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States Jerk up Deficit Spending by 90% to N800bn



Naira - Investors King

States Jerk up Deficit Spending by 90% to N800bn

The 36 state governments are set to incur about N800 billion budget deficit in 2021, representing a 90 per cent increase from the N420 billion recorded in 2020.

Analysis of the approved budgets for the 36 states show total proposed revenue of N7.05 trillion as against total proposed expenditure of N7.85 trillion, translating to a budget deficit of N800 billion.

In 2020, the states had N5.02 trillion as budgeted expenditure with N4.6 trillion as budgeted revenue, thus deficit of N420 billion.

Consequently, the N800 billion proposed budget deficit for 2021 represents a 90 per cent increase when compared with the N420 billion proposed budget deficit of the states in 2020.

Budget 2021 Breakdown

Further analysis of the states proposed budget showed dominance of capital expenditure which accounted for 54.8 percent of the total proposed budget while recurrent expenditure accounted for 44.6 per cent or N3.5 trillion.

Further analysis also showed that the proposed 2021 budget of N7.85 trillion is dominated by five states which accounted for 20 percent of the total states’ budget.

The five states are: Lagos (N1.15 trillion), Rivers (N448 billion), Akwa Ibom (N435 billion), Imo (N346 billion) and Ogun (N339 billion).

On the other side are the five states with the lowest budget, which accounted for 7.1 percent or N562.2 billion of the total proposed budget.

The states are Yobe (N106.9 billion), Ekiti (N109.6 billion), Osun (N109.8 billion), Nassarawa (N112.9 billion) and Ebonyi (N123 billion).

Revenue profile

Analysis also showed that 52 percent or N3.39 trillion of the proposed revenue of N7.05 trillion will come from Internally Generated Revenue (IGR) and Federation Account Allocation Committee (FAAC).

According to their approved budgets, the 36 states hope to raise N1.82 trillion from IGR, to complement FAAC receipts of N1.87 trillion.

Five states dominated the proposed revnue of N7.05 trillion for 2021 with 33.6 percent or N2.37 trillion. The states are: Lagos (N962.52 billion), Rivers (N448.6 billion), Delta (N384 billion), Ogun (N320 billion) and Akwa Ibom (N255.03 billion).

On the other hand, the five states at the bottom of the revenue chart accounted for 6.5 per cent or N464.46 billion. The five states are Ebonyi (N64 billion), Enugu (N79.76 billion), Oyo (N102.8 billion), Yobe (N106.9 billion) and Gombe (N111 billion).

In terms of FAAC revenue, Lagos and four other states dominated the chart accounting for 20.8 per cent or N389.88 billion. Lagos state led with N116.78 billion, followed by Katsina (N74 billion), Niger (N71.8 billion) , Bauchi (N68.3 billion) and Ogun (N59 billion).

At the bottom of the FAAC revenue chart are five states which accounted for 9.3 per cent or N174.1 billion. These are Ekiti with N29.4 billion, Ondo (N34.4 billion), Yobe (N35.3 billion) , Akwa Ibom (N36 billion) and Gombe (N39 billion).

States with the highest projected IGR are Lagos (N732.6 billion), Ogun (N119 billion), Jigawa (N51.6 billion), Kaduna (N50.6 billion) and Anambra (N36.6 billion).

States with the lowest 2021 projected IGR are Adamawa (N12 billion), Ebonyi (N12 billion), Kebbi (N12.2 billion), Katsina (N15.6 billion) and Benue (N19.7 billion).

States Deficit Funding Plans

Lagos State said it will finance the proposed deficit of N192.49 billion through external loans of N37.26 billion, internal loans of N55.24 billion and bond issuance of N100 billion this year.

On its part, the Kaduna State government intends to finance its budget deficit through internal grants of N39.99 billion, external grants of N9.2 billion, external loans of N46.9 billion while N1 billion will be generated through sale of government assets worth N1 billion.

On the other hand, Kano State is targeting N6 billion from internal and external loans as well as N33.29 billion from general grants.

Benue State said it will finance its N23.8 billion deficit through a combination of domestic loans and bond issuance.

Akwa Ibom on its part said it will finance its N180.6 billion deficit through internal loans of N40.04 billion, grants of N34 billion. Others are Ecological Fund – N2 billion, Reimbursement from Federal Government on Road and other Infrastructure – N 15 billion, N500 million from Investment Income; Exceptional Income of N 61.105 billion and N1 billion from Stabilization Account.

Anambra State plans to fund its N11 billion deficit through domestic loans at concessionary interest rates. Kogi State however noted that its estimated Capital Receipt is N48.08 comprising internal and external loans, aids and grants.

Abia State also indicated it will finance its N29.68 billion through domestic loans.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.

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IMF Staff Completes Virtual Mission to Lesotho




Lesotho has been struggling with the fallout from the pandemic and a sharp decline in revenues from the Southern African Customs Union (SACU); The authorities and the mission team made significant progress in their discussions on policies that could be supported by the IMF under a financial arrangement.

A team from the International Monetary Fund (IMF), led by Mr. Aqib Aslam, conducted a series of virtual missions, most recently from September 7 to October 15, 2021, to discuss the authorities’ economic and financial program and their request for IMF financial support.

