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2018 budget: Experts Fault Non-oil Revenue Projection

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  • 2018 budget: Experts Fault Non-oil Revenue Projection

Finance and economic experts on Wednesday commended the Federal Government for increasing allocation to some key sectors of the economy such as power, works and housing; industry, trade and investment; transportation, water resources, agriculture and rural development.

The Federal Government in the 2018 budget proposal submitted to the National Assembly by President Muhammadu Buhari on Tuesday proposed to spend N555.8bn on capital projects in the Ministry of Power, Works and Housing as against N529bn allocated in 2017.

Transportation has a proposal for N263.1bn capital expenditure in 2018 as against N262bn in the current year, while agriculture and water resources have N118bn and N95bn as against N75bn and N95bn, respectively in 2017.

The experts, however, said that while the budget was crafted to stimulate growth and reduce poverty, the naira/dollar exchange rate used was not feasible.

A former President of the Nigerian Economic Society and current Executive Director, African Centre for Shared Development Capacity Building, Prof. Olu Ajakaiye, said the government was too optimistic in its projected revenues from non-oil sources.

In 2018, the government projects oil revenues of N2.442tn and non-oil as well as other revenues at N4.165tn.

The non-oil and other revenue of N4.165tn include share of the Companies Income Tax of N794.7bn; Value Added Tax of N207.9bn; Customs and Excise receipts of N324.9bn; Federal Government of Nigeria independently-generated revenues of N847.9bn; amnesty income of N87.8bn; various recoveries of N512.4bn; N710bn as proceeds from the restructuring of government’s equity in Joint Ventures; and other sundry incomes of N678.4bn.

Ajakaiye also opined that the debt servicing would be consuming a lot of resources and advised that government’s shifting attention to foreign borrowing should not lead to foreign debt overhang in the future.

Ajakaiye said, “On a general note, the budget is good. The only aspect that is too optimistic is the non-oil revenue projection. The increase from the figure of last year is quite large. The government needs to make sure that it has a structure in place to realise its projection on VAT and Company Income Tax.

“They may have taken into consideration that corporations that have not been making returns will start doing so. This year, for instance, JAMB suddenly made a huge return to the government.

“However, over the years, the targets from the non-oil revenue had not been met. The government needs to close the gaps.”

He added, “Another thing we see is that the debt service charge is still too high. Shifting to low-cost borrowing, we need to ensure that the funds are applied to generate not only naira, but also foreign currencies. The future challenge and risk of external borrowing should not be ignored.”

Ajakaiye urged the National Assembly to scrutinise the budget and pass it on time so that the implementation could start in January, adding that this had been the challenge over the years.

The President, Institute of Fiscal Studies of Nigeria, Mr. Godwin Ighedosa, said the decision of the Federal Government to make non-oil sector as the centre of its revenue projections to execute its plans in 2018 was commendable.

He, however, expressed worry over how the funds would be raised.

Ighedosa said, “For the first time, we are projecting that non-oil revenue is going to overtake oil revenue, which obviously is a welcome development because since the 1970s, our economy has been largely dependent on oil revenues.”

On his part, the Registrar, Chartered Institute of Finance and Control of Nigeria, Mr. Godwin Eohoi, said the increased allocation to power, works and housing would stimulate economic activities.

He stated, “The 2018 budget was properly structured to revive our economy but where the government did not get it right is in the area of the exchange rate, which was pegged at N305 to a dollar. This is not realistic and it may cause distortions.”

Meanwhile, analysts have said the increase in allocation to the ministries of Agriculture, Power, Works, Housing, Petroleum Resources and Aviation, among others, is not something to be excited about.

According to them, the government has yet to show enough willingness to adequately implement previous budgets, as they stressed that although the increase in capital allocation in the 2018 bill was a welcome development, its implementation must be taken seriously.

