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FG Set to Release Second Tranche of Capital Budget

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  • FG Set to Release Second Tranche of Capital Budget

Barring any unforeseen circumstances, the Ministry of Finance will soon release the second tranche of the N2.1 trillion capital expenditure for the 2017 budget.

The Minister of Finance, Mrs. Kemi Adeosun, who made the disclosure at the State House in response to the implementation of the budget, said the first release of N336 billion from the capital budget was made in August shortly after the government announced its preparedness to release N350 billion.

Eventually, the government released N336 billion, leaving a balance of N14 billion which the minister said was currently being processed for eventual release.

According to her, the Ministry of Finance was last Tuesday compelled to announce the release of the N336 billion, following a report that the ministry had kept mum on the release of N350 billion shortly after the budget was signed by the then acting President Yemi Osinbajo on June 6, this year.

Adeosun, who had been summoned by the Senate last week to appear before it along with the Minister of Budget and National Planning over the perceived poor implementation of the 2017 budget, however, denied any inherent problem in the implementation of the budget.

According to her, the budget’s implementation was predicated on the release of funds on a quarterly basis, explaining that following the signing of the 2017 budget in June, the period of June and September marked the first quarter of the budget’s implementation, during which she said the government had done the needful by releasing N336 billion.

She said on this basis, the government was getting set to make the second capital release for the last quarter of the year, but was silent on the exact time the next tranche would be released.

She said the capital budget would be implemented despite the fiscal challenges confronting the nation in terms of the government’s commitment to infrastructure development and efforts to grow the economy.
“The 2017 budget was signed in June and we released N336 billion in August. I only made a statement yesterday in response to a misleading report by the press.

“That money was actually released in August and we are on course, getting set for the next set of releases. We are on course. There is always three months of the budget.

“If you work from June, the first quarter of the budget is over. So it’s the next quarter that we are getting set for. There is really no problem at all about releases. We are on course.

“Even with the fiscal challenges we have, we are committed to infrastructure expenditure that will get the economy out of the recession and indeed on the path of growth and we will continue with that.

“So the statement was only released because of the confusion that no money was released.

“We had said in the beginning that we had N350 billion and it was on the day that we said we had N350 billion that we started releasing it but there was misinformation (in the press) and the other N14 billion is being processed,” she explained.

When pressed for the exact time the next release would be made, Adeosun said the last release was still being utilised.

While signing the budget in June, Osinbajo had said the 2017 Appropriation Bill was designed to complement the Economic Recovery and Growth Plan (ERGP) with the aim of stimulating economic recovery.

He listed the priorities of the budget to include: macroeconomic stability, agricultural growth, energy sufficiency, improved transport infrastructure and industrialisation through support for Medium Small and Medium Enterprises (MSMEs).

The N7.44 trillion budget, with a projected fiscal deficit of N2.36 trillion, comprises N2.9 trillion recurrent non-debt expenditure, N2.177 trillion capital expenditure, N1.84 trillion for debt service and N177.4 billion for the sinking fund. The budget deficit will largely be financed through borrowings.

Osinbajo said implementation of the budget would trigger economic activities, which he pointed out would lead to job creation for young Nigerians, adding that the government was working hard to improve revenue collection efficiency through technology.

Osinbajo had also said the Treasury Single Account (TSA) was designed to improve transparency and accountability, observing that recoveries of looted funds had been factored into the budget.

However, concerns persist that the 2017 budget may fail to achieve the listed objectives, bearing in mind that less than 20 per cent of the N2.1 trillion capital budget has so far been released despite the advent of the last quarter of the year.

It was on this basis that the Senate recently raised concerns over the poor implementation of the budget and its decision to summon the two ministers responsible for its execution.

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

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CBN’s Monetary Policy Raises Concerns Over Nigeria’s Q2 Growth

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Nigeria’s economic outlook for the second quarter of 2024 is clouded with uncertainty as economists and analysts express concerns over the impact of the Central Bank of Nigeria’s (CBN) aggressive monetary policy.

Following a series of interest rate hikes aimed at curbing inflation, there are growing fears that these measures could stifle economic growth in Africa’s most populous nation.

The National Bureau of Statistics (NBS) reported that Nigeria’s Gross Domestic Product (GDP) grew by 2.98 percent in real terms in the first quarter of 2024, up from 2.3 percent in the same period of 2023.

However, this growth represents a slowdown from the 3.46 percent recorded in the fourth quarter of 2023.

The outlook for the second quarter is less optimistic with predictions of slower growth due to the CBN’s tightening measures.

“The year-on-year growth makes sense given that in the first quarter of last year, we were affected by the uncertainty about currency replacement, fuel queues, and elections,” said Ayo Teriba, CEO of Economist Associates.

“However, the tightening measures by the CBN that started in February are likely to take their toll in Q2 and subsequent quarters.”

Last week, the CBN raised its monetary policy rate by 150 basis points to 26.25 percent, marking the third consecutive hike.

This brings the total increase since February to 750 basis points, a move designed to combat inflation and defend the naira.

Analysts at FBN Quest warned that these rate hikes could slow economic growth and reduce consumer spending.

“Ultimately, the impact on the general economy could be a potential slowdown in economic growth, with consumer spending suppressed, and a decrease in business investments,” FBN Quest stated in a recent note.

The NBS report also highlighted that the services sector was the primary driver of GDP growth in the first quarter, recording a 4.32 percent increase and contributing 58.04 percent to the aggregate GDP.

The agriculture sector grew by 0.18 percent, a modest improvement from the -0.90 percent recorded in Q1 2023.

Meanwhile, the industry sector grew by 2.19 percent, up from 0.31 percent in the first quarter of 2023.

