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Experts to Buhari: Remove Petrol Subsidy, Cut Interest Rates



  • Experts to Buhari: Remove Petrol Subsidy, Cut Interest Rates

Foreign and local economic experts have said President Muhammadu Buhari should put at the top of his second-term agenda the removal of petrol subsidy as well as the reduction of interest rates in a bid to stimulate investments and economic growth.

Experts at Agusto & Co Limited, a credit rating agency, said in a report on Tuesday that the country “is currently in a dire fiscal strait and the numbers are quite grim.”

“For instance, despite the positive spin about Nigeria’s benign debt to Gross Domestic Product currently around 20 per cent, interest payments as a percentage of revenue are over 60 per cent,” they said.

The Lagos-based rating agency said Buhari’s government would have to work to raise revenue while also restructuring government spending.

It said, “All options on the table for Mr Buhari in his last term are hard choices with no easy way out. For instance, Nigeria’s current fuel subsidy regime indicates the country may have re-adopted opaque practices of the past that not only create a huge fiscal hole but a morass as well.

“With subsidy payments probably in the range of N1.2tn-N1.3tn annually, the country is obviously hemorrhaging especially amidst the steep opportunity costs. Mr Buhari will not only have to stop this fiscal hemorrhage but also muster the political will to deregulate the downstream petroleum industry once and for all.”

According to Agusto & Co, some of the big issues that will make or mar Buhari’s economic records will be the management of subsidies and other cost-unreflective tariffs being stifled by price controls.

“These reforms will require the removal of subsidies on the pump price of petrol, allow market forces to determine the domestic price of natural gas, allow electricity tariffs that enable operators to earn margins on their costs and also ensure exchange rates reflect fundamentals. These reforms could help stimulate investments across the board and unlock economic growth,” the experts added.

They said the Buhari administration should seek to improve efficiencies in the economy by concessioning key infrastructure and eliminating monopolies of state-owned enterprises in key sectors such as aviation (airport ownership and management), railway and electricity transmission by opening up the sectors to private sector investments.

The Global Chief Economist, Renaissance Capital, Charlie Robertson, in an emailed note on Tuesday, said Nigeria would require a doubling of oil price or industrialisation to achieve real per capita GDP growth of four to six per cent (i.e. headline GDP growth of seven to nine per cent).

He said, “Without it, per capita GDP growth may be around zero per cent, which implies headline GDP rising at roughly three per cent annually.

“To achieve industrialisation, Nigeria needs to raise the adult literacy rate from 60 per cent to 70-80 per cent – which we think can happen from 2024 onwards; treble electricity consumption – which we assume requires at least a doubling of the electricity tariff, and double the investment rate from 13 per cent of GDP to 26 per cent of GDP – or triple it, to match what Ethiopia is doing.”

Robertson added, “To double the investment rate, we suggest that reforms may be needed, like removing the implicit fuel subsidy that costs about 0.5 per cent of GDP. It supports consumption and not investment.”

He said the government should “boost domestic savings and bring down interest rates which will probably require a smaller budget deficit and higher taxes, and encourage foreign direct investment, which in 2018 fell to $2.2bn, according to the United Nations Conference on Trade and Development.

“Ghana got $3bn. To match Ghana (per capita), Nigeria should be getting $24bn a year. A change of approach to MTN, the oil majors and others may be required.”

According to Robertson, the naira should be allowed to trade closer to fair value, estimated today at N440/$, N470 by year-end and N670 by end-2023.

“Allowing faster currency depreciation does partly contradict point 3 on cutting interest rates,” he added.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.

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World Bank Lauds Kogi’s 2020 Financial Statement



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The World Bank has heaped praise on the Government of Kogi State concerning the state’s audited financial statement for 2020. The financial institution was said to have described the financial report as a standard to look up to concerning transparency and accountability in the public sector.

In a statement which was dated November 21, 2021 it was said that the bank made the commendation in a letter which was sent to the Accountant General of the state.

As said in the statement, the letter which was taken by the Kogi State Accountant General on November 2025 was signed by Deborah Hannah Isser, the Task Team Leader of the States Fiscal Transparency, Accountability and Sustainability Programme (SFTAS), Nigeria Country Office, Western and Central African Region.

SFTAS is a $750 million programme which has been set up to reward states for meeting any or every one of the indicators which demonstrate improvements in fiscal transparency, sustainability and accountability.

The indicators, which are nine in number were a byproduct of the former Fiscal Sustainability Plan of the federal government where States would be rewarded for meeting up to 22 targets.

