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#2018Budget Nigeria’s revenue: Walking a tight rope by Adeola Yusuf

By: Bhodemarz on November 29, 2017 / comment : 0 , , ,

Basking in the euphoria of the $3.7 billion Alternative Financing Agreement, which it secured for oil in the last three years, the last Wednesday, raised the 2018 oil revenue projection to N38 billion.
Its Group Managing Director, Dr. Maikanti Baru, who said this at the 35th Annual Conference of the Nigerian Association of Petroleum Explorationists (NAPE) in Lagos, maintained that Corporation, which secured the $3.7 billion deal on behalf of  government, had also set machinery in motion to achieve the revenue projection.
Securing external funding arrangement, he said, was crucial to sustaining oil and gas production in Nigeria and ensuring the survival of Nigeria’s energy future.
“Within the last three years, we have embarked on several successful alternative funding programmes to sustain and increase the national daily production and producibility,” Dr. Baru told delegates at the annual conference.
Breakdown of funding
According to the GMD, the $3.7 billion financing package included the $1.2 billion multi-year drilling financing package for 23 onshore and 13 offshore wells under NNPC/Chevron Nigeria Limited Joint Venture termed Project Cheetah and the $2.5billion alternative funding arrangements for NNPC/SPDC JV ($1Billion) termed Project Santolina; NNPC/CNL JV ($780million) termed Project Falcon as well as the NNPC/First E&P JV and Schlumberger Agreement ($700million).
Project Cheetah is expected to increase crude oil production by 41,000bopd and 127Mmscfd with a Government-take of $6billion over the life of the Project.
Also, Projects Santolina, Falcon and the NNPC/First E&P JV and Schlumberger Funding Arrangement are expected to increase combined production of crude oil and condensate by 150,000bopd and 618MMscfd of gas with a combined Government-take of about $32Billion over the life of the Projects, Dr. Baru added.
He observed that evolving a new funding mechanism for the JV operations was a critical part of President Muhammadu Buhari’s far-reaching reforms aimed at eliminating cash call regime, enhancing efficiency and guaranteeing growth in the nation’s oil and gas industry.
Alternate funding
Explaining further, Baru noted that as a result of the cash call underfunding challenge, which rose to about $1.2 billion in 2016 alone, NNPC and its JV partners began exploring alternative funding mechanisms that would allow the JV business finance itself in order to sustain and grow the business.
He added that with average JV cash call requirement of about $600 million a month, coupled with flat low budget levels over the past years, the budgeted volumes were hardly delivered.
“The truth is that it is difficult to deliver the volumes without adequate funding. The low volumes and by extension low revenues had resulted in the underfunding of the Industry by Government, which has stymied production growth,” he observed.
Today, with the new Alternative Funding Arrangement in place, JVs will now relieve government of the cash call burden by sourcing for funds for their operations (estimated at $7-$9 billion annually).
Baru, who spoke on the theme: “Review of the Current State of Funding for the Upstream Sector and the need for a New Policy Initiative,”commended NAPE for its contributions towards shaping the oil and gas landscape in Nigeria, said it was incumbent on NNPC to associate with such a professional body for the benefit of the nation.
“It is on record that key pieces of legislation such as the Marginal Fields Act and the Deepwater Fiscal Policies, the Nigerian Content Act, as well as the Unitization Policy were all based on templates that came out of previous NAPE Conferences,” he said.
Surmounting the roadblock
There are challenges to the realization of the projection and one of those who nshouldn know about this, a former GMD of NNPC, Funsho Kupolokun, called for fresh approaches such as the involvement of more indigenous participation to address the challenges of funding upstream operations in the country.
Expressing optimism that the revenue target could be met, Kupolokun maintained that participation of indigenous firms would go along way to guarantee success for the projections.
Similarly, the President of NAPE, Mr. Abiodun Adesanya, described the challenge of cash call as very critical because it affects all the objectives and targets of growing the reserves and increasing crude oil production in the country.
The Niger Delta question
The unrest in the Niger Delta has always been a major challenge to revenues projection by the government and as such, the Minister of State, Petroleum Resources, Dr. Emmanuel Ibe Kachikwu, has said that for a lasting peace to be achieved in the Niger Delta region, oil bearing communities must be involved in oil and gas exploitation in their areas.
The Minister made the assertion at the closing of the 2nd National Council on Hydrocarbons summit held in Uyo, Akwa Ibom State, noting that from a peak production of 2.35 million barrels per day recorded last year there was decline to 1.1 million barrels per day due to incessant vandalism.
However, Kachikwu observed that due to sustained engagements with the Niger Delta, production has ramped up to about 2.1 million barrels per day (mbpd) from 2016 crude oil production average of 1.85 mbpd.
From the horses’ mouth 
To address the challenges, Mr. Udom Emmanuel, Governor of Akwa Ibom State, one of the oil producing states, advocated for the establishment of the National Council on Hydrocarbons. This, he said, would help to address the crisis and agitations experienced in the oil and gas sector.
“I strongly believe that if we had a platform of this nature before now, where key players and stakeholders often converge to develop policy thrust to drive the industry, the crisis and agitations we have experienced in the sector would have long been addressed,” he said.
He said it was wrong for some Federal Agencies as well as some oil companies to carry out some interventionists’ projects without consulting the State Government or its agencies.
“This kind of action usually engenders mistrust, generates restiveness, which is not helpful in ensuring smooth operations of the industry,” he stressed.
For example, he said out of 2,198 names of youths from the Niger Delta region trained in welding and fabrication under the Presidential Amnesty Programme, the 107 names allocated to Akwa Ibom State, 26 of those youths were not from the State.
He equally noted with concern that despite pressure from all angles for the multinational oil companies to relocate their headquarters to Akwa Ibom State, nothing has been done.
“I think that the Federal Government should compel compliance of oil companies with immediate effect. Some of the oil companies operating in the region still neglect some vital processes of ensuring peace such as the signing of Memorandum of Understanding (MOU) with their host communities,” he said.
Last line
The Federal Government, nay NNPC, should rally all stakeholders to ensure that all obstacles to revenue projection are quashed. Only this could make the country savour all the benefit accruable from it crude recvenues.


