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Increasing VAT is Not The Ultimate Solution to Nigeria’s Revenue Problem

Nigeria’s finance Minister, Zainab Ahmed, recently admitted that Nigeria has a revenue problem. That was a euphemistic method of describing Nigeria’s current predicament.

Since 2015, national expenditure has doubled but the nation has continuously failed to meet revenue targets, necessitating the need to incur debt to meet the government’s obligations.

The reasons for Nigeria’s declining revenue are not farfetched. Nigeria derives the bulk of its government revenue and foreign exchange earnings from oil exports. However, the inflow of petrodollars has steadily declined in recent years owing to a fall in the price of crude oil from a peak of $113 per barrel in 2012 to around $60 in 2019. A situation which has resulted in the inability of the government to meet revenue targets.

To make up for the shortfall, the government has attempted to increase revenue generated from taxation, with the number of taxpayers doubling since 2015. Nevertheless, there remains a gaping hole in the nation’s coffers necessitating the need for heavy borrowing to make up the revenue shortfall.

However, Nigeria’s revenue shortfall is only half of the problem. The state of the government’s expenditure also leaves more to be desired. Currently, the government expends most of its earning on debt servicing with data from the Debt Management Office (DMO) revealing that 60 percent of government’s revenues goes into debt servicing. What is left goes into public administration, particularly paying salaries of public servants and government employees. It is therefore not difficult to deduce that not only does Nigeria have a revenue generation problem, it has an equally seriously problem with expenditure management.

It was therefore unsurprising that last week’s announcement of a proposed increase in the Value Added Tax (VAT) rate from 5 percent to 7.5 percent has been met with condemnation. While the federal government’s desire to increase the VAT rate is understandable, given that Nigeria not only has one of the lowest VAT rates in Africa, but also one of the world’s lowest ratios of tax to GDP; increasing the VAT rate in current circumstances is illogical at best.

In an economy which still grapples with the aftereffects of the recession it suffered in 2016, as well as spiralling unemployment and a low growth rate, increasing taxes is counterproductive to economic growth.

Typically, nations struggling with low economic growth and other forms of macroeconomic pressure tend to reduce tax rates in order to spur production and boost consumption, Nigeria instead has done the opposite. By increasing the VAT rate, the government is directly increasing tax burden on companies and consumers, thus reducing disposable income available for consumption of goods and services. This is far from ideal for the growth of the economy.

In addition, contrary to the rhetoric emanating from the government that the increase in VAT has no effect on poor people, the VAT is a regressive tax which affects the poor more than it affects the rich. Basic commodities including food, transportation etc. will invariably become more expensive, with the severest effects suffered by the nation’s poor. In a nation already adjudged the poverty capital of the world, a policy which results in higher cost of living should be the last on the government’s agenda.

Therefore, rather than increase the VAT rate or introduce new ones, the government’s priority should be improving tax collection. Currently, Nigeria ranks as one of the nations with the largest VAT gap in Africa. This implies that the government currently does not collect as much VAT as it should lends credence to the opinion that the focus should be on improving tax collection, not increasing rates.

There is an urgent need to improve the nation’s tax collection system such that the informal sector is adequately captured while also expanding the nation’s tax base to cover more taxable persons.

Furthermore, rather than increase the VAT rate, the government should be focused on addressing structural deficiencies in the macro economy, as well as improving the ease of doing business across the nation. Both acts will help to engender economic growth and ensure the successes of businesses, two scenarios which will expand the economic pie and result in higher tax revenues to the government, without destroying the spending power of citizens and bottom lines of businesses.

Also, perhaps there is a need to drastically reduce government expenditure.

In summary, Nigeria has a revenue problem. However, there are no short-term solutions to this problem. Increasing taxation without addressing the underlying fiscal and structural issues might increase government revenue in the short run but will ultimately render the Nigerian people and nation worse off in the long run.

