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FG Recorded N3.4tn Fiscal Deficit in 2018

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  • FG Recorded N3.4tn Fiscal Deficit in 2018

Between January and December last year, the Federal Government recorded a fiscal deficit of N3.4tn in its operations, figures obtained from the Central Bank of Nigeria have revealed.

The 2018 budget, signed by President Muhammadu Buhari on June 20 last year, had total spending of N9.1tn.

It is made up of N2.87tn for capital expenditure, N3.51tn for recurrent (non-debt) expenditure while N2.01tn was budgeted for debt servicing.

The N9.1tn budget was expected to be financed from N2.99tn to be generated from oil revenue, N31.25bn from Nigeria Liquefied Natural Gas dividend while N1.17bn was expected to be realised through revenue from minerals and mining.

To fund the budget, the Federal Government had planned to generate N658.55bn from Companies Income Tax, N207.51bn from Value Added Tax, N324.86bn from Customs while N57.87bn was expected to come from federation account levies.

In the same vein, the government was expected to raise N847.95bn through independent revenue from its agencies, while tax amnesty income, signature bonus and unspent balance from previous years was to provide N87.84bn, N114.3bn and N250bn respectively

Details of the fiscal operations of the Federal Government as contained in the CBN economic report for the fourth quarter of 2018 showed that the government had not been able to generate adequate revenue to meet its expenditure.

For example, in the first quarter of last year, the Federal Government’s retained revenue was put at N884.88bn while it’s expenditure was N2.01tn. This resulted in a fiscal deficit of about N1.13tn.

In the second quarter of last year, the Federal Government earned N1.12tn while it’s expenditure was N1.63tn, resulting in a deficit of N504.8bn.

For the third quarter, the revenue of the Federal Government was put at N1.03tn with the expenditure of N1.89tn, leading to a deficit of N855.09bn.

For the fourth quarter, the fiscal deficit widened to N910.4bn as the government was only able to generate N916.44bn to take care of its total expenditure of N1.82tn.

The report read in part, “The Federal Government retained revenue for the fourth quarter of 2018 was estimated at N916.44bn.

“This was below the proportionate quarterly budget estimate and the receipts in the preceding quarter by 51.5 per cent and 11.5 per cent, respectively.

“Of the total revenue, the Federation Account accounted for 90.4 per cent, while Value Added Tax, Excess crude/Petroleum Profit Tax,

Federal Government Independent Revenue, Excess Non-oil and Exchange Gain accounted for 4.3, 3.5, 1.4, 0.3 and 0.1 per cent, respectively.

The estimated Federal Government expenditure for the fourth quarter of 2018 stood at N1.82tn and was below the proportionate quarterly budget estimate of N2.37tn by 23.1 per cent and the level in the preceding quarter by 3.4 per cent.

“A breakdown of the total expenditure showed that the recurrent component accounted for 87.8 per cent, while capital and statutory transfers accounted for 5.9 and 6.3 per cent, respectively.

“A further breakdown of the recurrent expenditure showed that the non-debt component accounted for 53.8 per cent, while debt service payments were 46.2 per cent.”

The Minister of Finance, Mrs Zainab Ahmed, had last month while unveiling a Strategic Revenue Growth Initiative aimed at boosting the level of revenue generation, said the government was concerned about the inability of some of its agencies to meet their revenue target.

She admitted that it had become a challenge for the government to mobilise fiscal resources to deliver on its developmental objectives, adding that President Muhammadu Buhari had directed that revenue generation needed to be enhanced.

She said while oil revenue to oil Gross Domestic Product ratio stood at about 39 per cent, non-oil revenue to non-oil GDP was about 4.2 per cent.

The finance minister explained that the country’s VAT revenue to GDP stood at less than one per cent, noting that this was low when compared to the ECOWAS average of 3.4 per cent.

In terms of excise revenue, she said at 4.1 per cent, revenue generated from excise duty in Nigeria was low compared to Ghana at 15.3 per cent and Kenya at 19.5 per cent.

She said, “Nigeria’s low revenue generation capabilities have been an enduring challenge to the past and present governments.

“Although we are celebrated as the country in Africa with the largest economy, translating this wealth into revenues remains a challenge.

“We have, therefore, faces difficulty in mobilising domestic funds necessary for human capital development and infrastructure that are both drivers of sustainable economic growth.

“Our current revenue to Gross Domestic Product ratio of about seven per cent is unsatisfactory and we are keen on exerting all efforts in turning this around.”

Ahmed said she had tasked the ministry of finance and its agencies to identify what could be done to turnaround the current revenue situation.

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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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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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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