Source: New Telegraph

#VAIDS: 500 Prominent Nigerians Invited to Regularise their Tax Status – Adeosun

By: Bhodemarz on November 26, 2017 / comment : 0 , , , ,

About 500 prominent Nigerians with property and trusts abroad are to be invited to determine their tax compliance status at home.
The Finance Minister, Kemi Adeosun, said the 500 Nigerians would be served letters from Monday to invite them to take advantage of the tax amnesty to regularise their tax status and avoid prosecution and fines.
According to a statement from her office, the minister disclosed this on Saturday at a workshop organised by the Federal Ministry of Finance, Federal Inland Revenue Service, FIRS, and Joint Tax Board, JTB for lawyers, accountants and other professionals in Lagos.
The names of the affected Nigerians were compiled by the government recently as part of tax amnesty policy under the Voluntary Assets and Income Declaration Scheme, VAIDS, initiative.
VAIDS, an initiative of the Federal Ministry of Finance in collaboration with the State Tax Authorities, provides tax defaulters a nine-month opportunity to voluntarily and truthfully declare previously untaxed assets and incomes.
The tax amnesty period is expected to lapse on March 31, 2018.
“The first 500 letters are ready and will go out this week,” the Minister said. “But, there are many more.
“Receiving the letter is not an accusation of deliberate wrongdoing” but rather a notice that the data suggests possible underpayment and a prompt to check compliance,” the minister explained.
“It is premature to call such persons tax evaders as there are many reasons that taxpayers may have failed to comply. We will only label people as real tax evaders when the amnesty deadline expires and they have failed to regularize.
“We are sending out thousands of letters to those in the high risk categories. But our advice is that every person and every company should do a self-assessment and take advantage of VAIDs to correct any under declaration, irrespective of whether they get a letter,” she added.
Mrs. Adeosun said government was generating lots of data, both locally and internationally, on property ownership and other items by Nigerians.
As part of efforts to develop reliable tax payers database, Mrs. Adeosun said government had reviewed all companies that received major payments from the federal government in the last five years to identify those who may have made money from government, but under-declared.
The minister said after the government’s tax compliance team had looked at import records and compared the value of goods imported to the tax declarations of the importers, its findings on the variance was “wide, disturbing and worrisome.”
On personal income tax, she said government had reviewed property and company ownership as well as registration of high value assets and foreign exchange allocations, to give a sense of the lifestyles of their owners.
“We found major non-compliance. In some cases, people declared as little as N10 million as income, but purchased expensive property overseas and in Nigeria, registered high specification vehicles and funded luxurious personal events, costing multiples of the declared income,” she noted.
“We have blocked a major loophole by using data to profile tax payers. Thus, someone owning properties across multiple states and overseas can selectively declare knowing that tax authority had no means of cross checking.
“This is especially the case with overseas assets and income where state governments lacked jurisdiction. But with the centralisation of data under Project Lighthouse within the Federal Ministry of Finance, a major loophole has been plugged,” she added.
The minister reiterated the willingness of the government to prosecute tax evaders after the tax amnesty period had elapsed.
She therefore called on tax professionals to advise their clients to uphold honesty in the declaration of their assets and income as well as the regularisation of their tax status.
To create awareness on the tax amnesty programme, the minister said the federal government had recruited and trained 2,190 Community Tax Liaison Officers, CTLOs out of which about 1,710 have been deployed to 33 states.
The CTLOs are currently operating in Adamawa, Cross River, Delta, Edo, Enugu, Kaduna, Kwara, Lagos, Nasarawa, Niger, Ogun and Oyo, among others.
The CTLOs were part of the 7,500 job opportunities the federal government said would be generated for Nigerians through the N-Power scheme.
Noting the cooperation between the federal, states and foreign governments, Mrs. Adeosun said they have provided an unprecedented level of data to the Nigerian government.
These data, she said, had allowed government profile taxpayers accurately and identify those whose lifestyle and assets were not consistent with their declared income.