Source: Businessdayng

See Why CBN Has Increased Charges on Withdrawals, Deposits

The Central Bank of Nigeria, in a circular to all deposit money banks, yesterday announced the commencement of charges on deposits in addition to already existing charges on withdrawals.

According to the circular, the charges, which take effect from today, will attract three percent processing fees for withdrawals and two percent processing fees for lodgements of amounts above N500,000 for individual accounts.

Corporate accounts will attract five percent processing fees for withdrawals and three percent processing fee for lodgements of amounts above N3,000,000.

In a statement by the Director, Payments System Management Department at the bank, Sam Okojere, the CBN said the charges on deposits shall apply in Lagos, Ogun, Kano, Abia, Anambra and Rivers States as well as the Federal Capital Territory.

It also stated that the implementation of the cashless policy would take effect from March 31, 2020 nationwide.

The statement added: “with effect from September 17, 2019, the CBN has approved for banks to unbundle merchant settlement amounts and charge applicable taxes and duties on individual transactions as stipulated by regulations.”

Infinity Trust Leads This Week’s NSE Watchlist

Stocks to watch, comprises the top gainers and losers from the previous week, as well as companies that are expected to have corporate actions this week.  

Stocks to watch is not a Buy/Sell/Hold recommendation. 

 Infinity Trust Mortgage Bank Plc 

Infinity Trust Mortgage Bank Plc takes the first spot in this week’s watchlistas the company will be holding a Facts Behind the Figures session today at the Nigerian Stock Exchange (NSE). 

While the company has not disclosed this in any form, firms usually hold such events when a fund raise or some other key development is at hand.  

 Tripple Gee Plc  

Tripple Gee Plc takes the second spot in this week’s watchlist, as the company will be holding its Annual General Meeting (AGM) today. AGMs are opportunities for management teams to unveil plans for the rest of the year.  

 UACN Property Development Company (UPDC) 

UACN Property Development Company has a spot in this week’s watchlist, as the firm was the best performing stock last week, appreciating by 51.52% to close at N1.50.  

Investors could decide to sell down their holding this week to cash in their profits. The rally in the stock was due to the news of UAC Nigeria divesting its holding in the firm to shareholders. UPDC will in turn divest its holding in a REIT, to its shareholders. 

 AIICO Insurance Plc  

AIICO Insurance Plc was one of the top gainers last week, hence its place on the watchlist. Investors took positions in the stock, once news of a potential investment by private equity firm, Leapfrog, was announced.  

While details of the price at which Leapfrog is taking a stake are unknown, from precedence, it would be at a premium to its current market price.  

 University Press Plc  

University Press Plc has a spot in this week’s watchlist, by virtue of being one of the top 10 losers for last week. The stock declined by 6.25% to close at a 5year low of N1.05. Players in this space have struggled and the stock could tank further, as there are no compelling reasons for an uptick.  

Source: Nairametrics

The Power Of Purpose: Unlocking Africa’s $10 Trillion Opportunity In Housing

Africa has the youngest and fastest growing population on earth. It is expected to double from 1.3 billion today to over 2.5 billion by 2050. However, Africa does not have the money to build what it needs. In 2014 Shelter Afrique said that “African urban areas will need 565 million additional housing units between 2015 and 2030, just to keep up with rapid population growth and urbanization”–creating a huge business opportunity. One person who has been a passionate activist for growth and innovation in this space is Paul Musembwa, the CEO of Warp Developments. I caught up with him in Atlanta to find out more.

Paul, welcome. Please tell us a little bit about what you do with Warp

I am the CEO of Warp Developments. Warp is dedicated to homeownership for all because of its impact on humanity. To quote John Hope Bryant, one of Atlanta’s greatest philanthropists, “homeownership is the hedge fund for the average middle class family.” Homeownership defines the middle class. It is the most effective tool for financial inclusion in the United States and Canada. If it works here, it will work elsewhere. My mission is to make universal homeownership a reality.

That’s a great purpose. What is the housing problem in Africa and what is the size of the market opportunity?

