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FG Recorded N2.14tn Fiscal Deficit in 2017 –CBN

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  • FG Recorded N2.14tn Fiscal Deficit in 2017 –CBN

The Federal Government recorded a fiscal deficit of N2.14tn in its operations in the 2017 fiscal period, figures obtained from the Central Bank of Nigeria have revealed.

The figures are contained in the fourth quarter Economic Report of the apex bank, which was obtained by our correspondent in Abuja.

A fiscal deficit occurs when a government’s total expenditure exceeds the revenue that it generates, excluding borrowings.

An analysis of the report showed that the fiscal deficit for the 2017 financial year was lower than the N2.19tn recorded in 2016.

The report put the total retained revenue of the Federal Government during the period at N2.76tn, while the expenditure was put at N4.9tn, resulting in overall operational deficit of N2.14tn.

Investigations showed that the deficit was financed through domestic and foreign borrowings, including issuance of government securities.

Further analysis of the report showed that while the Federal Government earned N554.63bn in the first quarter of 2017, it incurred an expenditure of N1.34tn, resulting in a first quarter deficit of N782.96bn after the addition of primary deficit of N158.8bn.

For the second quarter, the sum of N688.69bn was earned by the Federal Government, with an expenditure of N1.17tn, resulting in a deficit of N489.33bn after adding the primary deficit of N185.74bn.

The report put the third quarter revenue of government at N788.56bn, adding that when matched with the N1.4tn expenditure for the period, it resulted into a deficit of N618.66bn.

For the fourth quarter, the government earned N731.61bn as revenue. However, with an expenditure of N979.05bn and a primary surplus of N197bn, the overall deficit for the quarter was put at N247.44bn.

The report read in part, “Provisional Federal Government retained revenue for the fourth quarter of 2017 was estimated at N731.61bn. This was below the proportionate quarterly budget estimate and the receipts in the preceding quarter by 45.8 per cent and 7.2 per cent, respectively.

“Of the total revenue, the Federation Account accounted for 87.2 per cent, while Value Added Tax, Federal Government Independent Revenue and exchange gain accounted for 5.0, 4.5 and 3.3 per cent, respectively.

“The estimated Federal Government expenditure for the fourth quarter of 2017 was N979.05bn. This was below the proportionate quarterly budget estimate of N1.93tn by 49.5 per cent and the level in the preceding quarter by 30.4 per cent.

“A breakdown of the total expenditure showed that the recurrent component accounted for 81.7 per cent, while capital and statutory transfers accounted for 9.6 and 8.7 per cent, respectively.

“A further breakdown of the recurrent expenditure showed that the non-debt component accounted for 44.4 per cent, while debt service payment was 55.6 per cent.”

Speaking on the fiscal deficit, finance and economic experts said the budgetary spending of the government needed to be reduced in a manner that would reflect the rate of revenue inflow.

The Director-General, Institute of Fiscal Studies of Nigeria, Mr. Godwin Ighedosa, said, “We have so much relied on oil revenue in the last 45 years and with the decline in oil revenue, the time has come now for us to review our fiscal position.

“There is a need for a reform of the country’s tax administration system to enable the Federal Government to raise more revenue from Capital Gains Tax. Our tax to Gross Domestic Product ratio is one of the lowest in the world and we need to address that.”

In his comment, the Head of Banking and Finance Department, Nasarawa State University, Dr. Uche Uwaleke, said there was a need for the National Assembly to come up with legislation to improve the level of coordination between fiscal and monetary policy authorities.

He said the law would enable both authorities to effectively come up with the right policy mix in addressing the fiscal challenges facing the economy.

He argued that the failure to properly coordinate both fiscal and monetary policies was having negative influences on the economy through deficit financing.

Uwaleke added that a weak policy stance in one area could burden the other area and would make the economy to suffer in the long run.

He said, “The need for policy coordination arises in the case of structural reforms and liberalisation of the financial sector. Such reforms can only proceed within the framework of a supportive fiscal policy that provides macroeconomic stability, fiscal discipline and avoidance of taxes that discriminate against financial activity.