Source: PremiumTimes

The dangers of high interest rates in Nigeria - Stears Business

By: Bhodemarz on November 22, 2017 / comment : 0 , , ,

The news cycle is still dissecting Nigeria's latest economic data which shows that the economy is on a recovery path after the 2016 recession, and inflation continues to trend downwards. 
In older news, commercial banks in the country are still under fire for failing to lend to many individuals and businesses. 
What ties all these together? Monetary policy. 
In a nutshell, monetary policy describes the activities through which a central bank regulates the financial and economic system, usually by setting interest rates. In Nigeria, this function lies with the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN).

Nigeria’s Monetary Policy
Since July 2016, Nigeria's national interest rate – known as the base rate or monetary policy rate – has been held at 14%. In contrast, the interest rate in South Africa, Nigeria’s perennial economic rival, is currently 6.75%. Unsurprisingly, many groups bemoan the high-interest rate environment, arguing that it restricts bank lending, which, in turn, impedes economic growth. 
Notwithstanding the truth in that statement, high interest rates serve multiple purposes. Primarily, as is the case in Nigeria at present, they are used to tackleinflation.
The national interest rate determines how Nigerians typically spend and consume. On the consumption front, the lower the national interest rate, the more willing people are to borrow money. When people borrow more and pay less interest on their debts, there is more money available for spending and consumption, which influences national output. However, at higher rates, people are unwilling to borrow. When higher interest rates are coupled with asymmetric information, banks provide fewer loans. The tighter lending standards mean that consumers will cut back on spending and consumption, which affect national spending. This has been the situation in Nigeria over the last few years. 
The effects of such a policy decision could be dangerous if not well-managed. A consistent slump in national spending and investment results in a shrinking economy, and ultimately, economic stagnation or a recession. Many economists would point to Nigeria's high interest rate environment as a factor impeding the country's economic recovery. 

Where Commercial Banks Come In
The danger of too-high interest rates does not stop there. When the CBN fixes a high base rate, the rate at which commercial banks lend to and borrow from themselves, the interbank lending rate, also becomes high. This, in turn, pushes up the cost of an individual or business obtaining a loan from a commercial bank (or similar financial institution). Effectively, banks transfer the high cost of borrowing from the CBN unto their retail and institutional customers, making loans expensive and less accessible. 
Furthermore, when interest rates are high, investors and banks are often only willing to invest in government securities which pay high returns – a phenomenon known as crowding out. How come? Well, if I can buy a risk-free 180-day treasury bill that pays me a 20% interest rate, I see little incentive in lending to a risky individual or institution, and if I do, I would definitely charge an exorbitant rate. Similarly, if I could get such a risk-free 20% return in half a year, why should I invest in the stock market or your business? In short, high interest rates on government securities draw investment away from other areas of the economy. 
Interestingly, the government does not particularly like this situation, either. High interest rates make the cost of government borrowing and debt servicing high. Again, Nigeria has experienced this recently – rising interest rates in the country have bloated the country's debt bill to the point that debt repayments now constitute as much as 60% of federal revenues, according to the International Monetary Fund. Unsurprisingly, wary of a debt crisis, Moody's recently reduced Nigeria's credit rating. 
Clearly, the CBN's interest decision has a significant effect on the economy. 

No Cause for Legislative Alarm
So should we be worried about Nigeria's high interest rates? Many key stakeholders believe so, with some calling for a cap on interest rates, similar to what Kenya implemented in 2016. However, this will only worsen the nation’s monetary equilibrium. Although the CBN can alter its base rate, actual interest rates are determined by forces subject to the national and global markets, thus cannot be regulated by fiat. Therefore, there is a need for restraint and an adherence to market principles for the management of the nation’s monetary policy.  
Just a year after the Kenyan parliament enacted its interest rate cap, the Central Bank of Kenya (CBK) is already pushing for a repeal of the law because of the negative effect it has had on the Kenyan economy. Caution must be applied to ensure that mistakes made in other countries are not replicated in Nigeria. 
Moreover, the biggest determinant of interest rates in Nigeria will always be the level of inflation. Until the CBN is able to arrest inflation, perhaps through its interventions in the agriculture sector, high interest rates will be Nigeria's norm. 