We should be building 40 million new homes or 160 Atlantas every year. That’s why Warp’s initiative is dubbed “A City A Year.” Africa has 54 countries. Altogether they do not build 1 million homes a year. The gap is the opportunity. 40 million modest homes require an investment of more than $1 trillion every year. The multiplier effects would add $10 trillion to annual GDP. That is 5 times current GDP. Closing Africa’s housing gap can generate 5 times current GDP! That will end Africa’s poverty.

And what are some of the myths about working in Africa that need to be dispelled?

“Africa is corrupt, politically unstable and dangerous. Land ownership is complicated. People cannot service mortgages. People are dishonest. You can’t succeed in the housing business.”

Africans say this. If we don’t believe in ourselves we should not expect foreigners to believe in us. Take a closer look. Africa is booming despite chronic underinvestment. These myths must be dispelled.

In the mid 70s Dr. Muhammad Yunus started lending money to poor women in Bangladesh. He discovered that the poor, without collateral, were better credit risks than wealthier people. That simple idea birthed microfinance and Grameen Bank. Dr. Yunus dispelled a myth that had denied finance to the majority of people in Bangladesh. He had no precedent.

Today microfinance is mainstream and impacting hundreds of millions of people. Dr. Yunus won a Nobel Prize. We have to dispel the myth that low income people anywhere in the world cannot own homes “because they are poor and/or have poor credit.” That change in thinking opens up 40 million homes a year  in Africa. I say that Africa is a great place to do business.

So what kind of technologies do you think would work there?

Technology should serve our objectives. We want to make homeownership universal to elevate the standard of living. That means we should use technologies that help us build 40 million homes a year at prices people can afford. We also should attract the funding that enables people own their homes outright in ten to twenty years. Finally, we should do all this in a manner that protects the planet.

We can use building technology that creates jobs, builds skills, increases wealth, and sustains the planet. Pre-fabricated housing, interlocking mortar-less block and 3D printing can work. Then there is a fintech opportunity worth over $1 trillion a year. Most Africans are unbanked. Out of necessity, Africa is already the trailblazer in mobile money. Developed countries can’t keep up. Africa has the best use-cases for blockchain and cryptocurrency technology. The size of the opportunity makes Africa the ideal platform for innovation and experimentation. Bring the tech!

Thank you Paul. Finally, what message do you have for investors looking to participate in this giant opportunity? 

Bill and Melinda Gates said that “Africa will be the world’s priority for the foreseeable future. There are 1.3 billion people. Median age of 19, whose GDP per person is under $1,600. Imagine increasing that to Malaysia’s level of $10,000 by 2030. Wow! China’s economy is massive just because hundreds of millions of people are moving into the middle class. Africa has almost as many people as China today. It will have twice as many in 2050. Does it make sense to invest in safe places like Europe and Japan with aging and declining populations? No! Interest rates don’t lie. Africa pays double digit interest rates because it needs money to grow. Europe and Japan are at zero or negative. You have to work really hard to find a modest return.

Africa needs more than $1 trillion a year just for housing. Throw caution to the wind. Risk-adjusted returns are phenomenal! If Warren Buffett was 30, he would be all-in. If you have a long-term perspective, gain mindshare now. Africa’s GDP will be at least $29 trillion by 2050. Engage now or Africa will go it alone until it doesn’t need investors. Then it will be too late. Don’t fall for the jaundiced narrative.  Above all think like venture capitalists not lenders. Gamble on 100 opportunities. You will get 1 unicorn.

Source: forbes

CBN To Subsidise Mortgage Rate to Single Digit in 2019

Central Bank of Nigeria (CBN) is at the final phase of commencing mortgage subsidy, with plans for the country to have a single-digit interest rate before the end of 2019, an Abuja-based industry player told Businessday on Tuesday.

According to the source that is part of the committee working on the mortgage policy in Nigeria, the recent removal of the cap MRP+ 5 percent on mortgage interest rate by the apex bank is in line with the plans for the regulator to achieve the single-digit mortgage rate.