Ikemesit Effiong, head of research and partner at SBM Intelligence, noted that services have significant exposure to monetary policy effects.

“Since growth was largely powered by services, I would expect some slow growth in Q2. But I don’t think the slowdown might be actually significant. It might just be around 2.4-2.5 percent.”

Analysts at Comercio Partners observed that the GDP growth rate has been slower yet steady, hovering around three percent from 2021 to 2023.

However, they warned that the CBN’s rate hikes could have a deleterious effect on growth.

“The central bank had hiked the MPR by a hefty 600 basis points to 24.75 percent to curb inflation in March. Despite these efforts, inflation has been stubbornly high, hitting a record 33.69 percent in April, eroding consumer purchasing power. The increased interest rate has also raised the cost of borrowing for real sectors, stifling economic growth,” Comercio Partners noted.

President Bola Tinubu’s recent economic reforms, including the removal of a costly petrol subsidy and the lifting of currency controls, have exacerbated inflationary pressures, further complicating the economic landscape.

The naira has suffered a near 30 percent devaluation this year, following a 40 percent devaluation last June. Rising inflation has weakened consumer purchasing power, while businesses grapple with higher operating costs.

Muda Yusuf, CEO of the Centre for Promotion of Private Enterprises, highlighted the importance of oil output in sustaining growth.

“We might see positive growth in Q2 if the improvement in oil production is sustained and the CBN is able to reduce volatility in the forex market because it is affecting confidence and fueling speculation,” he said.

Joseph Nnanna, Chief Economist at the Development Bank of Nigeria, cautioned that the latest rate hike could impede real sector growth and hinder GDP growth this year.

“The 150bps rate hike is pernicious to the real economy as households and MSMEs will feel the impact immediately,” Nnanna said.

“However, the rate hike has a signalling effect on the fiscal authorities. They need to improve fiscal discipline and prioritize spending to improve growth.”

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Bank of Ghana Set to Maintain Interest Rate at 29% Amidst Inflation Concerns

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The Bank of Ghana is anticipated to keep its benchmark interest rate steady at 29% to curb soaring inflation and stabilize the nation’s currency, the cedi.

This decision comes as Governor Ernest Addison prepares to announce the monetary policy committee’s (MPC) verdict later today in Accra.

According to a survey conducted by Bloomberg, most economists expect the MPC to maintain the current rate in an effort to control inflation, which has averaged around 25%, and to support the struggling cedi.

The Ghanaian currency has depreciated by approximately 10% against the US dollar since the MPC’s last decision to keep borrowing costs unchanged in March, marking it as the worst-performing currency globally over this period.

“I expect the Bank of Ghana to keep the policy rate on hold in May in order to bolster the cedi and prevent higher import prices from keeping inflation at the currently elevated level,” stated Mark Bohlund, a senior credit research analyst at REDD Intelligence.

The cedi’s decline has been significantly impacted by a sharp drop in cocoa earnings, with revenue from cocoa exports falling by 49% to $599 million in the first four months of this year.

Ghana, the world’s second-largest producer of cocoa, has faced adverse weather conditions, disease, and a fertilizer shortage, all contributing to decreased output.

In an effort to manage its economic challenges, Ghana is reorganizing most of its $42.2 billion debt as part of conditions for a $3 billion program from the International Monetary Fund (IMF).

Last Thursday, the nation received a draft agreement to restructure debts with its official creditors, a necessary step to secure a $360 million disbursement from the IMF expected by the end of June.

Economists like Bohlund and Courage Boti, of Accra-based GCB Capital Ltd., suggest that the MPC might be in a position to consider cutting rates at its July meeting.

They anticipate that the currency could start to recover with the forthcoming IMF disbursement, and the favorable base effects could lead to a sharp slowdown in inflation.

“The more appropriate time to look at a rate cut will probably be July, by which time the currency pressures would have eased and its full impact assessed,” said Boti.

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Agricultural Sector’s Contribution to GDP Decreases in Q1 2024

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Nigeria’s agricultural sector declined in its contribution to the Gross Domestic Product (GDP), according to recent data released by the National Bureau of Statistics (NBS).

The sector, which encompasses crop production, livestock, forestry, and fishing, experienced a decrease in its nominal growth rate compared to the same period in 2023.

The data reveals that the agricultural sector grew by 0.77% year-on-year in nominal terms in Q1 2024, a decrease of 4.47% points from the corresponding quarter of the previous year.

This decline is significant, especially when compared to the growth rate of 14.94% recorded in the preceding quarter, showcasing a downturn of 14.17% points.

Crop production emerged as the primary driver of the sector, constituting 87.98% of the overall nominal value of the sector in Q1 2024.

However, despite its dominance, the sector’s contribution to nominal GDP stood at 17.22%, reflecting a decrease from the rates recorded in both the first quarter and fourth quarter of 2023, which were 19.63% and 24.65%, respectively.

In real terms, the agricultural sector experienced a modest growth rate of 0.18% year-on-year in Q1 2024, indicating an increase of 1.08% points from the same period in 2023.

Nevertheless, this growth rate represents a decline of 1.92% points from the preceding quarter, which recorded a growth rate of 2.10%. On a quarter-on-quarter basis, the sector’s growth rate stood at -32.25% in the first quarter of 2024.

Despite these challenges, the agricultural sector remains a vital component of Nigeria’s economy, contributing significantly to employment, food security, and overall economic development.

As the nation navigates through economic fluctuations, policymakers and stakeholders may need to explore strategies to revitalize and strengthen the agricultural sector to ensure its sustained growth and resilience in the face of future uncertainties.

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