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Economy

ECA Drops to $71.8m in One Month

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Forex Weekly Outlook October 31-November 4
  • ECA Drops to $71.8m in One Month

Excess Crude Account (ECA) declined from $324.96 million to $71.81 million in one single month just as foreign reserves head south from $45 billion in June 2019 to $37.37 billion in February 2020.

A breakdown of the recent figures from the Federation Account Allocation Committee (FAAC) shows the ECA stood at $324.96 million as at the end of FAAC meeting on January 16, however, by February 19 the total amount in the ECA was put at $71.8 million. Indicating that $253.1 million has been depleted.

The Federal Government continues to struggle as weak revenue generation amid global uncertainty weighs on capital importation, especially with the ongoing coronavirus outbreak.

Brent crude oil, against which Nigerian crude oil is priced, declined from over $77 a barrel last year to $59 per barrel this month as the world’s largest importer of the commodity, China, battles a new type of coronavirus.

In an effort to sustain governance amid falling revenue, the government has started exhausting ECA account as oil revenue remains the powerhouse of the Nigerian economy despite billions spent on diversification program.

The Central Bank of Nigeria led Monetary Policy Committee (MPC) had warned that depletion of the ECA will leave the economy without fiscal buffers to cushion volatility during emergence.

In the last MPC meeting in January, Godwin Emefiele, Governor, CBN, said: “The MPC cautioned that public debt was rising faster than both domestic and external revenue, noting the need to tread cautiously in interpreting the debt to GDP ratio.

“The committee also noted the rising burden of debt services and urged the fiscal authorities to strongly consider building buffers by not sharing all the proceeds from the Federation Account at the monthly FAAC meetings to avert a macroeconomic downturn, in the event of an oil price shock.

“It urged government to gradually reduce reliance on oil receipts and focus on revenue diversification through reforms of the tax system.

“The committee also called on government to rationalise fiscal expenditure towards reducing the current excessively high cost of governance.”

However, with falling revenue, low capital importation and weak oil production, the Federal Government was forced to access the ECA as usual in order to sustain operations.

The International Monetary Fund (IMF) lowered Nigeria’s growth projection from 2.5 percent previously predicted to 2 percent, saying weak wage growth, slow recovery process and falling oil prices are some of the factors expected to hurt the nation in 2020.

The inflation rate rose to a 21-month high in January as border closure and lack of policy clarity bites. The MPC warned that the Open Market Operations policy of the apex bank could push consumer prices above the 12 percent if not checked, therefore, Cash Reserve Ratio was increased to curtail inflation.

Still, inflation rose from 11.98 percent in December to 12.13 percent in January, the highest in almost two years.

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

Seyi Makinde Proposes N266.6 Billion Budget for Oyo State in 2021

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The Executive Governor of Oyo State, Seyi Makinde, has presented the Oyo State Budget Proposal for the 2021 Fiscal Year to the Oyo State House of Assembly on Monday.

The proposed budget titled “Budget of Continued Consolidation” was said to be prepared with input from stakeholders in all seven geopolitical zones of Oyo state.

Governor Makinde disclosed this via his official Twitter handle @seyiamakinde.

According to the governor, the proposed recurrent expenditure stood at N136,262,990,009.41 while the proposed capital expenditure was N130,381,283,295.63. Bringing the total proposed budget to N266,6444,273,305.04.

The administration aimed to implement at least 70 percent of the proposed budget if approved.

He said “The total budgeted sum is ₦266,644,273,305.04. The Recurrent Expenditure is ₦136,262,990,009.41 while the Capital Expenditure is ₦130,381,283,295.63. We are again, aiming for at least 70% implementation of the budget.”

He added that “It was my honour to present the Oyo State Budget Proposal for the 2021 Fiscal Year to the Oyo State House of Assembly, today. This Budget of Continued Consolidation was prepared with input from stakeholders in all seven geopolitical zones of our state.”