The President, Oil and Gas Trainers’ Association of Nigeria, Dr. Mayowa Afe, said, “Since things are gradually improving, we expect that the budget implementation for next year will be something to cheer about. That is the expectation of all us, particularly in the energy sector.

“Adequate implementation of the budget will build and boost confidence in the system; a lot of people will have money to spend and we are looking forward to more spending by the government. That is our expectation; they should implement a greater percentage of the 2018 budget.”

The President, Constance Shareholders Association of Nigeria, Shehu Mikhail, stated that the poor implementation of budgets was not only affecting capital projects across the country, but was adversely impacting on the capital market.

He said, “The government is not serious about implementing the budget, so why should we celebrate the increase in capital expenditure in the 2018 Appropriation Bill? For the 2017 budget, have they implemented it to a considerable extent? No, it has not been adequately implemented.”

In his contribution, the President, Federation of Construction Industry, an umbrella body for construction companies in Nigeria, Solomon Ogunbusola, stated that the National Assembly should pass the bill in good time to help its implementation.

“The increase in allocation to the works ministry is a welcome development. But we hope the budget will be passed by the National Assembly in good time for proper or higher percentage implementation so that it does not go the way that the 2017 budget seems to be going at the moment,” he said.

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.

Economy

Electricity Consumers Get 611,231 Meters Under MAP Scheme

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Electricity Consumers Get 611,231 Meters Under MAP Scheme

A total of 611,231 meters have been deployed as at January 31, 2021 under the Meter Asset Provider initiative since its full operation despite the COVID-19 pandemic and other extraneous factors, the Nigerian Electricity Regulatory Commission has said.

NERC disclosed this in a consultation paper on the review of the MAP Regulations.

The proposed review of the MAP scheme is coming nearly four months after the Federal Government launched a new initiative called National Mass Metering Programme aimed at distributing six million meters to consumers free of charge.

“The existence of a huge metering gap and the need to ensure successful implementation of the MYTO 2020 Service-Based Tariff resulted in the approval of the NMMP, a policy of the Federal Government anchored on the provision of long-term low interest financing to the Discos,” NERC said.

The commission had in March 2018 approved the MAP Regulations with the aim of fast-tracking the closure of the metering gap in the sector through the engagement of third-party investors (called meter asset providers) for the financing, procurement, supply, installation and maintenance of meters.

It set a target of providing meters to all customers within three years, and directed the Discos and the approved MAPs to commence the rollout of meters not later than May 1, 2019.

But in February 2020, NERC said several constraints, including changes in fiscal policy and the limited availability of long-term funding, had led to limited success in meter rollout.

NERC, in the consultation paper, highlighted three proposed options for metering implementation going forward.

The first option is to allow the implementation of both the NMMP and MAP metering frameworks to run concurrently; the second is to continue with the current MAP framework with meters procured under the NMMP supplied only through MAPs (by being off-takers from the local manufacturers/assemblers).

The third option is to wind down the MAP framework and allow the Discos to procure meters directly from local manufacturers/assemblers (or as procured by the World Bank), and enter into new contracts for the installation and maintenance of such meters.

“Customers who choose not to wait to receive meters based on the deployment schedule of the NMMP shall continue to have the option of making upfront payments for meters which will be installed within a maximum period of 10 working days,” NERC said.

The regulator said such customers would be refunded by the Discos through energy credits, adding that there would be no option for meter acquisition through the payment of a monthly meter service charge.

“Where meters have already been deployed under the meter service charge option, Discos shall make one-off repayment to affected customers and associated MAPs. Such meters shall be recognised in the rate base of the Discos,” it added.

NERC urged stakeholders to provide comments, objections, and representations on the proposed amendments within 21 days of the publication of the consultation paper.

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Nigeria’s Economy Moving in Right Direction but Slow – Amina Mohammed

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Nigeria’s Economy Moving in Right Direction but Slow – Amina Mohammed

Nigeria is moving in the right direction economically but its movement is not fast, the United Nations stated on Thursday.