“The new policy is in preparation for the single digit interest on mortgages. The CBN has gotten to the board of governance for approval and before the year ends they would have commenced the subsidy and mortgages will be accessed with single digit interest,” the source said on the condition of anonymity.

High mortgage rate is considered one of the key culprits of Nigeria’s housing challenge. Typical mortgage in Nigeria ranges between 7-10 percent for Federal Mortgage Bank of Nigeria (FMBN) and between 15-25 percent for commercial mortgage institutions, one of the highest in the world.

This has made mortgage as a means of acquiring properties in Nigeria a less attractive option especially for many whose purchasing power was eroded from the country’s five quarter recession.

With the highest population in Africa, Nigeria has housing deficit of more than 17 million units and more than 90 percent of new homes that are built in the country utilise funds from personal savings.

With single-digit interest rates in some other countries, mortgage industry contributes a significant amount to economic growth and development this is however not the case in Nigeria as the roaring inflation rate and the attendant high mortgage rate has not only dampened housing demand but has reduced developers’ investment appetite.

Africa’s largest economy has one of the world’s lowest mortgages to Gross Domestic Product (GDP) ratio at 0.6 percent. This lags Ghana’s 2 percent, South Africa’s 30 percent and crawls after the US and UK rates of 60 percent and 70 percent, respectively.

“The biggest problem in the sector is high cost of the very limited mortgage that is available. If they can develop policy to ease housing finance, it will be impactful,” Wole Olabanji, the CEO of Cobuildit, a Lagosbased real estate firm, said.

On the September 6, 2019, the CBN said in a circular signed by Kevin Amugo, director, financial policy and regulation department, that the “maximum MPR + 5%” was no longer applicable to all financial institutions in Nigeria.

According to industry players, the new CBN policy could see mortgage rate climb even higher than the current rates, as financial institutions will no longer have a regulated cap added to the MPR.

“I think the Central Bank is trying to see if the market can regulates itself,” Roland Igbinoba, founder, Pison Housing Company, told Businessday by phone.

Source: Businessdayng

How Federal Government Plans to Increase VAT to 7.2% affects you

In a bid to increase government revenues, the Federal Executive Council has approved plans to increase Value Added Tax (VAT) from 5% to 7.2%. This represents a 44% increase (VAT has remained at 5% since January 1, 1994, when it became active).

This was made public in a series of tweets by Tolu Ogunlesi, the President’s Special Assistant on Digital and New Media.  

According to Tolu, this was one of the decisions taken at the Federal Executive Council meeting held on Wednesday at the Presidential Villa Abuja. Nigeria collected about N1 trillion in VAT in 2018. A 44% increases could generate over N400 billion in additional revenue for the government if everything remains constant.  

In a series of tweets Tolu reported as follows;  

  • The government wants to increase VAT from 5% to 7.2% 
  • The announcement kickstarts the commencement of the process for increasing VAT. This does not mean VAT will be automatically increased.  
  • For VAT to be increased, the National Assembly will have to approve it and pass an amendment to the current VAT ACT following which the president will append his signature. 
  • The process could take months if not years. 
  • Tolu also confirmed that part of the process will involve “extensive” nationwide consultations  
  • Consultations will mostly be with the organised private sector, Nigeria Labour Congress and other labour unions, foreign investors and multilateral organisations, media, state governors and members of the National Assembly. 

Government Revenue: Nigeria is widely believed to be facing a revenue crisis following the drop in oil prices in 2014. Since the Buhari administration assumed power in 2015, government revenue has failed to hit the heights of the immediate past administration which was over N12 trillion.

In 2018 total revenue accruing to the Federation Account was about N7.1 trillion compared to budget of N10.4 trillion. It was worse in 2017 at about N4.9 trillion. VAT revenues are also a significant portion of government revenues. In 2018, total VAT revenue accruing to the Federation account was N1.04 trillion or 14% of revenues.  