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Economy

World Bank Expects Nigeria’s Per Capita Income to Dip to 40 Years Low in 2020

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The World Bank has raised concern about Nigeria’s rising debt service cost, saying it could incapacitate the nation from necessary infrastructure development and growth.

The multilateral financial institution said the nation’s per capita income could plunge to 40 years low in 2020.

According to Mr. Shubham Chaudhuri, Country Director for World Bank in Nigeria, the decline in global oil prices had impacted government finances, remittances from the diaspora and the balance of payments.

Chaudhuri, who spoke during the 26th Nigerian Economic Summit organised by the Nigerian Economic Summit Group and the Federal Government, said while the nation’s debt is between 20 to 30 percent, rising debt service remains the bane of its numerous financial issues and growth.

Nigeria’s problem is that the debt service takes a big part of the government revenue,” he said.

He said, “Crisis like this is often what it takes to bring a nation together to have that consensus within the political, business, government, military, civil society to say, ‘We have to do something that departs from business as usual.’

“And for Nigeria, this is a critical juncture. With the contraction in GDP that could happen this year, Nigeria’s per capita income could be around what it was in 1980 – four decades ago.”

Nigeria’s per capita income stood at $847.40 in 1980, according to data from the World Bank. It rose to $3,222.69 in 2014 before falling to $2,229.9 in 2019.

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Economy

Nigeria Will Have no Business With Fish Importation in the Next Two Years- FG

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At the 35th annual conference of the Fisheries Society of Nigeria (FISON) held in Abuja on Monday, the minister of Agriculture and Rural Development, Mr  Sabo Nanono, expressed plans of the federal government to initiate and implement programmes that are aimed towards diversification, especially in the agricultural sector.

The minister explained that the fishery sub-sector contributes about 4.5 percent to the National Gross Domestic Products, with an estimation of over 12 million Nigerians actively involved in fish farming and production.

He further said that despite this number, Nigeria produces 1.1 million tonnes of fishes annually, while there is a total demand of 3.6 million tonnes of fish and this puts Nigeria is at a deficit of 2.5 million tones. The shortage is supplemented through importation.

“Let me inform you that the vision of Mr President is to grow Nigeria’s agriculture sector to achieve a hunger-free nation, through agriculture that drives income growth, accelerate the achievement of food and nutritional security, generate employment and transform Nigeria into a leading player in the group of food and fish markets, and to create wealth for millions,” he said.

He also explains the ministry’s plans of diversification and development of various empowerment programmes that aid job creation.

“In line with the theme of this conference, the ministry has developed various programmes to increase domestic food/fish production and the main target is the empowerment of the youth and other groups especially the women,” he stated, adding: “All these programmes are tailored towards wealth and jobs creation, arrest and prevention of youth restiveness”.

He said the government has directed all fish importers to commence backward integration for local consumption and export to international markets, these are part of the measures of the ministry to generate employment and reduce importation of fish into the country.

In regards to this plans, Nanono said that the ministry is optimistic that Nigeria will have no business with fish importation in the next two years, considering that several companies have complied to the laid down policy.

Representing the Director of Federal Department of Fisheries, Mr Imeh Umoh, he stressed that the fishery is one of the value chains in the ministry and a force that drives wealth, job creation, contribute to food nutrition, poverty reduction and creation of diverse investment for Nigerians “especially during the economic recession which is occasioned by the COVID-19 pandemic”.

Nanono said that considering the current economic situation due to the global health pandemic and the ongoing economic recovery programme, the contribution of the fisheries and aquaculture sub-sector of Nigeria will make a significant impact in terms of job creation, income generation, poverty alleviation, foreign exchange earnings and provision of raw materials.

Mr Adegoke Agbabiaka, President of FISON said that in the last decade the government has made a paradigm shift under the Agricultural Transformation Agenda and is now considering agriculture, including fisheries and aquaculture, as a business and this will aid to achieve self-sufficiency in fish production.

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