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Economy

IMF, World Bank Behind Nigeria’s High Cost of Living, Says Experts

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Economic experts have blamed the recent increase in prices from petrol, Value Added Tax (VAT) to electricity tariff on the International Monetary Fund (IMF) and the World Bank.

The experts said the two global financial institutions are known for dictating economic direction whenever a nation approaches them for financial assistance during a tough economic period.

Prof. Akpan Ekpo, an economist and Chairman of the Foundation for Economic Research and Training, said, “Once a country does not run its economy well and it wants to borrow from the IMF, it will be given conditions. If the economy is well-run, the country may be given soft conditions.

“But if the economy is not well-run, the country will be given tough conditions. At times, the reforms the World Bank or IMF wants the country to implement may not augur well with the common man. Some reforms are in our interest.”

In recent years, the IMF and the World Bank had expressed concerns about Nigeria’s weak revenue generation when compared to other nations, including African nations.

The IMF, in April, said Nigeria must up revenue collection efficiency to simultaneously finance its high rising debt profile and embark on capital projects necessary to further and sustain economic productivity.

This was before the Federal Government approached the Fund for $3.4 billion emergence assistance to address severe economic damage caused by the COVID-19 pandemic.

The Federal Government secured the loan after agreeing to remove fuel subsidy, introduce a single forex rate and up VAT and other taxes.

In a letter dated April 21, 2020, the Federal Government agreed to the demand and responded that “the recent introduction and implementation of an automatic fuel price formula will ensure fuel subsidies, which we have eliminated, do not reemerge.”

It immediately adjusted the nation’s foreign exchange rate in line with the Fund’s demand to N379/US dollar.

Dr. Bongo Adi, an economist and Senior Lecturer, Lagos Business School, said, “We know what the Bretton Woods institutions stand for. They are pro-market, liberal economic institutions. Before you access their loans, you have to be ready to meet certain conditions.

“Surely, you can see that there is a linkage between the loans we are trying to get and the conditionalities they have always traditionally required of any country seeking loans.”

However, apart from the IMF and the World Bank, some Nigerians including Investors King Ltd had been advocating for fuel subsidy removal and the deregulation of the downstream oil sector.

Deregulation will boost investment in the sector and finally put to an end fuel scarcity that over the years have crippled economic activities and overall growth of the nation. It also means that over N1 trillion budgeted for subsidy in 2019 and preceding years can now be channeled into capital projects.

The Managing Director/Chief Executive Officer, Cowry Asset Management Limited, Mr Johnson Chukwu, explained it better.

He said, “With or without external pressures, there was an absolute need for Nigeria to remove subsidies on consumption and channel the resources to more critical sectors of the economy that will stimulate the economy.

“What the IMF and the World Bank were emphasising was that Nigeria had some inefficiencies in resource allocation and that if the country wanted them to give it support, the inefficiencies should be eliminated.

“They were urging the government to plug the wastages in the system.”

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 Establishes New Crime Agency, Proceeds of Crime Recovery and Management Agency

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President Muhammadu Buhari

Proceeds of Crime Recovery and Management Agency Established by Government

The Federal Government has approved the creation of a new crime agency called “The Proceeds of Crime Recovery and Management Agency” to better manage the loots recovered from financial criminals by the growing list of anti-graft agencies established by the government.

The new agency was approved on Wednesday at the Federal Executive Council (FEC) meeting presided over by President Muhammadu Buhari.

The president said the new agency seeks to move the fight against corruption to the next level as there is no agency of government that “can give you off-head the number of landed assets, number of immovable assets, the amount in cash that are recovered by the federal government by way of interim forfeiture overweigh of a final forfeigture.”

“So, it is indeed overtime a kind of arrangement that is not uniform and consistent.”

He added: “Next level of transparency, next level of accountability in essence, will have in place an agency of government that is exclusively responsible for anything proceeds of crime.

“A one-stop shop arrangement by which all the assests that are recovered arising from crimes that are indeed vested in the federal government, you have a one-stop arrangenet where you can have an information. As it is for example, the Federal Ministry of Justice is only in a position to account and giving comprehensive account of what
recoveries were made by the ministry.

“But any recovery made by the police, DSS, the Ministry of Justice is not in a position to know. So, for the purpose of decision making and policy, the federal government is not in a position to have a wholistic appreciation.

“So, by the bill that is now presented for the consideration of the council, we’ll have a law that establishes an agency, and secondly, an agency.