Dire straits: The Federal Government is in a more precarious situation. Last year it budgeted N7.1 trillion as targeted revenue and only actualized N3.8 trillion in collection.

  • Out of this amount, VAT collection was about N146.5 billion (target N207.5 billion).
  • Though the Federal Government relies less on VAT it still needs as much as it can get for itself while helping out states scoop more money.
  • States & Local Government collect about 75% of VAT leaving the Federal Government with 15%.
  • The Federal Government makes more money from its share of Company Income Taxes and Custom Import duties where it collected N660 billion and N296.7 billion respectively. Total non-oil revenue was about N1.1 trillion. 

How VAT affects you: Nigerians will have to wait to see how the consultations pan out over the next few months. If the FG is able to convince various stakeholders, then it could likely sign the act amending the increase. Implementation could be January 1st, 2020 just like it was in 1994.

  • There will be major push backs from Unions who have also just secured increases in the minimum wage.
  • Unions could call for a lesser increase reducing it from 7.2% to anything else above 5%.
  • Nigeria has one of the lowest VAT rates in Africa.
  • VAT is a consumption tax and it is borne by the final consumer who is mostly an ordinary citizen of Nigeria.
  • In addition to VAT Nigerians also pay personal income tax, withholding taxes and sales taxes as collected by some state government (Lagos especially).
  • They will be most hit by a raise as their disposable income will be dented further.  
  • The Executive Chairman of the Federal Inland Revenue Service (FIRS), Babatunde Fowler, also recently reiterated that the payment of VAT on VATable online transactions is required by the law.
  • If this increase is passed by law there will likely be an increase in online transaction cost.
  • Nigerians will see an increase in nearly all items except the 11 items that are currently exempted (see page 14).
  • Corporations are merely collecting agents for the government and only incur a VAT cost when they are final consumers or fail to net off their VAT from purchases from VAT on sales.

Source:  Nairametrics

100 Days In Office: Yet No Economic Development Plans From Our Governors!

While we lament about the slow pace of PMB’s government, it is sad to note that most state governments are not any better. Of the 29 governors elected on March 9 and sworn in on May 29, it is difficult to identify states governed through a carefully and strategically crafted economic development plans. Most govern their states in an ad-hoc and reactionary approach though they have spent over a hundred days in office. This does not mean that positive signs from Oyo, Delta, Kebbi, Ebonyi, Rivers and Yobe states are not appreciated, but much is needed and expected given their deplorable situations despite immense resources.

Just as PMB delayed in forming a cabinet, most of the governors such as Abia, Cross River, Enugu, Ogun, Kano, Taraba, Jigawa, Gombe, Nasarawa and Osun are yet to form and inaugurate a cabinet six months after being elected or re-elected. Osun is the most notorious with Governor Oyetola seemingly incapable of forming a cabinet and effectively developing the state.

Moreover, this should not be the time for the articulation of policies and the inauguration of cabinets. It is the time for implementation of articulated policies that should have been formulated before elections and polished within the first thirty days in office with cabinets inaugurated within a week of being sworn-in.

Since states are supposed to be the primary platforms for Nigeria’s inclusive and sustainable development complementing the macro development initiatives of the federal government, it is said that most of the governors are exhibiting signs of ineptitude and unpreparedness.

Since sustainable development is presently pursued through public-private partnership (PPP), and based on the concept of forwarding guidance to enhance the economic development of our states, our governors should quickly provide us with a clear agenda of their governments.

It will help the private sector, individuals and other public agencies to have a clear idea of the policy direction of the state, plan and contribute effectively. The agenda should have clear and connected objectives as to the kind of states we want in the short-term (first four years), medium-term (five to eight years) and long-term (nine years onwards). And it should cover all aspects of human life and endeavour including where a borehole should be located and economic trees planted in one to fifty years.

That is how to plan for inclusive development and governance that will be sustainable and pro-poor. In the absence or delay in providing a clear agenda for their governments, the current uncertainty and insecurity will prevail and combined with other challenges, escalate our social and development problems. As I genuinely want Nigeria to succeed, let me provide a kind of an abstract of the kind of agenda we expect from our states in the short term, using Enugu state as the focus.

