Economic experts have blamed the recent increase in prices from petrol, Value Added Tax (VAT) to electricity tariff on the International Monetary Fund (IMF) and the World Bank.
The experts said the two global financial institutions are known for dictating economic direction whenever a nation approaches them for financial assistance during a tough economic period.
Prof. Akpan Ekpo, an economist and Chairman of the Foundation for Economic Research and Training, said, “Once a country does not run its economy well and it wants to borrow from the IMF, it will be given conditions. If the economy is well-run, the country may be given soft conditions.
“But if the economy is not well-run, the country will be given tough conditions. At times, the reforms the World Bank or IMF wants the country to implement may not augur well with the common man. Some reforms are in our interest.”
In recent years, the IMF and the World Bank had expressed concerns about Nigeria’s weak revenue generation when compared to other nations, including African nations.
The IMF, in April, said Nigeria must up revenue collection efficiency to simultaneously finance its high rising debt profile and embark on capital projects necessary to further and sustain economic productivity.
This was before the Federal Government approached the Fund for $3.4 billion emergence assistance to address severe economic damage caused by the COVID-19 pandemic.
The Federal Government secured the loan after agreeing to remove fuel subsidy, introduce a single forex rate and up VAT and other taxes.
In a letter dated April 21, 2020, the Federal Government agreed to the demand and responded that “the recent introduction and implementation of an automatic fuel price formula will ensure fuel subsidies, which we have eliminated, do not reemerge.”
It immediately adjusted the nation’s foreign exchange rate in line with the Fund’s demand to N379/US dollar.
Dr. Bongo Adi, an economist and Senior Lecturer, Lagos Business School, said, “We know what the Bretton Woods institutions stand for. They are pro-market, liberal economic institutions. Before you access their loans, you have to be ready to meet certain conditions.
“Surely, you can see that there is a linkage between the loans we are trying to get and the conditionalities they have always traditionally required of any country seeking loans.”
However, apart from the IMF and the World Bank, some Nigerians including Investors King Ltd had been advocating for fuel subsidy removal and the deregulation of the downstream oil sector.
Deregulation will boost investment in the sector and finally put to an end fuel scarcity that over the years have crippled economic activities and overall growth of the nation. It also means that over N1 trillion budgeted for subsidy in 2019 and preceding years can now be channeled into capital projects.
The Managing Director/Chief Executive Officer, Cowry Asset Management Limited, Mr Johnson Chukwu, explained it better.
He said, “With or without external pressures, there was an absolute need for Nigeria to remove subsidies on consumption and channel the resources to more critical sectors of the economy that will stimulate the economy.
“What the IMF and the World Bank were emphasising was that Nigeria had some inefficiencies in resource allocation and that if the country wanted them to give it support, the inefficiencies should be eliminated.
“They were urging the government to plug the wastages in the system.”
COVID-19 Vaccine: Crude Oil Extends Gain to $48 Per Barrel on Wednesday
Oil prices rose further on Wednesday as hope for an effective COVID-19 vaccine and the news that the United States of America’s President-elect, Joe Biden has begun transition to the White House bolstered crude oil demand.
Brent crude oil, a Nigerian type of oil, gained 1.63 percent or 78 cents to $48.64 per barrel at 11:50 am Nigerian time on Wednesday.
The United States West Texas Intermediate (WTI) crude oil rose by 1.36 percent or 61 cents to $45.52 per barrel.
OPEC Basket surged the most in terms of gain, adding 3.16 percent or $1.37 to $44.75 per barrel.
This was after AstraZeneca, Moderna and Pfizer-BioNTech announced the positive results of their trials.
Moderna and Pfizer had claimed over 90 percent effective rate in trials while AstraZeneca said its COVID-19 vaccine was 70 percent effective in trials but could hit 90 percent going forward.
“The possibility of having a vaccine next year increases the odds that we’re going to see demand return in the new year,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.
Also, the decision of President-elect Joe Biden to bring Janet Yellen, the former Chair of Federal Reserve, back as a Treasury Secretary of the United States is fueling demand and strong confidence across global financial markets.
“President-elect Biden’s cabinet choices, particularly Janet Yellen’s Treasury Secretary position, are adding to upside momentum across a broad space of asset classes,” said Jim Ritterbusch of Ritterbusch and Associates.
Seyi Makinde Proposes N266.6 Billion Budget for Oyo State in 2021
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.”
World Bank Expects Nigeria’s Per Capita Income to Dip to 40 Years Low in 2020
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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