“And as you rightly know, Mr President has sanctioned ever since he came on board, that there should be a budget line, a budget item for recovered assets.

“So, if you have a budget item for recovered assets, this agency will now be in a position to provide information to the Federal Ministry of Finance, Budget and National Planning on demand as to what amount is available for budget purposes, thereby establishing the desired transparency, the desired accountability which has not been available before now.

“So, it is about a memo that seeks to establish a legal framework, that seeks to establish institutional framework, that seeks to further take the fight against corruption to the next level by way of establishing transparency, accountability and making the possibility of forfeiture a proceeds of crime easy through the sanctioning of non-conviction based forfeiture among others.”

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Economy

Inflation Rate Increases Further in August to 13.22%

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Prices of Goods and Services Jump in Nigeria in August

Nigeria’s inflation rate rose further in the month of August to the highest since April 2018, according to the latest report from the National Bureau of Statistics (NBS).

In the report released on Tuesday, the NBS said Consumer Price Index, which measures inflation rate, increase by 13.22 percent in the month under review.

This represents a 0.40 percent points increase from the 12.82 percent posted for the month of July.

On a monthly basis, consumer prices increased by 0.09 percent points from 1.25 per cent achieved in July to 1.34 percent in August 2020.

The report read in part, “The consumer price index, which measures inflation increased by 13.22 percent (year-on-year) in August 2020. This is 0.40 percent points higher than the rate recorded in July 2020 (12.82 percent).

“On a month-on-month basis, the headline index increased by 1.34 percent in August 2020. This is 0.09 per cent higher than the rate recorded in July 2020 (1.25 per cent).”

Rising costs continue to disrupt consumer spending in Africa’s largest economy, especially after President Muhammadu Buhari removed subsidy, up VAT from 5 percent to 7.5 percent and implemented service reflective electricity tariff during a tough period of global pandemic.

Despite majority of Nigerians saying the time is wrong, experts have said it was the International Monetary Fund and the World Bank that compelled the administration to up revenue generation in order to continue to service its debt and embark on necessary capital projects.

With the $3.4 billion loan secured from the IMF in May running out amid falling oil price and weak demand for the commodity, the Buhari led administration once again approached the World Bank for another loan of $1.5 billion to further cushion the negative impacts of COVID-19.

According to the people familiar with the process, the new loan is not receiving much attention from the multilateral financial institution as it insisted that some of the agreement reached with the International Monetary Fund before securing the $3.4 billion have not been implemented.

This, experts said was one of the main reasons the federal government made all the recent adjustments despite economic challenges and limitations.

The food index increase from 15.48 percent in July to 16 percent in the month of August, according to the statistics office.

“This rise in the food index was caused by increases in prices of bread and cereals, potatoes, yam and other tubers, meat, fish, fruits, oils and fats and vegetables,” it added.

The persistent increase in prices bolstered cost of living and plunged consumer spending in Africa’s largest economy due to broad-based layoffs and businesses shutting down operations for a safe haven.

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Economy

NNPC Says It Spent N41.98 Billion on Pipeline Repairs in Six Months

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NNPC Spends N41.98 Billion on Pipeline Repairs

The Nigerian National Petroleum Corporation (NNPC) has said it spent a total sum of N41.98 billion on pipeline repairs and management in the first six months of the year.

The corporation stated in its latest monthly oil report, saying “Products theft and vandalism have continued to destroy value and put NNPC at disadvantaged competitive position.”

It explained that a total of 1,067 pipeline points were vandalised between June 2019 and June 2020 with 33 of those vandalised in June 2020. That was 11 percent lower than the 37 points vandalised in the month of May.

The NNPC said, “Mosimi-Ibadan accounted for 33 per cent while ATC-Mosimi and Warri-River Niger recorded 27 per cent of the breaks each; other locations make up for the remaining 13 per cent.

“NNPC in collaboration with the local communities and other stakeholders continuously strive to reduce and eventually eliminate this menace.”

Further break down showed the NNPC spent N5.48 billion on pipeline repairs and management costs in the month of January 2020. In February, March, April, May and June of the same year, the corporation spent N6.74 billion; N7.69 billion; N7.84 billion; N7.99 billion and N6.24 billion, respectively.

The corporation also said the pipelines have aged over the years, therefore, giving rise to frequent failures and consequent operational downtimes.

“In addition, these facilities have aged over the years giving rise to frequent failures and consequent operational downtimes, high maintenance cost and revenue losses,” the NNPC added.

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