Enugu (the coal city) played host to the advent of modern business in former Eastern Nigeria. Coal was at the heart of the country’s foreign revenue from the 1940s. Employment in the coal mining industry was about the most prestigious employment outside the civil service. With such history, a landmass of about 7,161 square km, a population of about six million people, undulating hills and plains, lush green fields and adventurous topography, Enugu readily became the capital of Eastern region and the nest of Igbo renaissance.

It is the time for implementation of articulated policies that should have been formulated before elections and polished within the first thirty days in office with cabinets inaugurated within a week of being sworn-in.

Today, the socio-economic development of the Enugu state can only be achieved through the strategic assessment of her comparative advantages and a determined effort in creating a synergy of the opportunities and potentials. These should be assessed in terms of her competitive niche within the Nigerian and global context, geographical location and heritage, human and physical resources and the market gaps in the local, national and global economy.

This will demand an urgent re-assessment of the role of the state government whose focus should be on improving the capacity of the state through a strategic combination of her internal coherence and external connectedness resulting in what can be described as embedded autonomy and associational economy.

The question is how will Enugu deploy her assets like coal, linkage location, and political heritage? How will it tap the entrepreneurial spirit of Ugwuja in Enugu Ezike and the unquenchable desire for human capital and the moral-oriented society of Udeze in Ezeagu? Is there a plan to attract big-time farmers to develop a rice plantation in Adani? Adani rice and Ezeagu cashew nuts are consumed by 100 million people in the world every day.

How do we get Cheng from China to build a power plant using coal; excite Mike Adenuga and Shell Plc to re-locate their regional and technical support office to Enugu; lure Zenith, UBA, GTB and Access Bank to always host their annual general meetings at Nike Lake Hotel. Ensure that the trailers of Waziri and Young Shall Grow buses make Enugu their hub to rest and refuel while crisscrossing of Nigeria.

How can Emeka Ekwujuru from Imo and Helen Bassey from Ogoja convince their parents to allow them to study at Enugu State University due to its excellent learning facilities? Can Mbanefo in Onitsha and Elechi in Abakaliki be enticing their husbands to relocate to Enugu while they still work in Awka and Abakiliki respectively as commute time is 30 minutes either way? Expectedly, sustaining the preference of Enugu and her potential pre-eminence in the committee of states will require the provision of world-class hospitals and medical facilities!

With the above, Enugu state will be repositioned to meet the wishes and aspirations of many and will definitely earn a referral position in Nigeria’s development discourse.

It will be characterised by cyclic employment and wealth generation, the emergence of industrial clusters, infrastructural development, the security of life and property. Enugu will emerge as the food basket of the country, a model for the practice of rule of law and improvements in the general standard of living with inclusive pro-poor growth.

Just as it is possible in Enugu, so it can in the other 35 states. All that is required is the commitment to succeed and the ability of Ugwuanyi and other governors to assemble a competent and moral-oriented team. A team that is humane and pro-poor with an uncommon innovative inclination to generate ideas. And enhance the internally generated revenue (IGR) of Enugu from N20 billion annually to N40 billion in two years and N100 billion in four years.

Source: Businessday

Naira Performance Picks Up on Tuesday

The performance of Naira was stronger on Tuesday than it was at the previous trading day at the foreign exchange market.

The local currency proved just that against the American Dollar at the Investors and Exporters (I&E) segment of the foreign exchange market yesterday by appreciating by 28 kobo or 0.10 percent to close at N361. 80 from N362.08 recorded on Monday.

Total trade at the I&E segment went down by $21.92 million or 11 percent to $174.59 million on Tuesday from $196.51 million recorded in the previous session.

The Naira also closed stronger at the Central Bank’s interbank segment of the market as the Naira/USD rate also appreciated by N0.05 or 0.02 percent to trade at N306.85 from N306.90.

