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Nigeria to Borrow N5.6 Trillion to Plug 2021 Budget Deficit

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Nigeria to Borrow N5.6 Trillion to Plug 2021 Budget Deficit

The Federal Government has said a total of N5.6 trillion would be borrowed in 2021 to plug the budget deficit.

The minister of finance, budget and national planning, Mrs Ahmed Zainab, disclosed this during the virtual review of the 2021 Federal Government approved budget.

According to the minister, N2.34 trillion each would be sourced from domestic and foreign sources while N709.69 billion would be borrowed from multilateral and bilateral loan drawdowns and another N025.15 billion is expected to come from proceeds of privatisation.

While Ahmed has said the nation is gradually reducing its exposure to crude oil as only 30 percent of the 2021 budget would come from crude oil with the non-oil sector expected to provide the remaining 70 percent, experts are worried that the rising debt will continue to hurt the nation’s growth and ability to finance capital projects.

In 2020, the Federal Government said it spent N3.27 trillion on debt servicing alone while personnel cost, including pensions, gulped another N3.19 trillion.

Speaking on 2020 expenditure, Ahmed said “Of the expenditure, N3.27tn was for debt service and N3.19tn for personnel cost, including pensions.

“As at year end 2020, N1.80tn had been released for capital expenditure, that is, about 89 per cent of the provision for capital.

Dr Muda Yusuf, the Director-General, Lagos Chamber of Commerce and Industry, who commented on the budget deficit, said the rising cost of debt servicing was a cause for worry.

Yusuf said, “We are currently dealing with a scenario where the combination of recurrent (non-debt) and debt service budgets are in excess of government revenues.

“This implies that our capital projects will be funded entirely from borrowing.

“Total projected revenue is N7.89tn; recurrent expenditure is N5.93tn; debt service is N3.12tn.

“Therefore, the combination of recurrent expenditure and debt service cannot be covered by revenue. And most often, actual revenues are less than budgeted revenues. And debt service is first line charge.

“It is thus imperative to begin to examine options for the restructuring of our fiscal operations. It is also necessary to promote reforms that will ease the burden of government expenditure and boost revenue. The oil and gas sector reform is one of such reforms.

“It is noteworthy that the Fiscal Responsibility Act stipulates that government borrowing should only be for funding of capital projects and human development. This once again brings to the fore the issue of cost of governance.

“The Act also prescribes that borrowing should be at concessionary rates and long term amortisation. One could interrogate how well current borrowing plans aligns with the provision of the Act.

“Generally, multilateral and bilateral sources are more concessionary and long term than foreign sources such as the international capital markets like the Eurobond. Multilateral and bilateral loans are often tied to specific projects, which is good.”

He added, “Until recently, domestic sources such as treasury bills and Federal Government Bonds were also very costly sources of deficit financing.

“We also need to worry about CBN financing of fiscal deficit, although, and curiously too, the budget is often silent about this.

“Strict compliance with the provisions of the Fiscal Responsibility Act and the streamlining of the cost of governance would facilitate the realisation of the fiscal sustainability objective.

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

FG Launches E-ticketing Platform to Deepen Train Usage and Convenience

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FG Launches E-ticketing Platform to Deepen Train Usage and Convenience

In a bid to improve the usage and enhance the convenience of train transport in Nigeria, the Federal Government on Thursday announced the launching of the Electronic Ticketing platform for the Kaduna-Abuja rail services.

The N900 million E-ticketing platform was introduced by the Minister of Transportation, Chibuike R. Amaechi, and the Nigerian Railway Corporation.

Amaechi said the new platform would improve efficiency, promote accountability, reduce leakage and enhance economic growth, as well as save time.

The E-ticketing platform was a Public-Private Partnership project done in conjunction with Secure ID Solutions, who provide and would manage the system for 10 years in an effort to recoup its investment before the Nigerian Railway Corporation take charge.

Kofo Akinkugbe, the Chief Executive Officer, Secure ID Solutions, said as the new E-platform issued 25,000 tickets after a successful pilot test on Thursday.