Follow this Writer on Twitter @LanreRufai_.


Source: Stears Business

Nigeria floats $3bn bond to fund #2018Budget

By: Bhodemarz on November 22, 2017 / comment : 0 , , , ,

The Federal Government has floated the much awaited US$3 billion dual series bond to fund approved budgetary expenditures.
A statement from the Federal Ministry of Finance yesterday quoted Minister  Kemi Adeosun as saying that “the government would utilise the proceeds of the Notes in funding the approved budgetary expenditures and for refinancing of domestic debt, as may be applicable.”
According to Mrs. Adeosun, the Notes represent Nigeria’s fourth Eurobond issuance, following issuances in 2011, 2013 (two series) and earlier in 2017.
She noted: “Nigeria is implementing an ambitious economic reform agenda designed to deliver long-term sustainable growth and reduce reliance on oil and gas revenues while reducing waste and improving the efficiency of government expenditure.
“Our economy is beginning to recover, Gross Domestic Product (GDP) having returned to growth in 2017, but we must maintain the momentum behind our investments in order to further drive growth. That is why we are, and will continue to focus investment on the enabling infrastructure we need to broaden economic productivity.
“Successfully extending out debt profile in the international market to 30 years is a key element of that strategy as it establishes a basis for the longer term financing required for transformational infrastructure investment.
“As we have always stated we are progressively replacing debt with revenue, which is reflected in the 2018 Budget proposal. We are establishing the building blocks for inclusive growth and beginning to see the results of the hard decisions that have been made to reset our economy appropriately.”
The aggregate principal amount of the dual series bond is being offered notes under the Federal Government’s US$4.5 billion Global Medium Term Note programme (increased from US$1.5 billion).
The Notes comprise a US$1.5 billion 10-year series and a US$1.5 billion 30-year series.
The Ministry of Finance said “the 10-year series will bear interest at a rate of 6.5%, while the 30-year series will bear interest at a rate of 7.625%, which will be repayable with a bullet repayment of the principal on maturity.
The statement said “the offering, which attracted significant interests from leading global institutional investors, is expected to be closed on or about 28 November, 2017, subject to the satisfaction of various customary closing conditions.”
When issued, the Notes will be admitted to the official list of the UK Listing Authority and available to trade on the London Stock Exchange’s regulated market.
Nigeria may apply for the Notes to be eligible for trading and listed on the Nigerian FMDQ OTC Securities Exchange and the Nigerian Stock Exchange.
The pricing was determined following a roadshow led by Mrs. Adeosun; the Minister of Budget and National Planning, Senator Udoma Udo Udoma; Central Bank of Nigeria (CBN) Governor Godwin Emefiele; Debt Management Office (DMO) Director-General Ms. Patience Oniha, and the Director-General of the Budget Office of the Federation, Mr. Ben Akabueze.
Commenting on the Notes’ pricing, the DMO Director-General Patience Oniha said: “With the successful pricing of our 4th Eurobond, Nigeria has become one of the few African issuers whose securities have attracted strong investor interest amongst institutional investors across the globe.
“This time, Nigeria issued a new 10-year bond at a yield of 6.500% and a 30-year benchmark, priced at a yield of 7.625%, which despite the longer tenure remains cheaper than our 15-year issuance earlier this year.
“The 30-year is a landmark as the tenor represents the first by a sub-Saharan country other than South Africa and importantly establishes the basis for long term infrastructure funding, which is a priority for this government.”
Oniha expressed satisfaction with international investors’ recognition of Nigeria’s huge potential.
“Perhaps even more important is that with this dual tranche issuance the objective of reducing the cost of government borrowing has been achieved,” she added.



Source: The Nation

Has the CBN fixed the Naira? - Stears Business

By: Bhodemarz on November 06, 2017 / comment : 0 , , , , ,

Three months ago, the U.S. Dollar was one of Nigeria’s scarcest commodities, priced at ₦500 in the black market. Today, it trades below ₦400/$1, a drop initiated by aggressive dollar sales by the Central Bank of Nigeria (CBN) in the past two months.
These foreign exchange (FX) sales have been done via an unending series of auctions, or “special windows”, as opposed to a general market sale. Most recently, the CBN opened such a window for “Investors & Exporters” transacting in invisibles (non-physical goods), with the aim of further boosting liquidity in Nigeria’s fragmented FX market. Unlike previous windows for Personal Travel Allowances, etc., this “NAFEX” window covers invisible transactions like loan repayments, dividend remittance, and capital repatriation. In short, the primary beneficiaries will be foreign portfolio investors i.e. foreigners participating in Nigeria’s financial markets. Understandably, the culmination of these moves has triggered international attention.
With dollars now readily available for most – to the point that banks are scrambling for naira to fund their dollar purchases – we can ask the question: Are Nigeria’s FX market woes over?

