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FG Approves MTEF, Targets 7% Growth by 2020

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  • FG Approves MTEF, Targets 7% Growth by 2020

The Federal Executive Council on Wednesday approved the 2018-2020 Medium-Term Expenditure Framework and Fiscal Strategy Paper, which hopes to achieve seven per cent growth rate by 2020.

The Minister of Budget and National Planning, Udo Udoma, disclosed this to State House correspondents at the end of a weekly meeting of the council presided over by the Acting President, Yemi Osinbajo, at the Presidential Villa, Abuja.

Udoma said the Federal Government would target 3.5 per cent growth rate in 2018; 4.5 per cent in 2019; and seven per cent in 2020.

He said, “The council approved the 2018-2020 Medium Term Expenditure Framework Fiscal Strategy Paper. As you know, we have been having extensive consultations in the last few weeks with the state governors, members of the public and the leadership of the National Assembly about the expenditure framework.

“The highlight of it is that we are committed to achieving seven per cent growth rate by 2020 in accordance with the Economic Recovery and Growth Plan. Indeed, the MTEFFSP is on plan.

“In terms of the trajectory of getting to the seven per cent, we have approved a slightly different trajectory in the sense that our target will be 3.5 per cent growth rate in 2018; 4.5 per cent growth rate in 2019; and in 2020, it will be seven per cent growth rate.

“In terms of crude oil projection for next year, it is 2.3 million barrels per day and we expect it to be broken down to 1.8 million barrels per day with regular crude and 500,000 barrels per day in terms of condensate. The price we have projected is $45 per barrel.

“We are also committed to raising additional revenue so as to reduce the debt service-to-revenue ratio. That is part of the policy of this government to make sure that our borrowing is reduced and to make sure that we keep a reasonable debt service ratio, which will of course help to reduce interest rate.”

He said the exchange rate remained N305 as indicated by the Central Bank of Nigeria.

On the crude oil target, the minister said the Nigerian National Petroleum Corporation had assured the government that the country had capacity more than 2.3 million bpd.

But he said, “We have a lot of constraints. Some of the constraints have to do with cash call investment.

“We are now exiting from cash calls and with that exiting, those investment constraints are no longer there and consequently, we can’t fully produce much more than 2.3 million barrels per day.

“Know that part of that production is condensate — regular crude which is within the OPEC quota and the condensate, which is outside the quota. All that goes to fund the quota,” he said.

The Minister of Communications, Adebayo Shittu, said the council approved the National Information Communication Technology Infrastructure Backbone Project, popularly called NIT2 and domiciled within the Galaxy Backbone Limited.

According to him, it is a Federal Government-owned agency, which engages in service-wide connectivity of all government offices across the country.

The minister said, “There has been NIT1 project, which is about 80 per cent complete. Essentially, it covers most of the southern states and has a data centre project.

“The NIT2 is a concluding component of it to ensure that the entire country is fully covered by fibre optic connectivity in the whole of the country. One is happy that the China Exim Bank graciously supported Nigeria.

“They funded phase one and they are funding this phase two. By today’s approval, the Ministry of Finance would enter negotiations for the full implementation of the funding with us.

“The funding will cost $328m, approximately N100bn. When concluded, it will not only cover the entire MDAs, it will be enough for commercialisation to the private sector, particularly the GSM companies and other ICT industries. So, we know Nigeria will be making a lot of money from this facility when completed.”

…to refinance $3bn T-bills with dollar debt

the Federal Government plans to refinance $3bn worth of naira-denominated short-term Treasury bills with dollar borrowing of up to three years’ maturity.

This, it said, was meant to lower costs and improve its debt position as the economy recovers from a recession.

The Finance Minister, Mrs. Kemi Adeosun, said this on Wednesday, adding that the government was aiming to borrow less in naira and more in foreign currency (dollar).

She said the Federal Executive Council had approved parts of efforts by her ministry to restructure the nation’s debt portfolio.

She said an approval was given in June to restructure the country’s debt and borrow less in naira and more in dollars because it was cheaper.

The minister said the government could borrow at a cost of seven per cent overseas, roughly half the interest rate it was currently paying locally.

Dollars have been in short supply in the country since the price of crude oil, the main source of hard currency, plunged in mid-2014, triggering a currency crisis, an exodus of foreign investors and its first recession in 25 years.

The government expects the economy to recover this year and grow by 2.2 per cent. The International Monetary Fund sees just 0.8 per cent growth.

The minister said, “We got approval to refinance Treasury bills. As the Treasury bills mature, we will be refinancing them into dollars. $3bn worth of Treasury bills will be refinanced into dollars.

“So, as the naira Treasury bills mature, we will be issuing dollar instruments. We are not increasing our borrowing, we are simply restructuring. Instead of borrowing naira, we are borrowing dollars.