Deputy Secretary-General of the United Nations, Amina Mohammed, said this during a meeting at the headquarters of the Federal Ministry of Industry, Trade and Investment in Abuja.

She said the challenges in Nigeria were huge, its population large but described the country’s economy as great with lots of opportunities.

The UN scribe stated that after traveling by train and through various roads in the Northern parts of Nigeria, she discovered that the roads were motorable, although there were ongoing repairs on some of them.

Mohammed said, “This is a country that is diverse in nature, ethnicity, religious backgrounds and opportunities. But these are its strengths, not weaknesses.

“And I think the narrative for Nigeria has to change to one that is very much the reality.”

Speaking on her trips across parts of Nigeria, she said, “What I saw along the way is really a country that is growing, that is moving in the right direction economically. Is it fast enough? No. Is it in the right direction? Yes it is.

“And the challenges still remain with security, our social cohesion and social contract between government and the people. But I know that people are working on these issues.”

She said the UN recognised the reforms in Nigeria and other nations, adding that the common global agenda was the Sustainable Development Goals.

Mohammad commended Nigeria’s quick response to the COVID-19 pandemic, as she expressed hope that the arrival of vaccines would be the beginning of the end of COVID-19.

On his part, the Minister of Industry, Trade and Investment, Adeniyi Adebayo, told his guest that the Federal Government was working hard to make Nigeria the entrepreneurial hub of Africa.

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N10.7tn Spent on Fuel Subsidy in 10 Years – MOMAN

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N10.7tn Spent on Fuel Subsidy in 10 Years – MOMAN

Nigeria spent a total of N10.7tn on fuel subsidy in the last 10 years, the Chairman, Major Oil Marketers Association of Nigeria, Mr Adetunji Oyebanji, has said.

Oyebanji, who was the guest speaker at the 18th Aret Adams Lecture on Thursday, said N750bn was spent on subsidy in 2019.

He highlighted the need for a transition to a market-driven environment through policy-backed legislative and commercial frameworks, enabling the sustainability of the downstream petroleum sector.

“Total deregulation is more than just the removal of price subsidies; it is aimed at improving business operations, increasing the investments in the oil and gas sector value chain, resulting in the growth in the nation’s downstream petroleum sector as a whole,” he said.

The managing director of 11 Plc (formerly Mobil Oil Nigeria Plc) said steps had been taken, “but larger and faster leaps are now required.”

According to him, deregulation requires the creation of a competitive market environment, and will guarantee the supply of products at commercial and market prices.

“It requires unrestricted and profitable investments in infrastructure, earning reasonable returns to investors. It requires a strong regulator to enable transparency and fair competition among players, and not to regulate prices,” Oyebanji said.

He noted that MOMAN had recently called for a national debate by stakeholders to share pragmatic and realistic initiatives to ease the impact of the subsidy removal on society – especially on the most vulnerable.

He said, “A shift from crude oil production to crude oil full value realisation through deliberate investment in domestic refining and refined products distribution, creates the opportunity to transform the dynamics of the downstream sector from one of ‘net importer’ to one of ‘net exporter’, spurring the growth of the Nigerian economy.

“Effective reforms and regulations are key drivers for the growth within the refining sector. Non-functional refineries cost Nigeria over $13bn in 2019. If the NNPC refineries were operating at optimal capacity, Nigeria would have imported only 40 per cent of what it consumed in 2019.”

Full deregulation of the downstream sector remains the most glaring boost to potential investors in this space, according to Oyebanji.

He said, “As crude oil prices will fluctuate depending on the prevailing exchange rates, it will be astute to trade in naira to avoid inevitable price swings.

“There needs to be a balance between ensuring the sustainable growth of the crude oil value chain (upstream through downstream) and providing value for the Nigerian consumer and the Nigerian economy.”

He said the philosophy should be for the government to put the legislative and commercial framework in place and let the market develop by itself.

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