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FAAC Meeting Ends in Deadlock Over NNPC’s N37bn Underpayment

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  • FAAC Meeting Ends in Deadlock Over NNPC’s N37bn Underpayment

The Federation Accounts Allocation Committee meeting, which was convened on Tuesday to consider and approve the statutory allocation for February, ended in deadlock.

The committee could not approve the allocation to the three tiers of government owing to what was described as discrepancies in revenue figures presented to the committee by the Nigerian National Petroleum Corporation.

The meeting, which is convened to consider and approve revenues into the Federation Account and allocation to the three tiers of government, is usually presided over by the Minister of Finance, Mrs. Kemi Adeosun.

Other members of the committee are the Accountant-General of the Federation, Alhaji Ahmed Idris; commissioners for finance from the 36 states; representatives of revenue- generating agencies such as the Federal Inland Revenue Service, the Nigeria Customs Service and the NNPC, among others.

Idris confirmed the inconclusiveness of the meeting during a media briefing shortly after the gathering, which was held at the headquarters of the Ministry of Finance.

He said the committee came to the decision to postpone the meeting after discovering that the revenue remitted by the NNPC into the Federation Account was understated.

Idris stated that following various submissions made at the meeting by the members of FAAC, it was decided that there was a need to postpone the meeting pending the reconciliation of the revenue figure.

He said, “Let me be quick to tell you that the meeting was inconclusive because issues around reconciliation of figures are on the table.

“Obviously, you are all aware that anything that has to do with the federation revenue is statutory and therefore constitutional. And we must always verify our figures to the last kobo, failing which we will be committing illegality and unconstitutionality.

“It is on that note that we observed some issues in the figures given by one of the major revenue-generating agencies, namely the NNPC. And the committee is of the opinion that until and unless these figures are reconciled, corrected, verified and are factual, we cannot distribute the revenue as the case is.”

He added that the revenue would not be distributed until all outstanding issues were resolved.

The AGF said that while the government was committed to meeting its obligations to the people, such must be done in line with constitutional requirements.

He stated, “Let me be quick to inform Nigerians that we are sensitive to the issues but again, we have to follow the constitution and the necessary laws for the distribution of revenue and it is on this note that I inform you that the meeting has not been concluded.

“We will look at the revenue figures as submitted by the NNPC and reconcile such figures, and upon the conclusion of the reconciliation of that figure, we will share the revenue accordingly.

“We have to explain this to Nigerians, bearing in mind that as civil servants, workers in the federal, state and local governments deserve to have their salaries and all other commitments of the government.”

When asked how much the under-remittance was by the NNPC, the AGF failed to provide the amount, but added that the committee would investigate and determine the figure.

He added, “It’s not about the quantum of amount that is being distributed; it’s about reconciliation. In finance and accounting, when you hear reconciliation, it means figures don’t tally as presented by different sections and once figures do not agree, they must be made to agree.

“Unless we get to the bottom of it, have clarity and some level of certainty, we remain where we are.”

When asked when the meeting would be reconvened, he said, “As soon as possible; as we leave here, we are going to embark on the exercise because we feel time is of the essence. We must meet our responsibilities to the Nigerian workers.”

The Chairman, Forum of FAAC Commissioners, Mahmoud Yunusa, who spoke in an interview with our correspondent after the meeting, said that the amount in contention was about N100bn.

He said, “We started this meeting last week and the NNPC did not submit their figures until yesterday (Monday), which we were not able to review until this morning.

“This morning when we were reviewing the figures as presented by the NNPC, it came as a great surprise to see that the amount was less than N100bn. So, we decided that we will not accept the figure presented, that we will contest it.

“And we are contesting the figure because pipeline vandalism has reduced, while crude oil prices have continued to go up. So, we are wondering why the nation cannot raise enough money through that sector to share to states so that everyone can pay workers, contractors and so on.”

Yunusa added that the inability to approve the revenue for the month of February on time might affect the payment of workers’ salaries before Easter.

Investigations by our correspondent revealed that the amount remitted by the NNPC into the Federation Account for February was N74.06bn.

This, according to documents made available to the committee, is N37.76bn lower than the N111.83bn remitted in the previous month.