Hold the currency, no matter what?
To answer this, we must first understand how we got here. After the 2014 oil price collapse that decimated our export revenues and government finances, the CBN resisted calls to allow the naira weaken. The apex bank decided to peg the naira at artificial levels to deter inflation. Despite twoforced devaluations, the apex bank kept pegging the currency and imposed various controls to restrict who could buy dollars and for how much.
As textbooks would prescribe, capital fled from Nigeria. This merely dried up supply in the FX market. The situation persisted through Nigeria’s recession until the OPEC oil deal and rebound in our oil production increased dollar earnings. Then the CBN started selling dollars again.
So, for a long time, the FX market was the scourge of Nigeria’s economy. The exchange rate became a national obsession, and it was all international partners wanted to talk about too. And for critics of the CBN, the chosen policy stance merely deepened Nigeria's recession. By their accounts, the recent loosening of dollar liquidity is either unsustainable if oil prices fall, or simply too little, too late. Regardless of your thoughts towards Emperor Emefiele, it is worth assessing the state of the FX market now. Does the Emperor really have new clothes?

The merits of the CBN's choices
Looking at where we are now, it is easy to understand why CBN Governor Godwin Emefiele could be satisfied. He has managed to avert another devaluation and in doing so, stop further inflation. Egypt, often used in comparison after they floated their currency in November 2016, experienced 31% inflation in March 2017. Pre-float, inflation was 14%. The comparison is crude but shows the potential inflationary effect of a weakened currency. Nigeria also experienced imported inflation in 2016 but to a significantly smaller degree: Inflation pre-devaluation was 16%. By the turn of the year, it was 19%. Considering the hardship caused by even this rise – inflation was 9% in 2015 – it would be churlish to discount the “deflationary” benefits of the CBN’s policies.
Meanwhile, it's hard to assess the CBN’s FX policies without accounting for the Federal Government’s (FG) long-term economic plans. As the Economic Recovery & Growth Plan suggests, the FG hopes to reduce Nigeria’s import dependency and to develop self-sufficiency in essential foods and petroleum products. Doing this will require a mix of FX demand management – like the 41 banned items – and industrialisation. And though till recent dollars have been scarce, the CBN prioritised industries that would most serve this agenda.
Despite these admissions, we will find that the FX conundrum is far from settled.  

More windows. Same problems
Crucially, the FX market remains fragmented. Previously, Nigeria was rumoured to have as many as six different exchange rates. Now, the CBN itself has created a range of sub-markets through “Special Windows”.  Apart from this new NAFEX window, there are windows for nearly every other reason for FX demand – personal travel, importing raw materials, and even importing petroleum products. Besides, these sub-markets are all still controlled or heavily influenced by the CBN, mainly because it is the primary supplier of dollars in those windows.
With all these markets – none of them “free” – it is difficult to ascertain the fair value of the currency. This means that some devaluation risk persists. At the same time, arbitrage is a major concern when multiple markets exist. The combination of all these erodes confidence in the market, a precursor for the reentrance of foreign investors.
And make no mistake about it, for Nigeria’s FX woes to end, we need these autonomous dollar suppliers. Foreign Portfolio Investors (FPIs) are the obvious source and incidentally, are the presumed targets of this new NAFEX window. But an additional window will not be enough to entice them. They will likely wait on the sidelines and observe trading activity at this window, gauging liquidity levels and price discovery. Short of a full currency liberalisation, the success of the NAFEX window may be our best hope of attracting more. Only then, when the CBN is not the only relevant FX supplier in the market, can we consider the FX debacle to be near its end. Nigeria still needs an FX market, not a bunch of windows.

