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President Buhari to Present N19.76 Trillion Budget Proposal Next Month

President Muhammadu Buhari will present the 2023 budget proposal of N19.76 to the National Assembly in October. 

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President Muhammadu Buhari will present the 2023 budget proposal of N19.76 to the National Assembly in October. 

Investors King learnt that barring any change, the president will present the 2023 budget proposal to a joint session of the National Assembly within the first two weeks of October. 

The Speaker of the House of Representatives, Rt Hon Femi Gbajabiamila disclosed the time for the 2023 budget presentation during the inspection of the ongoing renovation work on the House’s main chamber.

Federal Government aims to spend N19.76 trillion in 2023 which is a 15.37 percent increase from 2022. The projected deficit for the 2023 budget stood at N12.43 trillion. This represents a 54 percent increase from the 2022 budget deficit. 

Meanwhile the Senate, through its Committee on Finance, has disagreed with the Minister of Finance, Budget and National Planning,  Zainab Ahmed, as well as heads of revenue generating agencies in the country on the 2023 budget deficit of N12.43 trillion. 

The Senate Committee frowned that about N6 trillion was projected as tax and import duty waiver when the budget is having a deficit of N12.43 trillion. 

The Senate Committee Chairman, therefore urge the minister to look into the list of beneficiaries of the waivers for the required downward review to N3 trillion with an attendant reduction of a N12.43 trillion deficit figure.

In his word, “ The proposed N12.43trillion deficit for the 2023 budget and N6 trillion waivers are very disturbing and must be critically reviewed.  

“Many of the beneficiaries of the waivers are not injecting accrued gains made into expected projects as far as infrastructural developments are concerned”

“The same goes for the tax credit window offered by FIRS to some companies. Billions and trillions of naira can be generated by the government as revenue if such windows are closed against beneficiaries abusing them and invariably provide required money for budget funding with fewer deficits cum borrowings” He concluded. 

 

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Economy

Many Lagosians Risk Being Homeless as Cost of Rent Increases by Almost 40 Percent

The average rental price in Lagos State has increased between 20 per cent to 37.5 per cent depending on the location

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Housing - Investors King

The average rental price in Lagos State has increased between 20 per cent to 37.5 per cent depending on the location. 

Checks by Investors King showed that rental cost in Lagos State has been on an astronomical rise in the last two years. Houses in areas such as Lekki have increased by almost 40 per cent.  However, the increase of houses on the mainland is between 20 to 30 per cent.

Our correspondent gathered that several people living in Lagos spend at least 60 per cent of their annual income on rent. Unfortunately, the increase in house rent coupled with the rising inflation has significantly affected many Lagosians. 

Some of the landlords and rental agents which our correspondent spoke to blame the rising cost of rent on the increase in cement price, other building materials and construction costs. 

It could be recalled that cement price has risen from N2,450 in 2021 to N4,200 in 2022.

Our correspondent also learnt that the cost of land has also increased in almost all parts of Lagos States. In some places like Epe and Ajah, the increase was almost 100 per cent. 

The cost of a two-bedroom flat in Lekki is between N2.5 million to N3.5 million per annum.

In Ajah, it will cost between N1.5 million to N2.5 million.

Besides, some landlords and estate agents demand a rent of two years from tenants despite a law that prohibits such. 

Section 4 of the tenancy law of Lagos State 2011 prohibits an excess of more than 12 months as rent. Although there is punishment attached to any breach of this law as stated in section 5, Landlords nevertheless exploit the impetus of the house seekers because of the high demand. 

Section 5  stated that “Any person who receives or pays rent above what is prescribed in this Section shall be guilty of an offence and shall be liable on conviction to a fine of N100, 000 or to three (3) months imprisonment.”

Investors King further learnt that with the current state of the economy and the rising inflation which has limited the purchasing power of many, there could be an increase in the number of homeless people in Lagos State. 

It is therefore imperative for the government to look into the excesses of the shylock agents. Most importantly ameliorate the challenges to stop any menace that might come with the increase of homelessness in Lagos State. 

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Economy

FG Instructs DBN to Increase Funding Towards MSMES Following The Global And Domestic Disruptions

The federal government of Nigeria has directed the Development Bank of Nigeria (DBN) to step up its efforts to increase its funding for MSMEs.

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Global Banking - Investors King

The federal government of Nigeria has directed the Development Bank of Nigeria (DBN) to step up its efforts to increase its funding for MSMEs.

Following the impact of the Russian-Ukraine war that has disrupted business activities in different countries across the world, Micro Small and Medium Enterprises (MSMEs) during this period have continued to face increased difficulties.

Noting that MSMEs occupy a critical part of the Nigerian economy and contribute 48 percent to Nigeria’s GDP, the FG has demanded the DBN to expand its funding windows to provide affordable financing to a wider cross-section of MSMEs.

In a response to the demand of the federal government, the Managing Director of DBN Dr. Tony Okpanachi while speaking at DBN’s 3rd annual lecture series with the theme: “Thriving in the Face of Domestic and Global Disruptions”, assured that despite the adverse effect of domestic and global disruptions on MSMEs in Nigeria, the bank would continue to empower and drive the critical sub-sector of the economy to deploy innovative strategic solutions in the management of their businesses.

The Bank also assured of its continuous partnership with its Participating Financial Institutions (PFIs) to eliminate the financing constraints faced by MSMEs.

His words, “In Nigeria, we’re currently plagued with rising inflation of 20.52% (as of September 2022). We are as well afflicted with rising food and commodity prices, coupled with the rising and unstable exchange rates among others.

“The effects of Global disruption on international trade often come as a shock to businesses. These series of events have led to uncertainty and radical changes to companies’ well-established strategies across the globe and MSMEs are not exempted.

