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Focus on Nigeria’s Non-oil Revenue Potential

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NEPC
  • Focus on Nigeria’s Non-oil Revenue Potential

The recently released Central Bank of Nigeria’s (CBN) Financial Stability Report for December 2016 had shown that the federal government’s retained revenue for the second half of 2016 increased to N2.558 trillion, above the levels of N1.898 trillion recorded in the first half of 2016 and the half- year budget estimate of N2.025 trillion for 2016. The increase in the retained revenue relative to the first half was mainly attributed to increase in non-oil receipts.

With this, the federal government has signaled its move away from oil as it plans to reduce its stake in its oil assets.

The development is clearly in line with the federal government’s quest for economic diversification from oil to the non-oil sectors, given the volatility of crude oil prices.

The dwindling oil revenue provided the nation a painful but indispensable opportunity to look inwards in a bid to trigger economic growth, just as experts have continued to stress the need for Nigerians to appreciate locally manufactured goods such as fabrics, saying that patronising such goods would make local industries thrive and boost economy.

Nigeria has the potential to become a major player in the global economy by virtue of its human and natural resource endowments. However, this potential has remained relatively untapped over the years.

After a shift from agriculture to crude oil and gas in the late 1960s, Nigeria’s growth has continued to be driven by consumption and high oil prices. Oil accounts for more than 95 per cent of exports and foreign exchange earnings while the manufacturing sector accounts for less than one percent of total exports.

This was one of the reasons that led to the development of the Economic Recovery and Growth Plan (ERGP). The ERGP is also consistent with the aspirations of the Sustainable Development Goals (SDGs), given that the initiatives address its three dimensions of economic, social and environmental sustainability issues.

Nigeria aspires to have a rapidly growing economy with diversified sources of growth, increased opportunities for its people, and a socially inclusive economy that reduces poverty and creates jobs for the millions of young people entering the labour market annually.

To achieve this, the government will increase the tax base. It will also conduct a broad audit campaign to identify under-filing tax payers; improve tax compliance by engaging non-compliant taxpayers and making them comply; and formalise businesses in the informal sector. The government said it will also review key incentives such as the automobile, export expansion grant, mining and hotel incentives.

Nevertheless, it will focus on agriculture as a priority area, which it plans to grow by 6.9 per cent per year, and the non-oil sector. The government plans for Nigeria to become a net exporter of rice, tomatoes, vegetable oil, cashew nuts, groundnuts, cassava, poultry, fish and livestock. It wants the nation to become self-sufficient in tomato paste by 2017, rice by 2018, and wheat by 2020.

The ERGP was developed through a consultative process comprising retreats, seminars and round tables with a cross-section of Nigerians. The plan aims to restore sustained economic growth while promoting social inclusion and laying the foundations for long-term structural change. It will focus on providing macroeconomic stability, stimulating priority sectors and tackling critical constraints to long-term growth.

The International Monetary Fund (IMF) which recently endorsed the ERGP 2017- 2020, applauded it as “how fiscal policy should be thought in developing countries.” The Fund’s Director, Fiscal Affairs Department, Mr. Vitor Gaspar said he had the privilege of visiting Nigeria some months ago and was very happy to understand that for the Nigerian government, fiscal policies in general and tax policy in particular were part of the strategy for development.

Also, IMF’s Assistant Director/Head, Fiscal Policy and Surveillance, Catherine Pattillo, welcomed the country’s ERGP, saying its focus on diversification and attention to some of the problems facing the economy were steps in the right direction.

According to Pattillo, “We very much welcome the ERGP. As you are aware, Nigeria went into recession last year, there have been forecasted recovery, but still very fragile this year and the need to address the fiscal situation is urgent. Our recommendation is for the continued fiscal consolidation.

“One striking statistics I think is the fact that over the past years, the ratio of interest payment to tax revenue has doubled to 66 per cent in Nigeria. So, two-thirds of all tax revenue is going into interest payment, illustrating the need to raise tax revenue. That would allow the government to implement the social and growth-friendly policies that are part of the objectives of the ERGP.

The Minister of Finance, Mrs. Kemi Adeosun lamented that with a tax to Gross Domestic Product (GDP) ratio of six per cent, the country is rated one of the lowest in the world. To this end, Adeosun stressed that in line with the focus on non-oil revenue, the government has a lot of work to do. But the minister pointed out that the government would require the support of all stakeholders to achieve its objective of increasing non-oil revenue.