Source: StearsNG

Fed govt to restrict physical movement of dollars, other foreign currencies

By: Bhodemarz on November 05, 2017 / comment : 0 , , ,

The Federal Government is set to begin strict border controls on the physical movement of dollars and other foreign currencies.
This is expected to mitigate foreign exchange scarcity and check money laundering activities, it was learnt.
A draft law to ease dollar shortage by restricting movement of hard currencies in and out of Nigeria has passed its second reading at the National Assembly.
The draft law passed the second reading on Wednesday.
It will ban individuals and companies from exporting more than $50,000 in cash without written approval of the Central Bank of Nigeria, with contraventions punishable by up to two years in prison.
Anyone importing more than $10,000 would have to disclose the source of and use for the funds, according to a copy of the bill seen by Reuters on Wednesday.
The bill, read in the House of Representatives, is designed to replace a law passed in 2004.
A dearth of dollars since crude oil prices slumped in 2014, slashing the Federal Government revenues, prompted a recession in 2016 that the economy exited in the second quarter of this year.
Oil sales contribute over 90 per cent of Nigeria’s foreign exchange earnings.
During the currency crunch, most businesses ought dollars on the black market where the naira, at the start of the year, traded around 30 per cent weaker than on the official market.
To resolve the currency crisis, the CBN had set up at least different six exchange rates.
The bill, which would have to be passed by the upper house to become law, also seeks to extend the time for issuance of capital importation certificates to 72 hours from 48 hours.
Economic and financial experts are divided over the need for the bill.
A professor of Economics at the Olabisi Onabanjo, Sherriffdeen Tella, said the regulation was in order since it had to do with the physical movement of cash.
He said, “Normally, international transactions are meant to be done through the banking system. Physical movement of cash is probed in most countries of the world.
“For anybody to carry $50,000 in cash looks somehow. Payments are done via debit or credit cards now.”
An economic analyst and Chief Executive Officer of Cowry Asset Management Limited, Mr. Johnson Chukwu, said the Money Laundering Act had taken care of most of things the new law was trying to do.
Chukwu said, “To me, the exigencies of business may not make it easy for you to secure CBN approval before carrying $50,000. We already have a law that stipulates that you have to declare anything in excess of $10,000 and that you cannot move more than N10m or its equivalent.
“To declare means you state the source and the use. If it is found suspicious, it will be confiscated.”


Source: TodayNG

African Development Bank Calls Off Proposed Loans to Nigeria, Instead Redirecting it to Specific Projects

By: Bhodemarz on October 31, 2017 / comment : 0 , , ,

The African Development Bank has called off a loan to Nigeria that would have helped fund the country's budget, instead redirecting the money to specific projects, a vice president at the lender said on Monday.
The African Development Bank had been in talks with Nigeria for around a year to release the second, $400 million tranche of a $1 billion loan to shore up its budget for 2017, as the government tried to reinvigorate its stagnant economy with heavy spending.
But Nigeria refused to meet the terms of international lenders, which also included the World Bank, to enact various reforms, including allowing its currency, the naira, to float freely on the foreign exchange market.
Rather than loan Nigeria money to fund its budget, the African Development Bank is likely to take at least some of that money and "put it directly into projects," Amadou Hott, African Development Bank vice president for power, energy, climate change and green growth, told Reuters in an interview during a Nordic-African business conference in Oslo.
Because prices for oil, on which Nigeria's government relies for about two-thirds of its revenues, have risen and the naira-dollar exchange rate has improved, the country is relying less than expected on external borrowing, Hott said.
No one from the Nigerian finance ministry was immediately available to comment.
Nigeria's 2017 budget, 7.44 trillion naira, is just one in a series of record budgets that the government has faced obstacles funding, pushing it to seek loans from overseas.
In late 2016, the AfDB agreed to lend Nigeria a first tranche of $600 million out of $1 billion. But negotiations over economic reform later bogged down, blocking attempts to secure the second tranche of $400 million, sources told Reuters then.
Now, AfDB's loans will be more targeted, Hott said.
"It's hundreds of millions of dollars, just in one go, that we were supposed to provide in budget support, but we will move into real projects ... " he said.
Earlier this month, the head of Nigeria's Debt Management Office said the country is still in talks with the World Bank for a $1.6 billion loan, which will help plug part of an expected $7.5 billion deficit for 2017.

The administration is also trying to restructure its debt to move away from high-interest, naira-denominated loans and towards dollar loans, which carry lower rates.

Source: VOA News

2017 Budget Yet To Attain 10 Percent Implementation, don’t expect timely passage of 2018 budget, says NASS

By: Bhodemarz on October 29, 2017 / comment : 0 , , , , ,

The Chairman of House of Representatives committee on Legislative Budget and Research, Mr. Timothy Golu, has ruled out the possibility of passing the 2018 budget into law before the end of the year, even as he disagreed with the executive arm that paucity of funds caused the poor implementation of 2017 estimate.
Also, commenting on the brewing crisis, a principal officer in the Red Chamber observed that the ground was already being prepared for another round of budget crisis between the National Assembly and the executive arm of government.
According to him, the late submission of MTEF to the National Assembly as well as refusal to comply with relevant laws guiding budget preparations had always been the causes of challenges dogging Nigeria’s budgeting process.

