandum of Understanding and bring in any necessary amendment that is required to make this business run faster.”

The Kebbi State governor expressed appreciation to the NNPC for its cooperation on the biofuel project.

Bagudu said the cassava programme was well on course but the same could not be said of the sugarcane programme as the targeted milestone was yet to be attained.

Kebbi state is one of the states that the NNPC is in partnership with for the development of renewable energy.

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Nigeria To Benefit As G-20 Approves Extension Of Debt Relief Till December



Finance ministers of G-20 countries have approved an extension of debt relief for the world’s poorest nations till December 2021.

David Malpass, World Bank president, made the announcement at the virtual spring meeting, on Wednesday.

TheCable had earlier reported that the G-20 countries will meet this week to consider an extension of the debt freeze.

The G-20, is a group of finance ministers and central bank governors from 19 of the world’s largest economies, including those of many developing nations, along with the European Union.

G-20 countries had established a debt service suspension initiative (DSSI) which took effect in May 2020.

Nigeria had benefited from the initiative which delivered about $5 billion in relief to more than 40 eligible countries.

The suspension period which was originally set to end on December 31, 2020 was extended to June 2021.

Malpass said the extension to December 2021 will boost economic recovery and promote job creation in low income countries.

He urged countries to be transparent in their approach to the debt service payment extension.

“On debt, we welcome a decision by the G20 to extend the DSSI through 2021. The World Bank is also working closely with the IMF to support the implementation of the G20 Common Framework,” he said.

“In both these debt efforts, greater transparency is an important element: I urge all G20 countries to disclose the terms of their financing contracts, including rescheduling, and to support the World Bank’s efforts to reconcile borrower’s debt data more fully with that of creditors.

“Participation by commercial creditors and fuller participation by official bilateral creditors will be vital. I urge all G20 countries to instruct and create incentives for all their public bilateral creditors to participate in debt relief efforts, including national policy banks. I also urge G20 countries to act decisively to incentivize the private creditors under their jurisdiction to participate fully in sovereign debt relief efforts for low-income countries.

“Debt relief efforts are providing some welcome fiscal space, but IDA countries need major new resources too, including grants and highly concessional resources. From April to December 2020, the first DSSI period, our net transfers to IDA and LDC countries were close to $17 billion, of which $5.8 billion were on grant terms.

“Our new commitments were almost $30 billion, making IDA19 the single largest source of concessional resources for the poorest countries and the key multilateral platform for support. To recover from COVID, much more is needed, and we welcome the G20’s support for advancing IDA20 by one year.”

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IMF / Fiscal Monitor Report April 2021 Forecast




Unprecedented fiscal support by governments during the pandemic has prevented more severe economic contractions and larger job losses, but risks remain of long-term scarring the International Monetary Fund says in its Fiscal Monitor report released on Wednesday (April 7) in Washington, DC.

Meanwhile, such support, along with drops in revenues, has raised government deficits and debt to unprecedented levels across all country income groups, said Vitor Gaspar, Director of the Fiscal Affairs Department at the IMF.

The first lesson one year into COVID-19 is that fiscal policy can act timely and decisively. The fiscal policy response was unprecedented in speed and size looking across countries. We also learned that countries with easier access to finance or stronger buffers were able to give more fiscal support. They’re also projected to recover faster,” said Gaspar.

Average overall deficits as a share of GDP in 2020 reached 11.7 percent for advanced economies, 9.8 percent for emerging market economies, and 5.5 percent for low-income developing countries. Countries’ ability to scale up spending has diverged.

“So, what have we learned? We’ve learned that fiscal policy is powerful and that sound public finances are crucial in order to enable that power to be used to the fullest,” stressed Gaspar.

Gaspar urged policy makers to balance the risks from large and growing public and private debt with the risks from premature withdrawal of fiscal support, which could slow the recovery.

“In the spring 2021, we emphasize differentiation across countries. Moreover, COVID-19 is fast evolving, as are the consequences from COVID-19. The fiscal policy must stay agile and flexible to respond to this fast-evolving situation.” Said Gaspar.

He also warned that the targeting of measures must be improved and tailored to countries’ administrative capacity so that fiscal support can be maintained for the duration of the crisis—considering an uncertain and uneven recovery

“Moreover, countries are very different in their structures, in their institutions, in their financial capacity and much else. Therefore, policies and policy advice have to be tailored to fit.” Said Gaspar

Gaspar concluded his remarks by emphasizing that global vaccination is urgently needed, and that global inoculation would pay for itself with stronger employment and economic activity, leading to increased tax revenues and sizable savings in fiscal support.

“A fair shot, a vaccination for everybody in the world may well be the highest return global investment ever. But the Fiscal Monitor also emphasizes the importance of giving a fair shot at life success for everyone. It documents that preexisting inequalities made COVID-19 worse and that COVID-19 in turn made inequalities worse. There is here a vicious cycle that threatens trust and social cohesion. Therefore, we recommend stronger redistributive policies and universal access to basic public services like health, education, and social security,” said Gaspar.

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