“We have the tax to GDP ratio of six per cent, one of the lowest in the world. And with all the cooperation of encouraging companies to pay tax, it will support what we are doing to increase our GDP, improve amount of debt to take and improve our ability to fund our projects and get our economy going.

“The money that has left our country either through tax evasion or through money laundering, we need them back in Nigeria and what we are working on is a revenue initiative that would bring a lot of this money back so we can fund our infrastructure,” she explained.

But the Minister of Industry, Trade and Investment, Dr. Okechukwu Enelamah, pointed out that implementing realistically the ERGP by the federal government would help get the economy on track. He pointed out that the ERGP captures the essence and key priorities of the federal government for the medium term 2017-2020.

“We believe if implemented, it will get the economy on track. Even the greatest critiques of Nigeria agree that what we need to do is to diversify our economy from a mono-product economy that depends on oil for most of its foreign exchange and revenue, to other sources. The key is how do you do that? This ERGP captures in essence how you do that.

“Some of the highlights of the plan include the focus on agriculture, food processing and agro-businesses, which is a key contributor to our Gross Domestic Product, but one that requires more investments; focus on infrastructure, particularly energy and focus on industrialisation. We think that by implementing the strategies in that plan, we would definitely get the economy to where it ought to be.

“First there is a plan and then there is execution. But I think it is important to point to the fact that the plan is reasonably clear. There has to be focus on some key areas which include agriculture, infrastructure, transportation and industrialisation. The country has to get it right over the long run. What we are trying to do is to build on the fundamentals so that the growth can continue,” he explained.

Also, the Minister of Mines and Steel Development, Dr. Kayode Fayemi noted that: “There have been a lot of talks in the past about diversifying away from oil. Basically, a fall in the oil price is what becames the wake-up call for the areas the country has neglected for a long time such as agriculture, mining industry and are now getting the attention of the government.

“Yes, that has always been the trigger. When oil falls, what sector offers an opportunity for substitution? Mineral resources. Look at what we have done with cement. The limestone has helped us to produce the largest cement industry in Africa to the extent we are now a net exporter of cement.”

The foregoing clearly shows that there is need for the federal government to aggressively drive the implementation of the ERGP which among other things, aims to reduce unemployment and underemployment, especially among the youth. The ERGP accordingly prioritises job creation through the adoption of a jobs and skills programme for Nigeria including deepening existing N-Power programmes, and launching other public works programmes. The partnership with the private sector and sub-national governments for job creation will also focus on the policies required to support growth and diversification of the economy by placing emphasis on Made-in-Nigeria, public procurement which takes account of local content and labour intensive production processes.

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 market.

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Economy

Nigeria’s Main Refineries Record N406.62bn Loss in Two Years

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Port Harcourt, Kaduna, Warri Refinery posts N406.62bn Deficit in Two Years

Nigeria’s three main refineries recorded N406.62 billion loss in two years, according to the audited financial statements from the Nigerian National Petroleum Corporation (NNPC).

The three refineries located in Port Harcourt, Kaduna and Warri have a combined installed capacity of 445,000 barrels per day, however, the refineries have continued to function below the installed capacity.

The audited report showed the Kaduna refinery posted N64.34 billion loss in 2018, better than the N111.89 billion loss reported in 2017.

While Warri refinery filed N44.44 billion loss for 2018, also better than the N81.60 billion loss posted in 2017.

Port Harcourt refinery reported N45.59 billion loss in 2018, down from N55.76 billion loss posted in 2017.

The Nigerian government has spent billions of US dollars in maintaining and trying to improve the dilapidated refineries over the years. However, because of the inability of the three refineries to meet daily petrol demands of the Nigerian people, the Federal Government resulted to importation that has eroded the nation’s foreign reserves.

A recent report from the NNPC showed that Nigeria spent N2.37 trillion on petrol importation between May 2019 and May 2020 despite the nation struggling with falling foreign reserves due to low oil prices.

The weak foreign reserves has disrupted the nation’s economic outlook and weighed on the Nigerian Naira. The Naira has been devalued by 15 percent this year and was recently adjusted from N360 per US dollar exchange rate to N380/US$ for importers and investors to ease pressure on the nation’s foreign reserves.

Last week, at a summit organised by Seplat, Mallam Mele Kyari, the Group Managing Director, NNPC, said the three refineries were all idle despite the money being spent on them.