The senator recalled how in 2016, the Senate returned the MTEF to the executive arm of government due to lack of supporting documentation and details.
Golu, who spoke to The Guardian in Abuja, explained that the December 31-target cannot be realised due to the poor implementation of the 2017 budget, regretting that while the government said they have released funds, most of the Ministries, Departments and Agencies (MDAs) said they have not seen cash.
While contending that there is no way the MDAs would start implementation of any budget without money, the lawmaker, who represents Pankshin / Kanke / Kanan federal constituency of Plateau State, blamed the executive for the problem associated with the 2017 budget implementation.
He said: “Lack of money is not the main problem, government is slow in taking decision, it is slow in coordinating the agencies, it is slow in coordinating it’s policies. The government is just slowing down most of these things.
“I believe that if the government can accelerate action, if there can be proper coordination between the ministry of finance and the budget office and then the MDAs, these things could be sorted out.”
The lawmaker decried the situation whereby everybody in the executive is saying different things, stressing that they are not on the same page as far as budget data is concerned.
“So that is part of the problem; I don’t see us passing this budget before the end of the year, because we need to do a good job. They have not submitted it, yet they are talking about passage.
“We are yet to start work on MTEF-FSP; the relevant committees are about to work on the MTEF-FSP now, which should precede the submission of the main budget, so it means that we would be handling the budget together with the MTEF-FSP, which to us is not the problem, because we can do it.
“But to have enough time for the various committees to do their work, it would be difficult to pass this budget before December 31, because if we rush now and do an untidy job, Nigerians would not be happy. So we need enough time to handle the items, one by one, because the national assembly more than ever before is putting an eagle eye on every item,” he remarked.
Further, the legislator disclosed that the House of Representatives is doing what is referred to in port parlance as destination inspection of the budget items, stressing that since it is a law, “if we don’t do it well, the implementation would be bad and it would affect all of us.”
He disclosed that the leadership of the National Assembly has resolved to sit down and analyze in details, every item so that by the time it becomes law, you know that it would be implementable.
“That in itself is a problem, because there should be clear implementation of the 2017 budget to give way for the coming budget, because if the previous budget is not implemented then there would be no clearance for the new budget to take off. So, if they want to harmonize or roll over some things, I just don’t know how they are going to do it. “
On the level of implementation of the 2017 budget, Golu stated: “We have not heard anything about the 2017 budget yet. There is nothing happening. We have not heard about the implementation up until now, even 10 percent implementation has not been done and they are planning to bring 2018 budget.”
Some critical minds in the National Assembly believe that the approval given by FEC, which suggested that the executive had concluded action on the 2018 budget proposal and ready to present same to the Legislature amounted to turning the law upside down, which they say could kick start serious problems for the 2018 budget.
Picking holes on the procedure, a member of Senate Committee on Appropriation drew attention to section 18 of the Fiscal Responsibility Act, which clearly provides that the President ought to await the consideration and approval of the draft MTEF by the National Assembly before using same as basis for preparing the Budget proposal.
He said: “These are the issues we have always raised; why do we always behave as if we are ignorant of the laws guiding budget preparation? Look, it is sad that despite the presence of competent lawyers in cabinet, the executive is acting as if the law does not matter.
“Apart from the Vice President, you have the Attorney-General of the Federation there. Better still, the minister in charge of Budget is not only a lawyer, he was with us here as a member of Senate. Is it impossible to get the document on MTEF submitted by the end of August as required by law? They ignored that aspect of the Fiscal Responsibility Act and submitted MTEF in October.”
The lawmaker added: “Now, to do a thorough job before getting the MTEF approved, it takes a minimum of six weeks. That is why the law asked that the draft of the MTEF be submitted to the National Assembly at least four months to the end of the year, so that before the end of October of every year, the MTEF would have been considered, approved and sent back to the President.”
He argued that in the eyes of the law, “it is the approved MTEF sent to the President that he will use to cause the national budget to be prepared and later sent back to the legislature as Budget proposal.”
“At the moment, the National Assembly has not even started considering the MTEF draft because of its late submission and FEC has announced that it has approved the Budget proposal. What a mess! Is the National Assembly supposed to play the rubber stamp role and close its eyes to these irregularities? We wait and watch how the whole thing will play out,” he explained.
Late submission of MTEF to the National Assembly had in the recent past produced serious problems for the early passage and implementation of the budget.

Other lawmakers who expressed their minds to The Guardian on the issue expressed regrets that no lesson has been learnt from the budget crisis that had always been a source of quarrel between the executive and legislative arms of government particularly since the inception of President Muhammadu Buhari’s administration.
Specifically, the Fiscal Responsibility Act stated in section 18: “Notwithstanding anything to the contrary contained in this Act or any other law, the Medium-Term Expenditure Framework shall be the basis for the preparation of the estimates of revenue and expenditure required to be prepared and laid before the National Assembly under section 81(1) of the Constitution.
“The sectoral and compositional distribution of the estimates of expenditure referred to in subsection (1) of this section shall be consistent with the medium term developmental priorities set out in the Medium Term expenditure Framework.”