“If high fiscal deficit persist while the authorities are undertaking the reforms of the financial sector, interest rates could reach very high levels or if interest rates are kept at artificially low levels, either inflation will surge or the demand for credit and distortions in resource allocations will grow significantly.”

Uwaleke added, “The constitution empowers the legislature with three basic functions of representation, law-making and oversight.

“To this end, the National Assembly can facilitate synergy between monetary and fiscal policies towards economic diversification by making laws designed to put an end to budget delays and fiscal deficit.”

The Registrar, Chartered Institute of Finance and Control of Nigeria, Mr. Godwin Eohoi, said the deficit nature of the Federal Government’s budget was responsible for increase in government borrowing.

He stated, “It is expected that the debt profile of a country will rise considering the fact that we have a deficit budget and even the deficit side of the budget was not effectively met in the last budget year.

“We have a high fiscal deficit, which can only be funded through borrowing.

“When you borrow for investment, it improves the position on your balance sheet and when you borrow for consumption, it can cause problems for the economy as it will affect the level of confidence in the economy from investors, because they will assume we can’t manage our economy.”

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Economy

Seme Border Sees 90% Decline in Trade Activity Due to CFA Fluctuations

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The Seme Border, a vital trade link between Nigeria and its neighboring countries, has reported a 90% decline in trade activity due to the volatile fluctuations in the CFA franc against the Nigerian naira.

Licensed customs agents operating at the border have voiced concerns over the adverse impact of currency instability on cross-border trade.

In a conversation with the media in Lagos, Mr. Godon Ogonnanya, the Special Adviser to the President of the National Association of Government Approved Freight Forwarders, Seme Chapter, shed light on the drastic reduction in trade activities at the border post.

Ogonnanya explained the pivotal role of the CFA franc in facilitating trade transactions, saying the border’s bustling activities were closely tied to the relative strength of the CFA against the naira.

According to Ogonnanya, trade activities thrived at the Seme Border when the CFA franc was weaker compared to the naira.

However, the fluctuating nature of the CFA exchange rate has led to uncertainty and instability in trade transactions, causing a significant downturn in business operations at the border.

“The CFA rate is the reason activities are low here. In those days when the CFA was a little bit down, activities were much there but now that the rate has gone up, it is affecting the business,” Ogonnanya explained.

The unpredictability of the CFA exchange rate has added complexity to trade operations, with importers facing challenges in budgeting and planning due to sudden shifts in currency values.

Ogonnanya highlighted the cascading effects of currency fluctuations, wherein importers incur additional costs as the value of the CFA rises against the naira during the clearance process.

Despite the significant drop in trade activity, Ogonnanya expressed optimism that the situation would gradually improve at the border.

He attributed his optimism to the recent policy interventions by the Central Bank of Nigeria, which have led to the stabilization of the naira and restored confidence among traders.

In addition to currency-related challenges, customs agents cited discrepancies in clearance procedures between Cotonou Port and the Seme Border as a contributing factor to the decline in trade.

Importers face additional costs and complexities in clearing goods at both locations, discouraging trade activities and leading to a substantial decrease in business volume.

The decline in trade activity at the Seme Border underscores the urgent need for policy measures to address currency volatility and streamline trade processes.

As stakeholders navigate these challenges, there is a collective call for collaborative efforts between government agencies and industry players to revive cross-border trade and foster economic growth in the region.

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Economy

CBN Worries as Nigeria’s Economic Activities Decline

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Central Bank of Nigeria (CBN)

The Central Bank of Nigeria (CBN) has expressed deep worries over the ongoing decline in economic activities within the nation.

The disclosure came from the CBN’s Deputy Governor of Corporate Services, Bala Moh’d Bello, who highlighted the grim economic landscape in his personal statement following the recent Monetary Policy Committee (MPC) meeting.

According to Bello, the country’s Composite Purchasing Managers’ Index (PMI) plummeted sharply to 39.2 index points in February 2024 from 48.5 index points recorded in the previous month. This substantial drop underscores the challenging economic environment Nigeria currently faces.