“The advantages are two: one is cost reduction. The average rate at which we borrow internationally is at seven per cent; whereas on our Treasury bills, we are paying between 13 per cent and 18.5 per cent. We are almost halving the cost of borrowing and it is to try and reduce pressure on debt service.

“As you know, our debt service is very high and one of the ways to try and do that is to refinance.

“The second thing is that we will be spending the maturity profile of the debt. All our Treasury bill mature maximum of 364 days. We will be taking that borrowing out for up to three years in the expectation that as the economy recovers and grows, we will be in a better position to repay instead of just rolling over the debt, just as we are doing at the moment.

“So, by reducing government’s borrowing by $3bn, we will be creating more room for banks to lend to the private sector and hopefully that will also create some downward pressure on interest rate, which we all agree needs to come down.”

The minister said the government was aiming to restructure its debt portfolio into longer-term maturities by borrowing more offshore and less at home to lower cost and support private sector access to credit to boost the economy.

She said the impact on the economy would be positive because $3bn would be coming into Nigeria’s foreign reserves.

“It actually increases our foreign reserves. If you look at our debt profile, 80 per cent is in naira and that is actually challenging the economy because government is borrowing heavily. There is no room for the private sector to get loans from the banks and there is no incentive for the banks to lend to the private sector.

“One of the things we need to do to create jobs and get the economy moving is for private sector lending to recommence,” she said.

The minister added, “This $3bn is approximately N900bn. We will not take from the domestic market to create room for private sector to go in. It will commence when the National Assembly resumes. We will need the resolution to be able to do this. As soon as that is done, we have already negotiated with the various lenders and they are ready to do this.”

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.

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Economy

ECOWAS@46: Commission Seeks Trade Partnership With OPS To Deepen Intra-African Trade

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The Economic Community of West African States (ECOWAS) in commemoration of its 46th anniversary has sought partnership with the Organised Private Sector (OPS) to deepen intra-African trade and lift millions out of poverty.

This was revealed yesterday by the president of the ECOWAS Commission, Mr. Jean-Claude Brou, at a webinar organised in collaboration with the Lagos Chamber of Commerce and Industry (LCCI) yesterday.

The theme of the webinar is “Optimising Sustainable Trade, Investment and Regional Economic Integration through Effective Partnership between ECOWAS Institutions and the Organised Private Sector”.

Jean-Claude, represented by Mr. Kolawole Sopola, Acting Director, Trade, ECOWAS, said the commission, in recognition of the private sector’s role, created a stronger framework to boost the sector’s capacity for enhanced trade.

He said that the commission had also adopted more than 100 regional standards with 70 others under development on some products.

Brou listed mango, cassava, textile and garments as well as information and communication technology among such products.

“The growing importance of informal trade compels the ECOWAS to create a framework expected to engender more availability and reliability of up to date information on informal trade.

“The framework also seeks to implement reform that is essential to eliminate obstacles to informal trade among others.

“It is important to improve investment, particularly, private investment, in all sectors and I stress that digitalization must be at the center of activities for economic recovery.

“Infrastructural deficit must be addressed as well as sustainable and cheaper energy for the competitiveness of products.”

“The commission is developing projects on roads, renewable energy and education, needed for private sector development; all these to lift millions in the sub-region out of poverty,” he said.

Dr. George Donkor, President of, ECOWAS Bank for Investment and Development (EBID) said that many western states showed numerous hurdles to overcome as countries continue to export raw materials, therefore maintaining low levels of development.

Donkor, however, said that reforms were already underway to accelerate the capacities of the Micro, Small and Medium Enterprises (MSME) to spur private sector development for intra-African trade.

He noted that the EBID 2025 strategy was aimed at ensuring that the private sector benefitted up to 65 percent of the $1.6 billion available facilities.

“A vibrant private sector is key in driving regional integration and securing its active participation and has the potential to create a win-win situation for all participants.

“Increasing credit to the private sector will enhance capacity and the EBID is ready with strategies to ensure that the sector’s capacity is boosted,” he said.

Also, Otunba Niyi Adebayo, Minister of Industry, Trade and Investment, said that collaboration across societal sectors had emerged as one of the defining concepts of international development in the 21st century.

He stressed the need for ECOWAS member states to work together as a bloc to take advantage of the opportunities in the African Continental Free Trade Area.

“Since the establishment of ECOWAS in 1975, various protocols and supplementary protocols regulating member countries conduct have been signed.

“Our world has limited resources — whether financial, natural, or human — and as a society we must optimize their use.

“The fundamental of a good partnership is the ability to bring together diverse resources in ways that we can together achieve more impact, greater sustainability and increased value for all.

“This is so because it emphasises the need to work together as a bloc to leverage and take advantage of the opportunities offered by the African Continental Free Trade Area.

“My Ministry will do everything possible to ensure that the vision of the commission is taken to the next level,” he said.

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IMF Retains 2.5 Percent Economic Growth Estimate For Nigeria

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The International Monetary Fund (IMF) has retained Nigeria’s 2.5 percent economic growth forecast for 2021.

