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FG Plans N8.9tn Budget for 2019

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  • FG Plans N8.9tn Budget for 2019

The Federal Government is planning to spend a total of N8.9tn in the 2019 fiscal period.

The amount is an increase of N305.86bn over the original estimates of N8.61tn presented to the legislature on November 7, 2017 by President Muhammadu Buhari for the 2018 fiscal year.

However, the planned N8.9tn spending will be about N220bn lower than the N9.12tn 2018 budget, which was passed by the National Assembly and assented to by the President.

The government is also planning to raise a total of N6.32tn as revenue next year to finance the budget.

The N6.32tn, when compared to the N7.16tn revenue projection approved for the current year, represents a decline of about N840bn.

The figures are contained in the Fiscal Strategy Paper of the Federal Government, which was obtained by our correspondent from the Budget Office of the Federation in Abuja.

The document showed that as a result of the planned increase in spending, the fiscal deficit of the government was expected to rise from the current N1.9tn to N2.59tn in 2019.

Further analysis of the document showed that the ratio of the country’s deficit to Gross Domestic Product was estimated to be at 2.08 per cent by next year.

It was also revealed that capital expenditure as a percentage of non-debt expenditure had been estimated at 41.28 per cent for 2019.

In the same vein, capital expenditure as a percentage of the total Federal Government spending is expected to drop from 31.5 per cent this year to 29.57 per cent next year, while recurrent expenditure as a percentage of government spending is being planned to rise from 68.5 per cent to 70.43 per cent.

Further analysis showed that debt service to revenue ratio might rise from this year’s rate of 30.76 per cent to 36.53 per cent in the 2019 fiscal year, while deficit as a percentage of the total Federal Government revenue might increase from 27.22 per cent to 40.95 per cent.

Oil production volume, according to the document, is expected to rise from 2.3 million barrels per day to 2.4 million barrels per day, with the budgeted oil benchmark price pegged at $50 per barrel.

In terms of revenue that will be available to fund the expenditure, details of the N6.32tn projected revenue showed that oil was expected to generate N3.24tn next year as against the budgeted N2.98tn for the current year.

On the other hand, non-oil revenue is expected to contribute N1.55tn next year as against the N1.24tn budgeted for this year.

A breakdown of the N1.55ttn non-oil revenue showed that N906.1bn is expected to be collected as Companies’ Income Tax compared to the 2018 budgeted amount of N658.5bn, while N264.1bn is expected to come from Value Added Tax as against N207.51bn projected for this year.

The Nigeria Customs Service, according to the document, is expected to provide the sum of N324.25bn for the Federal Government next year, which is marginally lower than the N324.86bn set for the agency for 2018.

Other sources of revenue to finance next year’s budget, according to the document, are independent revenue, which is projected at N890.34bn as against N847.94bn for this year; and special levies of N12.9bn as against N17.21bn in the current fiscal period.

In the same vein, the sum of N203.37bn is expected to be raised through domestic recoveries, assets and fines as against N374bn this year.

Similarly, about N168.97bn is being planned to be realised from other recoveries in 2019 compared to N138.43bn for the current year.

Grants and donor funding are expected to contribute N209.9bn to government’s revenue next year as against the N199.9bn captured in the 2018 budget.

On the expenditure side, the strategy document stated that out of the projected N8.9tn spending, N2.38tn would go for capital expenditure next year, as against N2.42tn for this year.

Debt service is expected to gulp N2.31tn next year as against N1.95tn this year, while N3.16tn is projected to be spent on recurrent expenditure (non-debt) as against N3.51tn provided in the current year’s budget.

Other projections for the 2019 fiscal year are personnel costs of N2.1tn; overheads, N210bn; pensions, N220bn; Power Sector Reform Programme, N251.4bn; service wide votes, N208.6bn; and the Presidential Amnesty Programme, N70bn.

Finance and economic experts said that in view of the fact that oil prices had been on the upward trend coupled with the aggressive tax revenue drive of the Federal Government, implementing a budget size of N8.9tn would not be too difficult.

The Registrar, Institute of Finance and Control of Nigeria, Mr Godwin Eohoi, stated, “It will be possible to finance the budget, because looking at the oil price, it was at $50 to a barrel when the 2018 budget was presented, but now it’s selling far above $70 per barrel.

“So it is still within acceptable limit to have the benchmark at $50 per barrel.

“There are other windows available to the government to generate more revenue, considering the aggressive drive to raise tax revenue from six per cent of the Gross Domestic Product to 15 per cent; so, I think the budget is implementable by the government.”

A developmental economist, Odilim Enwagbara, said the size of the Federal Government’s budget was still low compared to the country’s GDP size.

He noted that for the budget to make any significant impact, it must be raised to about 10 per cent of the GDP.

Enwagbara stated, “We should also raise the oil benchmark price to $80 per barrel to enable us deploy more revenue to fund the budget. The budget should be increased further to about 10 per cent of our GDP, because we have one of the lowest budgets in the world.

“When South Africa is budgeting about $200bn, Nigeria is having about $28bn budget for the year; this is very low for us as a country.”

A former Director General, Abuja Chamber of Commerce and Industry, Chijioke Ekechukwu, said the budget figure could be absorbed by the expected revenue from oil and other sectors.

He explained, “This revenue expectation does not obliterate the deficit end of the budget, which will still be funded by debts. Much as the debt profile of Nigeria is rising every day, the debt to GDP ratio is still not above any tolerable benchmark.

“As far as the increase is not arising from indiscriminate and arbitrary increase for selfish gains, the budget will be implementable.”

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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Economy

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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Economy

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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