“The future of work is currently in a state of flux, with many old and new challenges hitting MSMEs particularly hard. Hence, Governments, corporate bodies, and individuals, mostly MSMEs must find ways to adapt to the changing times and the volatility of the market, deal with uncertainty, and figure out how to convert that into opportunities.”

The Development Bank of Nigeria (DBN) was conceived by the Federal Government of Nigeria (FGN) in collaboration with global development partners to address financing constraints faced by MSMEs and small Corporates in Nigeria.

The bank has successfully disbursed over N512 billion in loans to no less than 225,000 Micro, Small, and Medium Scale Enterprises (MSMEs) in Nigeria since it was established five years ago.

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Economy

Agriculture Well Below its Potential

Agriculture remains integral for developing economies, capable of stimulating growth across the non-oil economy via its broad potential value-chain interlinkages.

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Corn, Soybeans Decline As Favorable Weather May Boost U

Agriculture remains integral for developing economies, capable of stimulating growth across the non-oil economy via its broad potential value-chain interlinkages.

The latest national accounts released by the National Bureau of Statistics (NBS) show that agriculture accounted for c.23% of total GDP. On a y/y basis, the sector grew by 1.2% y/y in Q2 ’22, compared with 3.2% in the previous quarter. Within the sector, crop production grew by 1.5% y/y and accounted for 90% of agriculture GDP. The forestry and fisheries segments grew by 1.3% y/y and 0.9% y/y respectively.

However, livestock contracted by -2.9% y/y.

Over the past eight quarters, agriculture has grown by an average of 2.2% y/y. The agricultural sector has been a beneficiary of substantial credit interventions by the CBN and state-owned development banks. At its July meeting, the CBN/MPC disclosed that total disbursements under the Anchor Borrowers’ Programme (ABP) amounted to N1trn as at end-July ’22, distributed to c.4.2 million smallholder farmers across the country.

Furthermore, the total disbursements under the Commercial Agriculture Credit Scheme (CACS) amounted to N744bn for 678 projects in agro-production and agro-processing. The CACS is among the better performing credit intervention programmes, given its positive repayment outcome (currently estimated at c.N700bn). Meanwhile, for ABP only 40% of mature loans have been repaid.

The misalignment between the growth figures recorded in this sector and intervention efforts can be partly attributed to the large informal economy, which is estimated to represent c.50% of the economy. The formalisation process is partly hampered by absence of bank accounts (by an estimated c.40% of Nigerians).

Given the rural nature of agriculture, a significant number of farmers are unbanked. This contributes to the difficulties in accessing funds. The CBN is gradually winding down special intervention funds, except those that are tagged as critical (relating to SMEs and the power industry). This points towards gradual tapering to maintain the price stability mandate.

It is worth highlighting that the sector is still saddled with unresolved insecurity and structural challenges that undercut investments. Some of these structural challenges include poor storage facilities, poor transport networks, low technology, among others. These challenges contribute to the risk-averse posture of some banks with regards to providing credit to players within the agriculture sector.

Although there have been laudable interventions by the CBN and the FGN, the sector still requires investments. Based on the latest data from the CBN, credit to the agricultural sector accounted for just 6.1% of total credit to the private sector, compared with sectors such as trade/general commerce (7.1%), finance, insurance and capital market (8.6%), oil and gas (16.1%) as well as manufacturing (17.4%) in August ‘22.

Based on another data source, the NBS, agriculture accounted for 3.7% (USD57.4m) of total capital importation in Q2 ’22 compared with 3.3% (USD28.9m) recorded in the corresponding period in 2021. This is an increase of 99% or USD28.5m.

To encourage increased investments into the sector, financial institutions should consider innovative financing solutions targeted at active players across the agricultural value chain. This should boost returns and profitability as well as stimulate economic activity within the sector.

Regarding trade, agriculture exports accounted for 2% of total trade, declining by -30% q/q to N371bn in Q2. We note that cashew nuts in shell, sesame seeds, standard quality cocoa beans, shelled cashew nuts, and natural cocoa butter featured as top export products in Q2 ‘22.

However, agricultural exports have remained below 5% of total exports over the past five years. There is still vast room to boost agro-related exports. This can be achieved through sustainable public-private partnerships that can potentially transform the agriculture sector to ensure that it realises its potential.

In addition, a boost to export receipts should assist with fx revenue diversification and by extension, support overall GDP growth.

As for agriculture imports, it accounted for 9% of total trade, growing by 5% q/q to N464bn in Q2. The growth in imports is unfavourable for imported food inflation. As at August, imported food prices is 17.9%, increasing by 54bps YTD. On the back of supply-chain constraints exacerbated by the Russia-Ukraine crisis, prices of some agriculture commodities have spiked. Notably, the prices of maize and wheat have increased by 20% and 19% respectively YTD.

The Africa Continental Free Trade Area (AfCFTA) agreement should support agricultural activity, create new regional markets for farmers and strengthen the agro-value chain. However, there should be increased focus on value chain interventions, especially around agriculture commodities that the Nigeria has comparative and competitive advantage.

Furthermore, to boost agricultural exports, there is a need to improve quality of products to meet and/or exceed the global standard. This can be achieved through sensitisation programmes geared towards educating exporters across the country. This should assist with solving poor packaging, and high level of chemicals (in the case of agricultural produce), improper labelling, insufficient information on nutritional content, presence of high level of pesticide residue, among others.

Overall, agriculture can potentially drive economic diversification in Nigeria. Improving the agriculture sector requires stakeholders to adopt a longterm view and commit to short-term sacrifices beneficial to expanding the sector.

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