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Low Implementation of Capital Budget Ruffles Lawmakers

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budget
  • Low Implementation of Capital Budget Ruffles Lawmakers

The low implementation of the capital component of the 2017 N7.441 trillion by the federal government is currently causing major unease among federal lawmakers amid fears that it may affect their bid for re-election into the National Assembly in the 2019 polls.

The constituency projects, also called zonal intervention projects, are contained in the N2.1 trillion capital component of the 2017 budget, out of which only N440 billion has been released.

The low release of funds has ensured that only high priority capital projects are currently receiving the attention of the government, causing a complete neglect of the constituency projects for which N100 billion was appropriated.

Investigation gathered that the executive has not released a kobo for any item listed under the constituency projects, even though some of the items have been listed in procurement adverts by several Ministries, Departments and Agencies (MDAs) of government.

The lawmakers are further ruffled by the recent push of the executive arm of government to restore the fiscal year from January to December to allow for an organic budget calendar, as this may further affect the performance of the 2017 budget.

While they generally accept that a predictable budget calendar ensures better economic planning particularly for the organised private sector which is dependent on public spending, the lawmakers fear that the proposal to roll over up to 60 per cent of capital projects would further affect the constituency projects.

At a recent hearing by the Senate on the performance of the 2017 budget, the Minister of Budget and National Planning, Senator Udo Udoma had told the Senate Joint Committee on Appropriations and Finance that MDAs have been instructed to roll over most of their capital projects, to the 2018 budget.

Investigation gathered that the lawmakers are highly concerned about the impact this would have on their re-election bid in the 2019 general elections.

A highly placed source said the decision to isolate the constituency project items under the N100 billion Zonal Intervention Funds, in a separate section from the statutory budget of the MDAs, was deliberate.

“Even if this has happened before now, the executive deliberately did it this time around because for them it is not priority. Despite any detente, the executive still considers the constituency projects a ploy to make money by the lawmakers. Remember the tensions caused by the constituency issue last year, at some point House members even said they would not entertain any request from the executive, until ZIFs (Zonal Intervention Funds) are released,” the source explain.

“2018 is just a few months away, and that is campaign year. 2019 is just the election year. If the projects are not done, it would affect the lawmakers. Many have promised their constituents that they would implement certain projects, and when such is not on ground during campaigns, they would not be able to point to what they have done, and why they should be re-elected,” the source said.

“The 2016 capital budget, N1.7 trillion was not fully implemented. Also, just about 80 per cent of the 2016 ZIF was released after intense negotiations. Obviously lawmakers who could not finish their constituency projects from that budget, would be relying on the current budget, and must have assured their people. Now no funds are being released under the 2017 budget, and it is obviously not a priority to the executive,” the source explained further.

The source disclosed that about 50 per cent of the ZIF could be released, but added that it would be hard for the lawmakers to get anymore than that in the current budget.

“It is not for nothing that the executive repeatedly says it is concentrating on priority projects, and these priority projects are in all the zones anyway,” the source said.
Lawmakers from the Senate and the House of Representatives who spoke off record expressed their displeasure at the development.

“We are the closest to our people, hence these projects. We promised our people, if we do not fulfill our promises, why would they re-elect us? Our constituents just want to see the boreholes, the primary health care centres, among others they would not understand the struggle here,” a lawmaker said.

Another lawmaker said it would be unfair to expect them to use their personal allowances for the constituency projects.

“Even our salaries are being delayed under this dispensation, and we get nothing extra. We cannot expend that on our constituencies. Admittedly, some of our colleagues use their personal funds for some things back home, particularly in places where the competition is stiffer. If you want to return, you cannot wait until the ZIF is released before fulfilling some of the promises to the constituents,” he said.

A House member further said that the hearing at the Senate was ‘closely monitored’ by the members of the green chambers who were happy with the resolutions.