The document, which was obtained by our correspondent read, “A total sum of N74,067,185,437.92 was collected in the month of February, 2018, this shows a negative variance of N1,939,889,304.24 or 2.55 per cent below the approved monthly budget for 2017.

“Compared to the collection of N111,835,458,519.12 in January, 2018, this sum (N74,067,185,437.92), the February collection was lower by N37,769,273,081.20 or 33 per cent.

“We were unable to meet the approved budget as a result of low collection from concession rentals and PSC (Product Sharing Contract) and royalty.”

Meanwhile, Adeosun has reconvened the meeting of FAAC for today (Wednesday).

The meeting, according to a statement by her Media Adviser, Oluyinka Akintunde, on Tuesday night, is expected to hold at 9am at the headquarters of the finance ministry.

Akintunde said the minister had also called for an emergency meeting next week with the Group Managing Director of the NNPC, Dr. Maikanti Baru, and key management of the corporation over revenue payment into the Federation Account.

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

African Economy Set for Steady Growth: 4% Projected for 2025

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Nigerian Breweries - Investors King

Experts are forecasting a robust growth trajectory of 4% for the continent in 2025.

This optimistic projection was highlighted during the ongoing Afreximbank annual meetings, incorporating the Africaribbean Trade and Investment Forum, held recently in Nassau, The Bahamas.

Yemi Kale, Group Chief Economist and Managing Director of Research and International Cooperation at Afreximbank, presented the 2024 African Trade Report and Economic Outlook, saying the African Continental Free Trade Area (AfCFTA) is significant in driving economic integration and growth.

The projected growth rate of 4% for 2025 reflects a steady recovery path for Africa, building on the expected 3.5% growth anticipated for 2024.

This positive outlook comes at a crucial time when African economies are navigating challenges posed by global economic dynamics, including inflationary pressures and supply chain disruptions.

Kale underscored the resilience of intra-African trade, which expanded by 3.2% in 2023 despite a 6.3% overall contraction in Africa’s trade volumes.

This resilience is a testament to the AfCFTA’s potential to bolster regional trade ties and reduce dependency on external markets.

The Afreximbank report also delved into macroeconomic environments, trade patterns, and sovereign debt sustainability dynamics, providing policymakers and business leaders with actionable insights to navigate complexities in global markets effectively.

Nomusa Dube-Ncube, Premier of Kwazulu-Natal, highlighted Africa’s modest share of global GDP and manufacturing output, emphasizing the untapped potential within intra-African trade.

She noted that while Africa currently accounts for only 3% of world trade, intra-regional trade is steadily increasing, indicating a growing economic ecosystem within the continent.

Pamela Coke-Hamilton, Executive Director of the International Trade Centre (ITC), echoed the sentiment, advocating for enhanced trade between Africa and the Caribbean.

The ITC projects trade in goods and services between these regions to reach $1 billion by 2028, underscoring the mutually beneficial opportunities for economic expansion.

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Economy

Nigeria Sees 95% Surge in Food Imports Despite Emergency on Food Production

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Nigeria’s food import bill has surged to a five-year high in the first quarter of 2024, despite the federal government declaring a state of emergency on food production.

Data from the National Bureau of Statistics (NBS) reveals a 95.28 percent increase in food imports to N920.54 billion from January to March, compared to N471.39 billion in the same period last year.

This alarming rise comes amid soaring food inflation, which hit a record 40.5 percent in April, reflecting a 15.92 percent year-on-year increase.

The sharp inflation has left many Nigerians struggling to afford a balanced diet, exacerbating the food security crisis in Africa’s most populous nation.

In March, President Bola Ahmed Tinubu emphasized the government’s commitment to self-sufficiency in food production, stating that Nigeria would not rely on imports to stabilize prices.

“We will not allow the importation of food but rather turn the lack in the country into abundance,” Tinubu declared. However, the latest import figures suggest that this goal remains elusive.

The NBS Foreign Trade Statistics report highlights that the value of food imports via maritime, air, and land routes surged 29.4 percent from N711.4 billion in the fourth quarter of 2023.