The persistent contraction in economic activity, which has endured for eight consecutive months, has been primarily attributed to various factors including exchange rate pressures, soaring inflation, security challenges, and other significant headwinds.

Bello emphasized the urgent need for well-calibrated policy decisions aimed at ensuring price stability to prevent further stifling of economic activities and avoid derailing output performance. Despite sustained increases in the monetary policy rate, inflationary pressures continue to mount, posing a significant challenge.

Inflation rates surged to 31.70 per cent in February 2024 from 29.90 per cent in the previous month, with both food and core inflation witnessing a notable uptick.

Bello attributed this alarming rise in inflation to elevated production costs, lingering security challenges, and ongoing exchange rate pressures.

The situation further escalated in March, with inflation soaring to an alarming 33.22 per cent, prompting urgent calls for coordinated efforts to address the burgeoning crisis.

The adverse effects of high inflation on citizens’ purchasing power, investment decisions, and overall output performance cannot be overstated.

While acknowledging the commendable efforts of the Federal Government in tackling food insecurity through initiatives such as releasing grains from strategic reserves, distributing seeds and fertilizers, and supporting dry season farming, Bello stressed the need for decisive action to curb the soaring inflation rate.

It’s worth noting that the MPC had recently raised the country’s interest rate to 24.75 per cent in March, reflecting the urgency and seriousness with which the CBN is approaching the economic challenges facing Nigeria.

As the nation grapples with a multitude of economic woes, including inflationary pressures, exchange rate volatility, and security concerns, the CBN’s vigilance and proactive measures become increasingly crucial in navigating these turbulent times and steering the economy towards stability and growth.

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Economy

Sub-Saharan Africa to Double Nickel, Triple Cobalt, and Tenfold Lithium by 2050, says IMF

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In a recent report by the International Monetary Fund (IMF), Sub-Saharan Africa emerges as a pivotal player in the global market for critical minerals.

The IMF forecasts a significant uptick in the production of essential minerals like nickel, cobalt, and lithium in the region by the year 2050.

According to the report titled ‘Harnessing Sub-Saharan Africa’s Critical Mineral Wealth,’ Sub-Saharan Africa stands to double its nickel production, triple its cobalt output, and witness a tenfold increase in lithium extraction over the next three decades.

This surge is attributed to the global transition towards clean energy, which is driving the demand for these minerals used in electric vehicles, solar panels, and other renewable energy technologies.

The IMF projects that the revenues generated from the extraction of key minerals, including copper, nickel, cobalt, and lithium, could exceed $16 trillion over the next 25 years.

Sub-Saharan Africa is expected to capture over 10 percent of these revenues, potentially leading to a GDP increase of 12 percent or more by 2050.

The report underscores the transformative potential of this mineral wealth, emphasizing that if managed effectively, it could catalyze economic growth and development across the region.

With Sub-Saharan Africa holding about 30 percent of the world’s proven critical mineral reserves, the IMF highlights the opportunity for the region to become a major player in the global supply chain for these essential resources.

Key countries in Sub-Saharan Africa are already significant contributors to global mineral production. For instance, the Democratic Republic of Congo (DRC) accounts for over 70 percent of global cobalt output and approximately half of the world’s proven reserves.

Other countries like South Africa, Gabon, Ghana, Zimbabwe, and Mali also possess significant reserves of critical minerals.

However, the report also raises concerns about the need for local processing of these minerals to capture more value and create higher-skilled jobs within the region.

While raw mineral exports contribute to revenue, processing these minerals locally could significantly increase their value and contribute to sustainable development.

The IMF calls for policymakers to focus on developing local processing industries to maximize the economic benefits of the region’s mineral wealth.

By diversifying economies and moving up the value chain, countries can reduce their vulnerability to commodity price fluctuations and enhance their resilience to external shocks.

The report concludes by advocating for regional collaboration and integration to create a more attractive market for investment in mineral processing industries.

By working together across borders, Sub-Saharan African countries can unlock the full potential of their critical mineral wealth and pave the way for sustainable economic growth and development.

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