The authorities and the mission team had productive discussions on policies that could be supported by the IMF under a financial arrangement. The program under discussion would aim to support a durable post-pandemic recovery, restore fiscal sustainability, strengthen public financial management, and ensure the protection of the most vulnerable. Other key structural reforms to be implemented include strengthening governance and fostering private sector investment to spur inclusive growth and employment over the medium term.

At the end of the visit, Mr. Aslam issued the following statement:

“Lesotho has been experiencing twin economic shocks resulting from the pandemic and a decline in revenues from the Southern African Customs Union (SACU) that have proved to be highly volatile. Public expenditures have been increasing while SACU revenues were buoyant but have not adapted to their decline and the limited growth in other revenue sources. At the same time, the economy has been in recession since 2017. The resulting fiscal and external imbalances, if left unaddressed, would continue to put pressure on international reserves and lead to government payment arrears.

“Discussions emphasized the need to support a robust and inclusive post-pandemic recovery. To this end, the mission discussed with the authorities a number of options for containing the fiscal deficit to a level that is sustainable and can be fully financed. The team noted that the adjustment should be focused on expenditure measures while boosting poverty-reducing social spending to protect the most vulnerable. Complementary actions include efforts to broaden financial access and inclusion; strengthen financial supervision; modernize the legal frameworks for bank lending, business rescue, and restructuring, and digitalize payment systems.

“On the fiscal front, efforts should focus on addressing the public sector wage bill, which is one of the largest in the world compared to the size of the economy; saving on public sector and official allowances; better targeting education loans; streamlining the capital budget and initiating gender-responsive budgeting. Discussions also considered measures to modernize tax policy and improve domestic revenue mobilization. The mission noted the need to address long-standing PFM issues to ensure the provision of reliable fiscal data, the integrity of government systems, and the sound use of public resources.

“Significant progress was made during the visit, and discussions will continue in the coming weeks. If agreement is reached on policy measures in support of the reform program, an arrangement to support Lesotho’s economic program would be proposed for the IMF Executive Board’s consideration.

“The IMF team thanks the authorities for their hospitality and constructive discussions.”

The IMF mission met with Prime Minister Majoro, Minister of Finance Sophonea, Central Bank Governor Matlanyane, and other senior government officials. The team also met with representatives of the diplomatic community, private sector, civil society, and multilateral development partners.

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Nigeria’s Inflation: Prices Increase at Slower Pace in September 2021



Consumer Confidence

Prices of goods and services moderated further in Africa’s largest economy, Nigeria in the month of September 2021, the latest report from the National Bureau of Statistics (NBS) has revealed.

Consumer Price Index (CPI), which measures the inflation rate, grew at 16.63 percent year-on-year in September, slower than the 17.01 percent rate achieved in the month of August.

On a monthly basis, inflation rose by 1.15 percent in September 2021, representing an increase of 0.13 percent from 1.02 percent filed in August 2021.

Food Index that gauges price of food items grew at 19.57 percent rate in the month, below the 20.30 percent rate recorded in August 2021.

The increase in the food index was caused by increases in prices of oils and fats, bread and cereals, food product N.E.C., fish, coffee, tea and cocoa, potatoes, yam and other tuber and milk, cheese and egg.

However, on a monthly basis, the price of food index rose by 0.20 percent from 1.06 percent filed in August 2021 to 1.26 percent in September 2021.

The more stable twelve months average ending in September 2021 revealed that prices of food items grew by 0.21 percent from 20.50 percent in August to 20.71 percent in September.

Prices of goods and services have been on the decline in Nigeria in recent months, according to the NBS. However. on masses are complaining of the persistent rise in prices of goods and services across the nation.

Some experts attributed the increase to Nigeria’s weak foreign exchange rate given it is largely an import-dependent economy.


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Global Debt Rises by $27 Trillion to $226 Trillion in 2020 – IMF



IMF - Investors King

The pandemic has led to an unprecedented increase in debt—issued by governments, nonfinancial corporations, and households the IMF estimated in the latest Fiscal Monitor report. In 2020 global debt reached $226 trillion and increased by $27 trillion, the IMF estimated Wednesday  (October 13) in Washington, DC.

High and growing levels of public and private debt are associated with risks to financial stability and public finances, said Vitor Gaspar, Director of the IMF’s Fiscal Affairs Department.

“According to preliminary estimates from the Global Debt Database, global debt by governments, households, and non-financial corporations reached $226 trillion. That represents an increase of $27 trillion relative to 2019. Both the level and the pace of increase are record highs. We know that high and rising debts increase risks to financial stability and public finances,” Gaspar said ahead of the Fiscal Monitor release.

Gaspar emphasized that countries with a high credibility fiscal framework benefit from better bond market access. They also experience lower interest rates on sovereign bonds.

“A strong message from the fiscal monitor is that fiscal credibility pays off. Countries that have credible fiscal frameworks benefit from better and cheaper access to bond markets. That’s a precious asset to have in an uncertain and difficult times like COVID 19. Fiscal credibility pays off!,” added Gaspar.

He also recognized that while the international community has provided critical support to alleviate fiscal vulnerabilities in low-income countries, still more is needed.

“In 2020, the IMF’s rapid financing and the G20 Debt Service Suspension Initiative contribute to make resources available to the countries that need it the most. But more is needed. With a general allocation of SDRs of $650 billion, liquidity has been provided, but much more could be achieved if rich countries would make part of their resources available to the developing world. By doing so, donors would be contributing to fighting the pandemic and to the achievement of sustainable and inclusive growth,” said Gaspar

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