The institution said this in its World Economic Outlook (WEO) for July titled “Fault Lines Widen in the Global Recovery” released on Tuesday in Washington DC.

According to it, the slow rollout of vaccines is the main factor weighing on the recovery for Low-Income Developing Countries (LIDCs) which Nigeria is part of.

It also retained its 6.0 percent growth forecast for the global economy for 2021 and 4.9 percent in 2022, adding that though the global forecast was unchanged from the April 2021 WEO, there were offsetting revisions.

The IMF had at its 2021 Virtual Spring Meetings in April, projected a 2.5 percent growth for Nigeria’s economy in 2021, up from 1.5 percent it projected in January.

It said that in LIDCs, the overall fiscal deficit in 2021 was revised up by 0.3 percentage points from the April 2021 WEO, mainly because of the re-emergence of fuel subsidies as well as the additional COVID-19 and security related support in Nigeria.

“Still, at 5.2 percent of Gross Domestic Product (GDP), the overall fiscal deficit remains well below that of advanced and emerging market economies, reflecting financing constraints, about 60 percent of LIDCs are assessed to be at high risk of or in debt distress.

“The public debt-to-GDP ratio for 2021 is projected at 48.5 percent.

“Several LIDCs have announced an intention to restructure their debts and some have sought debt relief under the G20 Common Framework (Chad, Ethiopia, and Zambia),” it said.

On the global scene, the IMF said that uncertainty surrounding the global baseline remain high, primarily related to the prospects of emerging market and developing economies.

It added that although growth could turn out to be stronger than projected, downside risks dominated in the near term.

“On the upside, better global cooperation on vaccines could help prevent renewed waves of infection and the emergence of new variants, end the health crisis sooner than assumed, and allow for faster normalisation of activity, particularly among emerging market and developing economies.

“Moreover, a sooner-than-anticipated end to the health crisis could lead to a faster-than-expected release of excess savings by households, higher confidence and more front-loaded investment spending by firms.”

On the downside, it said growth would be weaker than projected if logistical hurdles in procuring and distributing vaccines in emerging markets and developing economies led to an even slower pace of vaccination than assumed.

The report added that such delays would allow new variants to spread, with possibly higher risks of breakthrough infections among vaccinated populations.

“Emerging market and developing economies, in particular, could face a double hit from tighter external financial conditions and the worsening health crisis, further widening the fault lines in the global recovery.

“Weaker growth would, in turn, further adversely affect debt dynamics and compound fiscal risks.

“Finally, social unrest, geopolitical tensions, cyber-attacks on critical infrastructure, or weather-related natural disasters, which have increased in frequency and intensity due to climate change could further weigh on the recovery.”

On ensuring a fast-paced recovery, the IMF said the highest priority was to ensure rapid, worldwide access to vaccines and substantially hasten the timeline of rollout relative to the assumed baseline pace.

According to it, the global community needs to vastly step up efforts to vaccinate adequate numbers of people and ensure global herd immunity.

This, it said, would save lives, prevent new variants from emerging and add trillions to the global economic recovery.

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FG to Put an End to N360 Billion Annual Electricity Subsidy Payments in 2022 – Osinbajo

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Electricity - Investors King

Vice President Yemi Osinbajo on Monday said the Federal Government will end an estimated N360 billion annual subsidy payments in the electricity sector in 2022. This represents a monthly subsidy payment of N30 billion.

Osinbajo disclosed this while speaking at the 14th Nigerian Association for Energy Economics/IAEE conference in Abuja on Monday.

At the conference titled “Strategic responses of energy sector to COVID-19 impacts on African economies“, the vice president, who was represented by Engr. Ahmad Zakari, the Special Assistant to the President on Infrastructure, said the federal government would be investing over $3 billion in the sector to strengthen distribution and transmission infrastructure across the nation.

He stated that the numerous efforts of President Muhammadu Buhari at ensuring the power sector plays a critical role in the growth of the nation’s social and economic well-being will materialise fully once the ongoing reform in the energy sector is complete.

He said: “Electricity tariff reforms with service-based tariff has led to collections from the electricity sector by 63 per cent, increasing revenue assurance for gas producers and stabilizing the value chain.

“It is anticipated that all electricity market revenues will be obtained from the market with limited subsidy from next year as reforms in metering and efficiency with the DISCOs continue to improve.

“Accelerated investment in transmission and distribution, over $3 billion will be out into this sub-segment of the electricity value chain that will put us on the path to delivering 10 gigawatts through the interventions of the Central Bank of Nigeria, Siemens partnership, World Bank and Africa Development Bank, and others.”

He said as the electricity sector continued to be stabilized, more power was needed for the country’s large population.

“That is why this administration continues to invest in generation to cater for our current and future needs,” he said.

Osinbajo charged the participants to come up with solutions to key energy challenges facing the country, especially with the COVID-19 pandemic and energy transition.

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