“The resolution cautioned against selective implementation of the capital budget, which is where our projects are. That is our way of demanding of the implementation of the ZIF items” he said.

Reacting to the development, the Deputy Spokesman of the Senate, Senator Ben Murray Bruce expressed hope that the constituency projects would be funded, as they benefit the people more, not the lawmakers.

Speaking in a telephone interview, Ben Bruce said the project is for the people who get angry when they are not implemented as promised by “If you promised a link road that costs N20 million, and you do not have the link road, then people would be angry. If you promise a borehole because people have dirty water and they have monkeypox, because of the dirty water and dirty environment, and you cannot provide clean water, then they would be angry, because they put you into office and you cannot provide them clean water.”

“In a place like Bayelsa state which is riverine, no toilets anywhere, people use the bathroom (ease themselves in the waters) and drink it at the same time, are you surprised there is monkey pox? So something as simple as water, which does not benefit the senator or the House of Representatives, it benefits the poor man who needs clean water, and then you do not deliver, first you have sick people, you have an epidemic, you have angry people, people who cannot understand that in a modern economy, some people do not have clean water to drink, who do you blame?”

“Last year, my constituency project was providing solar power, so children can do their homework at night. This year, its agriculture (fish, corn, rice) , people have to feed. If I do these, how would that have a negative impact on the economy, and why would the government not fund such projects? None of the projects benefit me, they benefit the people who voted me into office. So constituency project is not a bad word, not a bad thing to do and i am glad we have it in the budget. I hope they fund it,” the Senator said.

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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Economy

Goldman Sachs Urges Bold Rate Hike as Naira Weakens and Inflation Soars

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Central Bank of Nigeria (CBN)

As Nigeria grapples with soaring inflation and a faltering naira, Goldman Sachs is calling for a substantial increase in interest rates to stabilize the economy and restore investor confidence.

The global investment bank’s recommendation comes ahead of the Central Bank of Nigeria’s (CBN) key monetary policy decision, set to be announced on Tuesday.

Goldman Sachs economists, including Andrew Matheny, argue that incremental rate adjustments will not be sufficient to address the country’s deepening economic challenges.

“Another 50 or 100 basis points is certainly not going to move the needle in the eyes of an investor,” Matheny stated. “Nigeria needs a bold, decisive move to curb inflation and regain investor trust.”

The CBN, under the leadership of Governor Olayemi Cardoso, is anticipated to raise interest rates by 75 basis points to 27% in its upcoming meeting.

This would mark a continuation of the aggressive tightening campaign that began in May 2022, which has seen rates increase by 14.75 percentage points.

Despite this, inflation has remained stubbornly high, highlighting the need for more substantial measures.

The current economic landscape is marked by severe challenges. The naira’s depreciation has led to higher import costs, fueling inflation and eroding consumer purchasing power.

The CBN has attempted to ease the currency’s scarcity by selling dollars to local foreign exchange bureaus, but these efforts have yet to stabilize the naira significantly.

“Developments since the last meeting have definitely been hawkish,” noted Matheny. “The naira has weakened further, exacerbating inflationary pressures. The CBN’s policy needs to reflect this reality more aggressively.”

In response to the persistent inflation and naira weakness, analysts are urging the central bank to implement a more coherent strategy to manage the currency and inflation.

James Marshall of Promeritum Investment Management LLP suggested that the CBN should actively participate in the foreign exchange market to mitigate the naira’s volatility and restore market confidence.

“The central bank needs to be a more consistent and active participant in the forex market,” Marshall said. “A clear strategy to address the naira’s weakness is crucial for stabilizing the economy.”

The CBN’s decision will come as the country faces a critical period. With inflation expected to slow due to favorable comparisons with the previous year and new measures to reduce food costs, including a temporary import duty waiver on wheat and corn, there is hope that the economic situation may improve.

However, analysts anticipate that the CBN will need to implement one final rate hike to solidify inflation’s slowdown and restore positive real rates.

