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Oil Slump: FAAC Disbursements Drop in Q1 2019

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  • Oil Slump: FAAC Disbursements Drop in Q1 2019

The fall in oil prices slightly affected government earnings in the first quarter of 2019 as the Federation Allocation Account Committee disbursed N1.929tn between January and March this year.

The figure represents a 0.45 per cent decline from the N1.938tn disbursed for the same period in 2018, but 36.7 per cent higher than the N1.411tn disbursed in the corresponding period in 2017.

The information is contained in the latest issue of the Quarterly Review of the Nigeria Extractive Industries Transparency Initiative.

Total FAAC disbursements in Q1 2019 ended the recent trend of over N2tn disbursements which lasted for three consecutive quarters of 02 to Q4 2018.

A breakdown of the disbursements showed that the Federal Government received N803.18bn in the first quarter of the year.

This was 1.18 per cent lower than the N812.8bn the Federal Government received in the same period in 2018 and 46.2 per cent higher than the N549.1bn disbursed in the corresponding quarters of 2017.

A further breakdown showed that the 36 states shared N675.2bn in the first quarter of this year, representing 1.19 per cent decline on the N683.4bn disbursed to the states in Q1 2018 but 48 per cent higher than the N456bn disbursed in Q1 2017.

From the review, only the N398.44bn disbursed to local governments in Q1 2019 was higher by 1.28 per cent when compared to N393.4bn disbursed in the first quarter of 2018, and 47.8 per cent higher than the amount disbursed to them in 01 2017.

The NEITI review attributed the reduction in FAAC disbursements to drop in oil prices.

It stated that “Oil prices experienced a downward spiral from November 2018. Oil prices were above $80 per barrel in October 2018 but by December 2018, they had dropped to $57 per barrel. The average oil price for the first quarter of 2019 was $63.17 per barrel.

“Average oil price for the year 2018 was $71.06 per barrel. Thus, oil prices have been considerably lower in the first three months of 2019 than they were in 2018.”

Another striking disclosure in the NEITI Quarterly Review is that this year’s budgets as already presented by 35 states cannot be adequately funded even by combined net FAAC disbursements to each state in 2017 and 2018.

In addition, the NEITI Review noted that total state revenues (FAAC and Internally Generated Revenue) in 2017 and 2018 could not fund 2019 budgets of 28 states.

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

Dangote Fertiliser Plant to Commence Shipment of Urea in March 2021

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Dangote to Sells Petrol in Naira, Plans to Commence Urea Shipment in March 2021

The Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele, has said Dangote Fertiliser Plant will commence shipment of Urea in March 2021.

The CBN governor disclosed this during an inspection tour of the sites of Dangote Refinery, Petrochemicals Complex Fertiliser Plant and Subsea Gas Pipeline at Ibeju Lekki, Lagos on Saturday.

Emefiele further stated that Dangote Refinery would sell refined petroleum products in Naira when it starts production.

This he said would save the country from spending 41 percent of the nation’s foreign exchange on importation of petroleum products yearly.

Based on agreement and discussions with the Nigerian National Petroleum Corporation and the oil companies, the Dangote Refinery can buy its crude in naira, refine it, and produce it for Nigerians’ use in naira,” Mr Emefiele said.

That is the element where foreign exchange is saved for the country becomes very clear. We are also very optimistic that by refining this product here in Nigeria, all those costs associated with either demurrage from import, costs associated with freight will be totally eliminated.

Emefiele explained that this will make the price of Nigeria’s petroleum products affordable and cheaper in naira.

If we are lucky that what the refinery produces is more than we need locally you will see Nigerian businessmen buying small vessels to take them to our West African neighbours to sell to them in naira.

“This will increase our volume in naira and help to push it into the Economic Community of West African States as a currency,” Mr Emefiele said.

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Economy

UK Budget 2021: Will Sunak’s Budget Run Into Unintended Consequences?

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Rishi Sunak’s Budget will encourage higher earners to consider their “international financial options” and will drive businesses away from the UK, warns the CEO of one of the world’s largest independent financial advisory and fintech organizations.

The warning from Nigel Green, chief executive and founder of deVere Group, comes as the Chancellor delivered his 2021 Budget in the House of Commons, his second since he took on the role.

Mr Green says: “The Chancellor has got an extraordinarily difficult hand to play as he tries to stem the economic damage caused by the pandemic, support jobs and businesses and, crucially, rebuild the public finances.

“Whilst Mr Sunak is being hailed a hero for the continued and unprecedented levels of support, it should also be remembered that he is – in a stealth move – dragging more people firmly into the tax net.

“He is raising taxes under the radar.

“Yes, there is no income tax rise. However, he is freezing personal tax thresholds, meaning as incomes rise and thresholds don’t, he is able to raise money by fiscal drag.”

Earlier this week, the deVere CEO noted: “Those most impacted by this stealth move will be looking at the financial planning options available to them, including international options, in order to grow and protect their wealth.”

Rishi Sunak also confirmed that corporation tax will increase to 25% from 2023, up from the current level of 19%.

Of this tax hike, Mr Green goes on to say: “Lower corporation tax helps job and wealth-creating business to survive and thrive. It also helps attract business to move and invest in the country.

“Instead of increasing taxes, Mr Sunak should have relentlessly focussed on growth and stimulus policies for businesses.  This would have been of greater help to firms, the economy, jobs and, ultimately, the Treasury’s coffers.”

He adds: “Again, this corporation tax hike is likely to serve as a prompt for businesses to consider their overseas financial options.”

The deVere CEO concludes: “The Chancellor had to perform a tough juggling act.  But stealthily dragging more people into the tax net and raising corporation tax might have negative, unintended consequences for the Treasury’s bottom line.”

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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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