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At last, National Assembly Passes N9.12tn Budget

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  • At last, National Assembly Passes N9.12tn Budget

The National Assembly eventually passed the 2018 budget on Wednesday, six months after President Muhammadu Buhari submitted the estimates to both chambers of the assembly.

The President had on November 7, 2017 submitted a proposal of N8.612tn for the 2018 fiscal year, but lawmakers on Wednesday passed N9.12tn as the budget, increasing it by N508bn.

From the passed budget, the Federal Government will spend N2.2tn to service debts, with N1.75tn to be spent on domestic debts, and N254.07bn on foreign debt service, while the sum of N190bn is appropriated as “sinking fund for retiring maturing debs.”

In 2017, debt servicing gulped N2.014tn.

The crude oil benchmark price for the budget also changed from $45 proposed by the Executive to $51.

The additional N508bn to the budget size was reflected in the sectoral allocations to government’s Ministries, Departments and Agencies.

For example, in Buhari’s estimates, the recurrent expenditure was captured as N3.494tn, but on Wednesday, the legislators approved N3.515tn as recurrent expenditure. Similarly, the development fund for capital expenditure was raised to N2.869tn from N2.652tn.

The provision for statutory transfers also rose to N530.421bn from N456bn.

For sectoral allocations, the Ministry of Power, Works and Housing got the highest vote of N714.6bn for recurrent and capital expenditure instead of Buhari’s total of N555.88bn.

Out of the N714.6bn, the ministry received N682.9bn for capital projects, leaving the balance of N31.7bn for recurrent spending.

The Ministry of Interior followed closely with a combined capital and recurrent vote of N576bn. The third largest sectoral allocation went to the Ministry of Defence, which got N575.6bn. This provision was aside from other votes for the military like the N78bn for the ‘Operation Lafiya Dole’.

The Ministry of Education got N541.2bn for both capital and recurrent expenditure, up from the N496.9bn proposed by the President.

The National Assembly too benefitted from the increase in allocations, raising its vote from N125bn to N139.5bn.

However, the naira/dollar exchange rate was retained at N305/$1, while the daily crude oil production was also retained at 2.3 million barrels.

The Chairman, House Committee on Media and Public Affairs, Mr. Abdulrazak Namdas, gave additional information on the changes made to the budget soon after the lawmakers rose on Wednesday.

Namdas said the new crude oil benchmark price was approved in order to reduce the overall deficit by N50.88bn and to make additional allocation of N106.5bn to the power, works and housing ministry.

He stated that health and security sectors got additional N57.1bn and N46.7bn, respectively.

“We put N15.7bn, for example, for the 12 new universities and meal subsidy for unity schools. Also, the judiciary received N10bn, while the Niger Delta Development Commission got N44bn, among others,” Namdas said.

The budget by the National Assembly, however, did not include the $496m fund for the purchase of 12 Super Tucano aircraft from the United States for which President Buhari had sought anticipatory approval from the legislature.

The $496m was taken from the $1bn already approved by the Federal Executive Council for security purposes.

The lawmakers, who had declared the subsidy on Premium Motor Spirit (petrol) being funded by the Nigerian National Petroleum Corporation as illegal, asked Buhari to forward a supplementary budget to include the arms and subsidy funds.

The Chairman, Senate Committee on Appropriations, Senator Danjuma Goje, who presented the report on the budget, stated that Buhari’s request for the aircraft was not included in the budget due to the amount of money involved.

“Don’t forget that the President wrote to this chamber requesting that it should be included in the budget. But we did not because of the size of the amount. It should come as a supplementary budget,” he said.

The report said the additional N508bn was based on the agreement between the executive and the legislature due to the increase in the price of crude oil.

It read in part, “(The) special intervention (is) as a result of increase in oil price benchmark. After close consultation with the executive, the increase in oil price benchmark was applied in the following critical sectors of the economy.

“Reduction of deficit, N50.88bn; security, N46.72bn; health, N57.15bn; power, works and housing, N106.50bn; education, particularly for the infrastructure for the 12 newly established universities and meal subsidy in unity schools, N15.70bn; judiciary, N10bn; and Niger Delta Development Commission, N44.20bn.”

The President of the Senate, Bukola Saraki, in his remarks, asked the executive to present a supplementary budget that would capture areas not covered in the passed budget.

Saraki said, “For me, today is a very happy day for those of us who are from the medical profession, those serving and those who are not serving. I want to, on behalf of all practising doctors – not native doctors – thank the entire National Assembly for this one per cent of the budget (voted) towards primary health care provision. This will go a long way in addressing our health issues.

“As we all know today, Nigeria accounts for 10 per cent of the world’s maternal mortality, nine per cent for child mortality, and about eight per cent for infant mortality. This is not where we should be as a country. And I think what we have done today is to open a new page that enables our people to be much healthier and stronger.”

He added, “In the area that we could not address, which is the issue of fuel subsidy, I want to make an appeal again that the executive needs to look into this for the interest of transparency, where an expenditure close to over N1tn must be captured in the budget. And when the supplementary (budget) comes, the executive should do something about this area. It is an important issue we must address.

“In doing that, we must appreciate now that the crude oil price is close to $80 (per barrel) and a lot of Nigerians are expecting to see our Excess Crude Account to be on the rise. But if money is being used for subsidy, at the end of the day, we will have it difficult to explain. That is why it is important that we capture this subsidy into the budget.”

Meanwhile, finance and economic experts have said that the passage of the budget by the National Assembly will boost investors’ confidence in the economy.

The Head, Banking and Finance Department, Nasarawa State University, Prof. Uche Uwaleke, said during a telephone interview with one of our correspondents that the delay in the passage would affect the full implementation of the capital component of the budget, adding that it would in the short term provide the much needed direction for the economy.

He stated, “It’s a welcome development because it is better late than never. We are likely going to see an upsurge in economic activities and it’s going to facilitate the pace of economic recovery now that the budget has been passed.

“The expectation is that the President will assent to it and stop further delay, because the amendments that were made by the National Assembly are justified because the assumptions sent by the executive are no longer realistic.

“So, we expect that economic activities can commence, particularly in the capital market. Activities in the capital market, most especially the equity segment of the market, have been down as a result of uncertainties caused by the delay in the budget passage. Now that the budget has been passed, the market will react positively because we now have a short-term direction.”

Uwaleke added, “It is going to reduce uncertainty and boost investors’ confidence in the economy; but going forward, we should avoid a situation where it will take over six months for the budget to be passed.

“We should try to get the budget started so that implementation can commence. As it is, it is difficult to talk about the success rate of implementation, because you can’t expect that the budget will be implemented 100 per cent, particularly the capital component, as the budget is coming rather late.”

In his comments, a former Managing Director, Unity Bank Plc, Mr. Rislanudeen Mohammed, said that the Federal Government might not be able to fully implement the capital component of the budget owing to the delay in its passage.

He said while the overhead, personnel and debt service components would be fully implemented, the timing of the budget passage would not make it effective for the capital votes to be implemented.

Mohammed stated, “The government cannot implement the budget effectively. What will happen is that the recurrent expenditure will be fully implemented, the statutory transfers will also be fully implemented, but the capital expenditure will suffer because there will be no time.

“What they can implement with the delayed budget is about 40 per or 50 per cent of capital votes, and this is not good for the economy, because it is the capital projects that will have direct effect on the livelihood of Nigerians. Politics has overtaken economics.”

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

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Zambian economy

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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Northern Ethiopia - Investors King

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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