Source: GuardianNG

NIGERIA IS OUT OF RECESSION AND PRESIDENT BUHARI IS TRANSFORMING THE ECONOMY, BY KEMI ADEOSUN

By: Bhodemarz on October 28, 2017 / comment : 0 , , , ,

Around the middle of 2014, when the price of crude oil fell dramatically, Nigeria’s finances became challenged. This is not hard to explain: We’ve historically depended on crude oil for as much as 70 per cent of government revenues and 90 per cent of foreign exchange earnings. The outcome—pressure on government finances—was by no means unusual. A similar fate befell most oil-rich countries around the world.
Where Nigeria possibly stood out was in the fact that during the preceding three years—when oil prices were in excess of $100 per barrel—the previous administration did little in terms of saving and investing for the future. Our sovereign wealth fund—which was established in October 2012 with just US$1 billion—did not receive any further inflow during the oil price boom. Instead, billions of dollars were squandered through corrupt oil and defense contracts.
It is a terrible thing for a country to fall on hard times without a savings buffer. But there was nothing unexpected about our downturn. It was the inevitable result of the choices we made or didn’t make during the years of boom.
What is remarkable—yet not talked about as much—is the way we have worked so hard to exit the recession, reset the economy and reposition Nigeria for a brighter future for present and future generations of Nigerians. President Muhammadu Buhari and his administration are laying the foundations for the kind of economic growth that makes a real impact in the lives of citizens.
The downturn has inspired unprecedented levels of fiscal responsibility, in line with President Buhari’s determination to fight Nigeria’s endemic corruption.
Shortly after taking office, he issued a presidential order mandating the immediate implementation of the Treasury Single Account (TSA) system, consolidating thousands of government accounts scattered across banks into a unified system that is transparent and easy to centrally monitor and track. Under the old system, it was common for government accounts to be converted into personal use, but under the TSA this is impossible. Also, the proliferation of accounts encouraged several questionable practices.
Budgetary reform has also taken a lot of our time and attention. We are pioneering the use of software to prepare our annual budgets, which allows greater transparency and the ability to track changes.
We have insisted on using biometric verification in the deployment of our social investment programme, which includes a job scheme for unemployed graduates; a school feeding scheme for primary school pupils; a conditional cash transfer scheme targeting a million of our poorest citizens; and a micro-credit scheme for artisans, farmers, and traders. In the past, social investment payments would have been made as cash handouts.
A similar insistence on biometric verification for the federal payroll has resulted in the detection of tens of thousands of bogus beneficiaries—or “ghost workers,” as we often refer to them in Nigeria—and savings running into billions of naira every month. The tighter rein on public finances allowed us invest $500 million in our sovereign wealth fund during a recession.
We are pursuing unprecedented cooperation with foreign governments and powers, as part of our transparency and anti-corruption drive. For the simple reason that a disproportionate amount of public funds looted in Nigeria end up in the United Arab Emirates, Nigeria has signed bilateral agreements with the UAE government on extradition, exchange of information, and repatriation of stolen public funds.
One strong demonstration of our political will has been a whistleblowing scheme we launched months ago that empowers citizens to report public corruption. The impact in terms of recoveries has exceeded our expectations: In two high-profile examples, $43 million and $9.8 million in looted cash were recovered from apartments in Lagos in the south and Kaduna in the north respectively.
A lot of the work we have done since President Buhari came to office in May 2015 has been focused on dismantling the old ways of doing things, rebuilding them, and empowering and fortifying our institutions with technology to block loopholes, discourage abuse, and prevent a relapse into the destructive ways of the past.
The new Nigeria we seek will not happen without this kind of foundational reform that imposes on us new ways of thinking and of doing things. The early results are already being seen. A concerted focus on agriculture has seen our rice imports from Thailand dropping by 90 per cent between 2015 and 2016 and being replaced by locally grown variants.
As oil has let us down, we have started to do what we should have done decades ago: Invest in agriculture and mining. Throughout the recession, agriculture recorded healthy growth. As we emerge from the recession, its impact is certain to multiply and position Nigeria for a prosperous future.
The most important elements of any reform effort tend to be the least flamboyant. We are confident that in the months and years ahead, Nigerians and the world will see the full impact of the foundational resetting that the Buhari administration has been focused on since 2015.
There is of course a lot of resistance to reform, by vested interests within and outside the system. But we are not fazed. The work of reform goes on. To borrow a phrase from the Nigerian novelist, Chinua Achebe, it is morning yet on Creation Day. Not very long from now, Nigerians and the world will look back on the recession we have just emerged from, and realize that it was the turning point in Nigeria's journey to true growth and greatness.

Kemi Adeosun is the Minister of Finance of Nigeria.

Culled from Newsweek


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