Federal Government Records N1.3 Trillion Fiscal Deficit in the Third Quarter of 2020
The Federal Government posted N1.29 trillion fiscal deficit in the third quarter of 2020, according to the latest economic report from the Central Bank of Nigeria (CBN).
The CBN said the federal government revenue rose by 4.5 percent to N2.27 trillion in the third quarter when compared to the preceding quarter. However, it was 22.1 percent below the same quarter of 2019 and 10.7 percent below the stipulated budget benchmark.
In the report released on Sunday, the apex bank said “At N2.27tn, federally collected revenue in the third quarter of 2020 grew by 4.5 percent, over the level in the preceding quarter.
“However, it was below collections recorded in the same quarter of 2019 and the budget benchmark by 22.1 per cent and 10.7 per cent, respectively. Oil receipt accounted for 42.0 percent of the total collection, while non-oil revenue made up the balance of 58.0 per cent.”
The report hinged the deficit on low oil receipts due to the negative impact of COVID-19 on Nigeria’s main source of revenue.
It said, “The retained revenue of the Federal Government of Nigeria, at N842.09bn, fell short of the budget benchmark and the level in the third quarter of 2019 by 42.3 per cent and 35.7 per cent, respectively.
“The provisional FGN expenditure in the period was N2.13tn, representing a shortfall of 21.1 per cent, relative to the budget.
“The decline in expenditure underscores the imperative of prioritising spending amidst persisting revenue challenges. Consequently, the fiscal operations of the FGN resulted in an estimated deficit of N1.29tn.”
Nigeria’s Big Oil-Refining Revamp Gets Off To A Slow Start
A year after shutting down all of its dilapidated refineries to figure out how to fix them, Nigeria still can’t say how much it will cost to do the work or where the money will come from.
Nigerian National Petroleum Corp. said it has finished the appraisal of its largest facility, but hasn’t completed the process at two others. Refining experts said the extended halt means the plants are at risk of rotting away and unlikely to restart on time.
“Things haven’t been looking good lately,” with Nigeria’s plants probably “completely out of action for some 18 months,” said Elitsa Georgieva, Executive Director at Citac, a consultant that specializes in African refining.
The dysfunction of its domestic refineries has long put Africa’s biggest oil producer in an ironic situation. It exports large volumes of crude to plants overseas, then pays a premium to import the fuels its customers produce.
Pledges to fix the facilities have been made and broken again and again over the years. For at least a decade, NNPC’s 445,000 barrels a day of refining capacity barely processed 20% of that amount.
The latest effort to fix the refineries was supposed to be different to the failed attempts that came before. The company had totally shut all three plants down by January 2020 to do a comprehensive appraisal, and set the ambitious target of having them all back up and running at 90% of capacity by 2023.
“The refineries have been deliberately shut down to allow for a thorough diagnosis,” said Kennie Obateru, an Abuja-based NNPC spokesman. “They can be fixed based on what the diagnosis reveals.”
The appraisal of the 210,000-barrel-a day Port Harcourt refinery has been completed and NNPC has called for bids for the necessary repairs, Obateru said. The company hasn’t determined how much the work will cost.
“It is when we close the bids, everything is analyzed and presented that we will know how much we need,” he said.
The diagnosis is underway at the 125,000-barrel-a-day Warri facility and should be complete before the end of the year, he said. After that, the study of the 110,000-barrel-a-day Kaduna plant will commence.
One year into the process, refining analysts are skeptical that all this work can be done by 2023.
“I don’t think anyone has a good understanding technically of what’s wrong with those refineries,” said Alan Gelder, vice president of refining, chemicals and oil markets at Wood Mackenzie Ltd. “They’re probably corroding, which makes it a very difficult proposition.”
NNPC reaffirmed its deadline and said there’s no reason the refineries, which are at least 40 years old, can’t be restored to full operation.
“There are refineries that are over a hundred years old still running, so age is not necessarily an impediment,” Obateru said.
There are parallel efforts backed by private companies to add to Nigeria’s capacity. Aliko Dangote, Africa’s richest person, is building a state-of-the-art 650,000 barrel-a-day refinery, which Citac estimates will start production in 2023.
Bringing NNPC’s Port Harcourt refinery to the same clean-fuel standards as Dangote’s modern plant would cost about $1.3 billion for the equipment, on top of whatever other repairs are required to get the facility running, Georgieva said.
NNPC is talking to oil-trading firms about $1 billion of prepayment deals that could finance the repairs at Port Harcourt, Reuters reported last week. Obateru declined to comment on the report, but said “I don’t envisage that we will have a problem getting people to invest.”
Food Inflation Hits Record High of 19.56 Percent in December 2020
Food Index, which measures prices of food items, grew by 19.56 percent in the month of December 2020 amid herdsmen attacks and flooding.
In the latest report from the National Bureau of Statistics (NBS), increases were recorded on Bread and cereals, Potatoes, Yam and other
tubers, Meat, Fruits, Vegetable, Fish and Oils and fats.
On month on monthly basis, the food sub-index rose by 2.05 percent in December 2020, 0.01 percent from 2.04 percent recorded in November 2020.
“The average annual rate of change of the Food sub-index for the twelve-month period ending December 2020 over the previous twelve-month average was 16.17 percent, 0.42 percent points from the average annual rate of change recorded in November 2020 (15.75) percent” the report stated.
Headline inflation number increased by 15.75 percent in the month of December 2020, up from 14.89 percent.
The report noted that increases were recorded in all COICOP divisions that yielded the Headline index.
On a month-on-month basis, “the urban index rose by 1.65 percent in December 2020, same as the rate recorded in November 2020, while the rural index also rose by 1.58 percent in December 2020, up by 0.02 percent above the rate that was recorded in November 2020 (1.56 percent).”
Nigeria’s Inflation Rate Rises to 15.75 Percent in December
Inflation rate in Africa’s largest economy, Nigeria, rose at the fastest pace in several months in the last month of 2020, according to the latest report from the National Bureau of Statistics (NBS).
Consumer Price Index (CPI), which measures inflation rate, increased by 15.75 percent year-on-year in December 2020, representing a 0.86 percent increment from the 14.89 percent attained in November.
On a monthly basis, headline inflation rose by 1.61 percent in the month of December, representing 0.01 percent increase from the 1,60 percent posted in the month of November.
Food gauge that measures prices of items in Africa’s largest economy increased by 19.56 percent in December from 18.30 percent in November.
NBS attributed the increase to the surge in prices of Bread and cereals, Potatoes, Yam and other tubers, Meat, Fruits, Vegetable, Fish and Oils and fats.
On a monthly basis, the food sub-index grew by 2.05 percent in December 2020, an increase of 0.01 percent points from 2.04 percent recorded in November 2020.
The more stable annual rate showed Food sub-index over the last 12 months increased by 0.42 percent points from 15.75 percent in November to 16.17 percent in December.
Herdsmen attacks, the rising cost of fuel, flooding and the wide exchange rate are some of the key factors impacting the cost of food items in Nigeria, especially in December when demands were the highest.
Still lack of enough fiscal buffer to cushion the effect of COVID-19 and ease forex scarcity also drag on raw materials necessary for the production of some import-dependent items.
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