The World Bank had previously backed the federal government to give incentives to the states in order to properly execute the 22-point Fiscal Sustainability Plan, which has now gone under a revamp as the nine Disbursement Linked Indicators under SFTAS.

Some of the criteria on which judgement will be based on are: improvement in financial reporting and budget reliability, improved cash management, increased openness, citizen participation in the budget process, reduced revenue leakages through the execution of State Treasury Single Account (TSA), a strengthened Internally Generated Revenue (IGR) collection, biometric registration and Bank Verification Number (BVN) used to reduce payroll fraud.

The World Bank commended the Kogi State government for preparing its audited financial statements in line with the basis of the International Public Sector Accounting Standards.

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Nigeria’s Rigid Forex Policy Discouraging Investors, Fueling Inflation – World Bank



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The World Bank has blamed the Central Bank of Nigeria’s rigid forex policy for the drop in Nigeria’s capital importation and rising inflation rate.

The bank disclosed in its November report, Nigeria Development Update.

Explaining modalities for its position, the World Bank stated that there had been constant pressure on the Nigerian Naira with the current forex policy, forcing the central bank to consistently increase its nominal official exchange rate in an effort to ease some of the pressure.

This, it blamed on the rigid foreign exchange management system of the Central Bank of Nigeria, saying the system has also been responsible for the rising inflation rate in Nigeria.

The report read in part, “The government’s exchange rate management policies continue to discourage investment and fuel inflation. Exchange rate stability is a key CBN policy objective, and to preserve its external reserves the CBN continues to manage FX demand and limit the supply of FX to the market.

“Pressure on the naira remains intense, and while the CBN has raised the nominal official exchange rate three times since the start of the pandemic (by 15 per cent in March 2020, five per cent in August 2020, and seven per cent in May 2021), FX management remains too rigid to respond to external shocks. Meanwhile, exchange-rate management has emerged as one of the key drivers of inflation.”

The World Bank further stated that the central bank foreign exchange system needs to be more flexible to withstand external shocks, especially given Nigeria’s mono-product nature. It added that the NAFEX rate does not reflect the true market rate but the central bank managed rate.

It read in part, “While the CBN supplied an average of $2.5bn to the Investors and Exporters forex window in the months just prior to the COVID-19 crisis, it only supplied an average of $0.5bn in the months thereafter.

“The NAFEX rate, which is now the guiding exchange rate for the economy, continues to be managed and is not fully reflective of market conditions. The parallel market premium over the NAFEX rate reached 29 per cent in August 2021 after the CBN cut off its weekly supply of $20,000 per bureau de change. The CBN has intermittently supplied forex to BDCs since 2005, providing ample opportunities for currency round-tripping.”

The institution however advised that Nigeria adopt a more predictable, transparent and flexible foreign exchange management system in order to attract and sustain private investment flows.

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Nigeria’s Non-oil Revenue Now N1.15 Trillion – Minister of Finance



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Mrs. Zainab Ahmed, the Minister of Finance, Budget and National Planning, has said that Nigeria’s non-oil revenue is now N1.15 trillion, representing 15.7 percent above the country’s target. This, she claimed, was a result of the federal government’s efforts at diversifying the nation’s economy.

Mrs. Ahmed disclosed this at the Institute of Directors (IoD) 2021 Annual Directors Conference which was held on Wednesday in Abuja.

According to the News Agency of Nigeria (NAN) the event with the theme: “Creating the Future: Deepening the Corporate Governance Practice through Multi-Sectoral and Multi-Generational Collaborations,” was meant to discuss economic development.

Mrs Ahmed added that the recent development was in line with President’s commitment to further diversifying the Nigerian economy which is heavily dependent on oil. She observed that Nigeria was showing resilience in recovery from recession from coronavirus (COVID-19) pandemic which intensely affected global economies.

The minister said the federal government alongside the private sector had implemented a wide range of monetary measures to stimulate economic recovery, growth and development, job creation and improved standards of living.

She also explained that the government was doing everything to improve and diversify Nigeria’s revenue generation.

Nigeria was quickly able to exit recession and is on her way to path of sustainable growth and we are intensifying efforts to grow and diversify our revenue sources to grow revenue from the current 8 per cent.”

“Our non-oil revenues have grown to N1.15 trillion, representing 15.7 per cent above set target. We are working on the 2021 finance bill and it’s nearing completion. Also, the recent approval of the medium-term national development plan is an important milestone of Buhari’s commitment to delivering sustainable growth and we require strong support and monitoring during implementation,” she said.

Mrs Ahmed reinforced the government’s decision to do something about infrastructure and reduce the cost of production for businesses in the country.

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