The local currency closed strongly at the parallel market against the British Pound Sterling as the Naira traded at N446/£1 against a single unit of the British currency note, appreciating N1 following the previous day’s N447/£1.

Against the US Dollar, the local currency closed at N360/$1 against the greenback as it did in the previous trading day.

The Naira followed the same manner with the Euro at the close of Tuesday’s trading as the local currency remained flat at the end of the trading day at N395/€1.

Source: businesspostng

FG Projects N9.78trn Budget For 2020

The Federal Government has projected N9.78 trillion budget for 2020 fiscal year.
It will also, from this September, begin deduction of the N614 billion bailout funds it gave to states for payment of salaries of workers in 2016.
Zainab Ahmed, Minister of Finance, Budget and National Planning, who disclosed these on Tuesday said that the deduction would commence in the Federation Accounts Allocation Committee (FAAC) provision for states in September.

The minister was speaking at a Public Consultative Forum on the draft 2020-2022 Medium Term Expenditure Framework/Fiscal Strategy Paper (FSP) in Abuja.
She said that the funds would be deducted from source and remitted to the Central Bank of Nigeria (CBN), adding that the refund would not form part of the revenue for funding the budget.

“It was a loan which was advanced by the CBN and the repayment will be made to the same CBN.
“So the recovery process for us is to deduct from the FAAC allocation to the states and remit same to the CBN.
“We are going to start these remittances by the next FAAC. So there will be no requirement for us to consider the Fiscal Sustainability Plan (FSP) implementation.
“We want the states to stay on the path of fiscal sustainability, but it will not be a condition for the deduction. We will deduct direct from source and remit to the CBN,” the minister said.

It would be recalled that the Federal Government gave out the loans to 35 states as conditional budget support provided by the CBN to help them pay salaries, gratuities and pensions.
The loans were provided by the CBN at nine percent, with a grace period of two years, while the Federal Ministry of Finance helped in the disbursements, with documented approval by the presidency.

Only Lagos State did not access the loan.
On the issue of waivers and incentives to businesses, Ahmed said that it was agreed from the finance side that there were actually too many of them and that it was costing the government a lot.’

“We also agree that there has to be a review of the pioneer status certificate issuance process because the waivers and the incentives are costing us a lot.
“However, when decisions have been made and approvals have been given and businesses make their decisions based on those incentives, you cannot pull them out overnight.
“So there has to be a period within which the commitments that have been made are allowed to exit before you post new conditions, but we are currently reviewing the quantum of the waivers,” Ahmed said.

According to her, the idea is to see which one can be reviewed to pull back from to reduce the cost on government.
Ahmed said that the projected budget for 2020 was N9.78 trillion, N10.110 trillion for 2021 and N10.418 trillion for 2022, with revenue for 2020 projected to be N7.63 trillion.
According to her, privatisation proceeds is expected to rake in N126.5 billion in 2020, while multi-lateral/bilateral project-tied loans are to bring in N328.1 billion.
On the expenditure side, while capital expenditure would gulp N1.764 trillion, 21 percent lower than the N2.962 trillion (32 percent) budgeted in 2019, N4.749 trillion was projected for recurrent expenditure in 2020.

The minister said that the recurrent expenditure was occasioned by rise in personnel cost and marginal increase in overhead due to creation of more ministries.
“Debt service is projected to gulp N2.452 trillion, sinking fund N296 billion and statutory transfers N526.45 billion in 2020,” she said.
Ahmed added that personnel costs, inclusive of pension costs, had continued to rise, as it was set at over N3 trillion, adding that the Federal Government was taking steps to contain it.

She said that one of the steps taken was a directive by President Muhammadu Buhari that all MDAs must implement the Integrated Personnel and Payroll Information System (IPPIS) by October, failure of which salaries would not be paid to them.
New borrowings, she said, would be N1.7 trillion to be shared equally between domestic and foreign creditors.
Meanwhile, total fiscal deficit was put at N2.14 trillion for 2020.
For the key assumptions in making the projections, the minister said that oil production volume on the average was expected to be 2.18 million barrels per day (mbpd), lower than the 2.3mbpd projected in 2019.