In Nigeria today, we are importing practically every petroleum product that we consume in this country.

“We are working to make sure that we are able to fix our refineries,” Kyari stated.

All hopes are now on Dangote’s refinery.

Aliko Dangote, Africa’s richest man and the world’s richest black man, is presently constructing a 650,000 barrels per day refinery.

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Osinbajo Says FG Plans to Create 5 Million Jobs

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FG to Create 5m Jobs from Strategic Investments in Manufacturing, Agriculture

Vice President, Prof. Yemi Osinbajo, has said the Federal Government plans to create at least 5 million jobs in the next few years.

Osinbajo, who spoke at the Virtual Presidential Policy Dialogue Session organised by the Lagos Chamber of Commerce and Industry (LCCI), said the Buhari-led administration is focused on job creation.

He, therefore, stated that this would be achieved with strategic investments in key sectors like the manufacturing and agriculture sectors.

The Vice President said, “We are to create jobs and boost our national housing programme. We would be intentional in the support of manufacturers in using our local raw materials. We are seriously engaging the use of cement in building our roads, as it will be cheaper for us and more durable.

“We are targeting electrification of five million households with solar power, and we are supporting SMEs, especially in the pharmaceuticals to enhance the production of personal protective equipment.”

Mrs. Toki Mabogunje, the President of LCCI, who also spoke at the event, expressed concerns over the failure of the Nigerian Customs Service to adhere to the Executive Order which forbids Customs checkpoints around the ports and within given geographical delimitations in the country.

She also noted the slow pace of reforms in the oil and gas sector, one of the nation’s main sectors. According to her, the oil and gas sector was another cause for worry, saying up till now the PIB passed has not been signed by President Muhammadu Buhari.

According to her, “Closure of the land borders has enormous implications for cross border economic activities around the country. The indications are now that the closure is indefinite. While we share the concern of government on issues of security and smuggling, we believe that the indefinite closure of land borders is not the solution to the problem.

“We are excited about the signing of the AFCTA. But we need to get ourselves ready for the pressure of competition inherent in the continental economic integration agenda. A number of commitments were made about the creation of an environment that would enable the private sector to be competition ready. But not much has happened in this regard so far.

“We are aware of the efforts of government to fix our infrastructure, including roads and railways, but funding has remained a major challenge. We would like to see a new funding model with much bigger focus on private sector capital within a Public Private Partnership [PPP] framework for infrastructure development in the country.

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Fuel Scarcity: NUPENG to Commence Strike on Monday

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Lagosians Should Brace for Fuel Scarcity as NUPENG Embarks on Strike

Nigerians should brace for fuel scarcity as the national leadership of the Nigeria Union of Petroleum and Natural Gas (NUPENG) directed all petroleum tanker drivers to withdraw their services from Lagos State starting from Monday, 10 August 2020.

In a statement released by NUPENG on Friday, the union said the directive followed the failure of various authorities in Lagos State to address three major issues that had impacted the operations of petroleum tanker drivers in the state for several months.

The statement signed by the National President, Williams Akporeha and the General Secretary, Olawale Afolabi, NUPENG and titled title ‘NUPENG leadership directs withdrawal of services by petroleum tanker drivers in Lagos State with effect from Monday, August 10, 2020,’ noted that members of the union are frustrated and pained by the barrage of challenges faced while carrying out their activities in Lagos State.

NUPENG said, “The entire rank and file members of the union are deeply pained, frustrated and agonised by the barrage of these challenges being consistently faced by petroleum tanker drivers in Lagos State and are left with no other option but to direct the withdrawal of their services in Lagos State until the Lagos State Government and other relevant stakeholders address these critical challenges.

“It is sad and disheartening to note here that we had made several appeals and reports to the Lagos State Government and the Presidential Task Force for the decongestion of Apapa on these challenges but all to no avail.

NUPENG listed the major challenges faced by petroleum tanker drivers in Lagos State as extortion and harassment by various security agents and, area boys’ (miscreants).

This menace must stop and the leadership of these security operatives in Lagos State must go all out to call their men to order with immediate effect.

The Union added that it is sad that the security agents who were expected to ensure the free flow of traffic and protection of road users were the same people using their uniforms and arms to intimidate, harass and extort money from petroleum drivers in Lagos State.

Therefore, it said it had embarked on an indefinite strike to force the Lagos State Government to address the situation.

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