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Economy

Currency Drop Spurs Discount Dilemma in Cairo’s Markets

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Egyptian pound

Under Cairo’s scorching sun, the bustling streets reveal an unexpected twist in dramatic price drops on big-ticket items like cars and appliances.

Following March’s significant currency devaluation, prices for these goods have plunged, leaving consumers hesitant to make purchases amid hopes for even better deals.

Mohamed Yassin, a furniture store vendor, said “People just inquire about prices. They’re afraid to buy in case prices drop further.” This cautious consumer behavior is posing challenges for Egypt’s consumer-driven economy.

In March, Egyptian authorities devalued the pound by nearly 40% to stabilize an economy teetering on the edge. While such moves often lead to inflation spikes, Egypt’s case has been unusual.

Unlike other nations like Nigeria or Argentina, where costs soared post-devaluation, Egypt is witnessing falling prices for high-value items.

Previously inflated prices were driven by a black market in foreign currency, where importers secured dollars at exorbitant rates, passing costs onto consumers.

Now, with the pound stabilizing and foreign currency more accessible, retailers are struggling to sell inventory at pre-devaluation prices.

Despite price reductions, the overall consumer market remains sluggish. The automotive sector has seen a near 75% drop in sales compared to pre-crisis levels.

Major brands like Hyundai and Volkswagen have slashed prices by about a quarter, yet buyers remain cautious.

The economic strain is not limited to luxury items. Everyday expenses continue to rise, albeit more slowly, with anticipated hikes in electricity and fuel prices adding to the pressure.

Experts highlight a period of adjustment as both consumers and traders navigate the volatile exchange-rate environment. Mohamed Abu Basha, head of research at EFG Hermes, explains, “The market is taking time to absorb recent fluctuations.”

Meanwhile, businesses face declining sales, impacting their ability to manage operating costs. Yassin’s store has offered discounts of up to 50% yet remains quiet. “We’ve tried everything, but everyone is waiting,” he laments.

The devaluation has spurred a shift in economic dynamics. Inflation has eased, but the pace varies across sectors. Clothing and transportation costs are up, while food prices fluctuate.

With the phasing out of fuel subsidies and potential electricity price increases, Egyptians are bracing for further financial strain. The recent 300% rise in subsidized bread prices adds another layer of concern.

The situation underscores the balancing act between maintaining consumer confidence and attracting foreign investment.

Economists suggest potential stimulus measures, such as lowering interest rates or increasing public spending, to boost demand.

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Economy

MPC Meeting on July 22-23 to Tackle Inflation as Rates Set to Rise Again

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Interbank rate

The Monetary Policy Committee (MPC) is set to convene on July 22-23, 2024, amid soaring inflation and economic challenges in Nigeria.

Led by Olayemi Cardoso, the committee has already increased interest rates three times this year, raising them by 750 basis points to 26.25 percent.

Nigeria’s annual inflation rate climbed to 34.19 percent in June, driven by rising food prices. Despite these pressures, the Central Bank of Nigeria (CBN) projects that inflation will moderate to around 21.40 percent by year-end.

Market analysts expect a further rate hike as the committee seeks to rein in inflation. Nabila Mohammed from Chapel Hill Denham anticipates a 50–75 basis point increase.

Similarly, Coronation Research forecasts a potential rise of 50 to 100 basis points, given the recent uptick in inflation.

The food inflation rate reached 40.87 percent in June, exacerbated by security issues in key agricultural regions.

Essential commodities such as millet, garri, and yams have seen significant price hikes, impacting household budgets and savings.

As the MPC meets, the National Bureau of Statistics is set to release data on selected food prices for June, providing further insights into the inflationary trends affecting Nigerians.

The upcoming MPC meeting will be crucial in determining the trajectory of Nigeria’s monetary policy as the government grapples with economic instability.

The focus remains on balancing inflation control with economic growth to ensure stability in Africa’s largest economy.

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