“Actual daily crude oil production and exports have been well below budgetary projections since 2013, despite the installed capacity of up to 2.5mbpd, for a number of reasons.
“For 2018, actual production was 1.84mbpd and for the first half of 2019, it was 1.86mbpd,” she said.

 


Ahmed added that considering the expected oil glut in 2020 and the need to plan against unexpected oil price shock, a lower benchmark oil price of $55 per barrel was set against the $60 per barrel projected in 2019.’

On Gross Domestic Product (GDP) growth rate, she said that 2.93 percent was projected for 2020, 3.35 percent for 2021 and 3.85 percent for 2022.

FG Receives N2trn Revenue From January To June 2019

Meanwhile, the Federal Government received two trillion naira as revenue from January to June 2019, Director-General of the Budget Office, Ben Akabueze, has said.
Akabueze disclosed this at the Public Consultative Forum on the 2020 to 2022 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) in Abuja on Tuesday.
He explained that within the period under review, about N3.3 trillion was expended by the Federal Government.
The director-general said that there was an average of 1.6 million barrel of crude oil production per day on base production.

Source: Independentng

Nigeria to trim 2020 budget by 0.19- Finance Minister

Mrs Zainab Ahmed said Nigeria is planning to trim its budget for 2020 marginally by 0.19 %  to N8.90 trillion, as against the N9.16 trillion approved by lawmakers for 2019.

The government approved a 34 and 66 %  capital/ recurrent expenditure fiscal policy in 2018 and 32 and 68 %  in the approved 2019 budget.

Details of the medium term expenditure framework (MTEF) and fiscal strategy paper (FSP) 2020-2022 showed that capital expenditure will suffer successive cuts for the three-year period to N1.76 trillion, N1.70 trillion and N1.68 respectively for 2020, 2021 and 2022 despite increases in total expenditure at N8.6 trillion, N8.98 trillion and N9.4 trillion during the same period.

Recurrent on the other hand, is expected to increase from N3.41 trillion in 2018 to N4.7 trillion in 2019.

Key Assumptions of the 2020 Budget Framework: Oil Production 2.18 mbpd; Oil Price $55/b; Exchange Rate N305/$; Inflation Rate 10.81%; Nominal Consumption N122.75 trn; N142.96 trn Nominal GDP; and GDP Growth Rate of 2.93%.

A lower benchmark oil price of $55/b (against $60/b for 2019) is assumed considering the expected oil glut in 2020, as well as the need to cushion against unexpected price shock.

Mrs Zainab Ahmed said Nigeria is planning to trim its budget for 2020 marginally by 0.19 %  to N8.90 trillion, as against the N9.16 trillion approved by lawmakers for 2019.

The government approved a 34 and 66 %  capital/ recurrent expenditure fiscal policy in 2018 and 32 and 68 %  in the approved 2019 budget.

Details of the medium term expenditure framework (MTEF) and fiscal strategy paper (FSP) 2020-2022 showed that capital expenditure will suffer successive cuts for the three-year period to N1.76 trillion, N1.70 trillion and N1.68 respectively for 2020, 2021 and 2022 despite increases in total expenditure at N8.6 trillion, N8.98 trillion and N9.4 trillion during the same period.

Recurrent on the other hand, is expected to increase from N3.41 trillion in 2018 to N4.7 trillion in 2019.

Key Assumptions of the 2020 Budget Framework: Oil Production 2.18 mbpd; Oil Price $55/b; Exchange Rate N305/$; Inflation Rate 10.81%; Nominal Consumption N122.75 trn; N142.96 trn Nominal GDP; and GDP Growth Rate of 2.93%.

A lower benchmark oil price of $55/b (against $60/b for 2019) is assumed considering the expected oil glut in 2020, as well as the need to cushion against unexpected price shock.

Source: homelandnewsng

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