Major agricultural goods imported included durum wheat from Canada and Lithuania, valued at N130.26 billion and N98.63 billion, respectively. Frozen blue whitings from the Netherlands accounted for N16.67 billion.

Wheat imports alone constituted N519.75 billion of the total food import bill. The average cost of wheat imports, a significant driver of the food import value, increased by 33 percent compared to the previous quarter’s value of N391.01 billion.

The rising importation of wheat reflects its popularity among Nigerian consumers amid skyrocketing prices of close substitutes like garri and rice.

Overall, Nigeria’s total imports for Q1 2024 amounted to N12.64 trillion, representing a 39.65 percent increase from N9.05 trillion in Q4 2023 and a 95.53 percent rise from N6.47 trillion in Q1 2023. Food imports accounted for 7.3 percent of total imports during the period under review.

The bulk of Nigeria’s imports came from Asia, China, Europe, America, and Africa. Mineral fuels topped the import category with N4.44 trillion, representing 35.09 percent of total imports.

Machinery and transport equipment followed with N3.17 trillion, contributing 25.08 percent, and chemicals and related products at N1.79 trillion, making up 14.13 percent of total imports.

Despite the federal government’s initiatives to boost local food production and reduce dependency on imports, the latest data underscores the persistent challenges facing Nigeria’s agricultural sector.

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Ethiopia Boosts Spending by 21%, Eyes IMF Program for Economic Relief

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Ethiopia has announced a 21% increase in its 2025 budget, marking the first budget since defaulting on a Eurobond payment and committing to economic reform discussions with the International Monetary Fund (IMF).

The nation’s Finance Minister, Ahmed Shide, revealed the new budget details to lawmakers on Tuesday, outlining plans to spend 971.2 billion birr ($16.9 billion) in the fiscal year starting July 2024.

The increased budget reflects Ethiopia’s commitment to addressing its economic challenges head-on. Despite the heightened expenditure, the fiscal deficit is projected to remain stable at 2.1% of gross domestic product (GDP), unchanged from the current fiscal year.

Financing the Deficit

Minister Shide outlined a plan to cover the 358.5 billion-birr deficit through a combination of local and foreign borrowing.

The domestic borrowing component will be managed via government treasury bills and medium-term bonds. Shide emphasized that until substantial external donor support is secured, Ethiopia will continue to rely heavily on its domestic markets to finance budget deficits.

“While the government has secured some external financing from the World Bank and the European Union, negotiating an IMF program will be crucial to alleviate pressure on local banks and secure overall debt relief,” said Giulia Filocca, a senior analyst at Standard & Poor’s for sovereign and international public finance ratings.

IMF Program and Economic Reforms

An agreement with the IMF is seen as a pivotal step for Ethiopia. The nation failed to remit a $33 million coupon payment for its $1 billion bond in December 2023, leading to agreements with some creditors, including the Paris Club, to suspend debt repayments.

In exchange, Ethiopia is expected to reach a staff-level agreement with the IMF, which will likely include economic reforms such as devaluing the birr currency.

“Our expectation is that an IMF program will be signed this year, but the timeline remains unclear due to ongoing political developments and challenges over foreign-exchange reforms,” added Filocca.

Budget Highlights

The new budget includes 451.3 billion birr for recurrent spending, 283.2 billion birr for capital expenditure, and 236.7 billion birr allocated for regional subsidies.

The government projects income of 612.7 billion birr, with tax revenue expected to contribute 502 billion birr and non-tax income 61.6 billion birr. Sector budget support is anticipated to bring in 7.3 billion birr, with aid and grants expected to add 41.8 billion birr.

Economic Outlook

Ethiopia’s economy is forecasted to expand by 8.4% in the coming fiscal year, up from an expected 7.9% growth rate in the current period. The budget increase is designed to support this growth trajectory by enhancing public investment and stimulating economic activity.

“Our partnership with the IMF and other international financial institutions will be key to ensuring Ethiopia’s economic resilience and sustainable growth,” Minister Shide concluded. “We are committed to implementing the necessary reforms to secure a brighter economic future for our country.”

As Ethiopia navigates its economic challenges, the government’s proactive approach to increasing spending and engaging with the IMF reflects a strategic effort to restore fiscal stability and drive long-term economic development.

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