Potential Travelers can book via three ways:

1. Mobile app
2. Website
3. POS or Cash at the station

A validator would be used to scan the ticket barcode to ascertain its authenticity before boarding.

Amaechi further announced that self-service ticket vending machines at various train stations would be introduced soon.

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Economy

Nigeria’s Excess Crude Account (ECA) Balance Now $72.4 Million

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Zainab Ahmed Finance Minister

Nigeria’s Excess Crude Account (ECA) Balance Now $72.4 Million

The Minister of Finance, Budget and National Planning, Zainab Ahmed, on Thursday said Nigeria’s Excess Crude Account (ECA) stood at $72,411,197.80 as of January 20th, 2021.

The minister disclosed this at the first National Economic Council (NEC) meeting of the year presided over by Yemi Osinbajo, Vice President and had in attendance State Governors, Federal Capital Territory Minister, Central Bank Governor and other senior government officials.

Ahmed said “Excess Crude Account (ECA), balance as at 20th January, 2021, $72,411,197.80; Stabilization Account, balance as at 19th January, 2021, N28,800,711,295.37; Natural Resources Development Fund Account, balance as at 19th January 2021, N95, 830,729,470.82.”

The minister also said President Muhammadu Buhari has approved N6.45 billion for the setting up of gas plants in 39 locations nationwide in an effort to increase COVID-19 treatment.

What is Excess Crude Account (ECA)

Excess Crude Account (ECA) is an account used to save the disparity in the market price of crude oil and budgeted price of crude oil as stipulated in the Federal Government Appropriation Bill.

Key Takeaways of Excess Crude Account (ECA)

  • Excess Crude Account (ECA) was established in 2004 by the Federal Government to stabilize Nigeria’s economy and smooth out the effect of crude oil fluctuation on Africa’s largest economy.
  • The ECA rose to its highest of $20 billion in November 2008 during the global oil boom when prices were above $100 per barrel.
  • Controversy, allegations of corruption, and uncertain performance have trailed the ECA since creation.
  • The balance plunged from $20 billion in 2008 to $72.4 million in January 2021.

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Economy

AfCFTA: Nigeria Customs Service Requested For Detailed Role In The Free Trade Agreement

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AfCFTA: Nigeria Customs Service Requested For Detailed Role In The Free Trade Agreement

Nigeria Customs Service (NCS) requested for a proper and detailed role expected to be carried out in the implementation of the African Continental Free Trade Area (AfCFTA) agreement.

The NCS said detailed explanations of roles and responsibilities of all parties involved in the free trade agreement should be spelled out to avoid overlapping of duties and to achieve a seamless implementation of AfCFTA.

Mr. Joseph Attah the Public Relations Officer, on behalf of the Comptroller-General of the NCS, Col Hameed Ali (Rtd.), issued a statement to address the call for a detailed role of the Customs.

“Our functions are highly automated and primarily systems-driven, hence the need to methodically harvest and integrate all data associated with AfCFTA into our system for easy deployment, access, and use by the trading public.

“We, therefore, await the National Action Committee (NAC) on the list of duties and charges waived for liberalised goods under AfCFTA. The list of the 90 percent liberalised national trade offers (NTOs); list of the 70 percent non-liberalised exclusive goods at the regional level; and list of the 3 percent non-liberalised sensitive goods.

“The appointment of a competent authority responsible for issuing and authenticating certificates of origin and registering enterprises and products within the region.” He said.

In the statement, NCS pledges commitment to the success of the trade pact and also identifies the transformational impact the free trade agreement would have on businesses in Nigeria and the Africa continent at large.

“Also, it is pertinent to inform the public about steps which must be taken to enable its smooth and full implementation,” He added

NCS recommended that the member-country of the free trade agreement should have a representative in the continental chamber, this is to ensure transparency and build the confidence of the members in the system.

“This, in our view, should be complementary to the activities of the various chambers of commerce of each country in the region. While awaiting clear directives concerning tariffs for all goods covered by this agreement, we want to assure the public of our preparedness to fully deploy our services at the shortest notice.

“Our desire is to imbue trust in the system while guaranteeing the economic safety and wellbeing of businesses within the country,”  NCS noted.

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