Finance
Senate approves MTEF as oil prices, Naira crash further
Yemie ADEOYE
ABUJA — The Senate, yesterday, approved the Medium Term Expenditure Framework, MTEF, and Fiscal Strategy Paper, FSP, 2016-18 submitted by the Federal Government, basing the financial estimates on oil revenue at benchmark of $38 per barrel and exchange rate at N197/ $1. MTEF and FSP are the three-year fiscal plan from where the annual budget is extracted.
But the international oil prices and the domestic currency market at the parallel segment have all moved against both benchmarks, yesterday.
While the global oil benchmark, West Texas Intermediate and Brent Crude closed, yesterday, at $35.83 per barrel, down by 4.07 per cent and Brent Crude down by 3.25 per cent to $37.20 per barrel, the OPEC reference where Nigeria’s Bonny Light trades also closed lower at $32.6 per barrel, far below the Federal Government’s 2016 budget benchmark.
Similarly, while the official exchange rate has been retained by the Central Bank of Nigeria, CBN, at N197/ $1, the Naira crashed to N270 per dollar at the parallel market, yesterday.
Market operators blamed the continued crash in Naira value at the parallel market on constrains in the supply of the foreign exchange resources coupled with speculations that official devaluation is becoming inevitable following steady decline in foreign reserves and dollar inflow from crude oil sales.
The speculations appeared further fuelled by CBN’s reduction of quantity of foreign exchange supply to Bureaux de Change, BDCs, yesterday to $10,000, down by over 66 per cent from $30,000 per week.
At the backdrop of these developments, President Muhammadu Buhari is expected to present the 2016 budget estimates to the National Assembly on Tuesday for further deliberations and final approval of the 2016 Appropriation Bill.
Single salary account for all employees
Meanwhile, the Senate also approved, yesterday, that the Federal Government should, in 2016, establish a data base and possibly a single salary account for all its employees to help streamline and reduce its personnel cost.
The Senate also urged the government to sustain the implementation of Treasury Single Account, TSA, in 2016 with e- collection platform.
President Buhari had, Wednesday, December 8, forwarded the MTEF and FSP to the National Assembly with far reaching economic proposals including scraping of oil sector subsidy.
President Buhari wrote the National Assembly yesterday, informing it of his readiness to present the 2016 Appropriation Bill to the joint session of the Senate and House of Representatives on Tuesday.
Senate President, Bukola Saraki, who read Buhari’s letter at plenary, said the President had requested to address the joint session of the federal parliament on the 2016 budget at exactly 10:00 am.
The approval of the MTEF and FSP documents were sequel to a report by the Joint Committee on Finance, Appropriations; and National Planning and Economic Affairs by the Chairman, Senator John Owan Enoh.
Recommendations
In the approved MTEF report, the Senate also asked the Federal Government to sustain the current tempo towards increasing Federal Government internally generated revenue and diversification of the economy, as well as the projected increase in oil production from current 1.9 million barrels per day, mbpd, to 2.2 mbpd
Other recommendations of the joint committee as approved by the Senate were: “that the relevant committees of the National Assembly should closely and constantly maintain oversight over the ministries, departments and agencies, MDAs, responsible for implementing special intervention programmes to ensure that the targeted benefits are achieved while safeguarding against abuses.
“The diversification of the economy should be accompanied with economic modernisation such that the economy can be more competitive and productive; arrears of 2015 fuel subsidy for domestic consumption as proposed in the MTEF be sustained;the funding of the infrastructural development stated in the MTEF should be clearly captured in the details of the 2016 Appropriation Bill;
“The National Assembly in close collaboration with the executive should as a matter of urgency consider an accelerated passage of the Petroleum Industry Bill (PIB) particularly those sections with implication on joint venture funding by the federal government (JV Cash Calls).”
In his remarks, Senate President, Bukola Saraki who noted that the contents of the MTEF document had clearly indicated that Nigerians were going to a very challenging times in 2016 because the nation was still practicing a mono economy with a product that we do not control the price, stated: “We must continue to increase our independent revenue, we must make effort to increase our tax revenue and the committees should intensity efforts in their oversight activities.
“We must also work to reduce the level of borrowing and the executive should also comply with the senate recommendations on the MTEF particularly as regards to oil subsidy. The situations in the past where we submit MTEF and we then go to do something completely different I think should not be entertained again.”
Business
Nigeria pays US$4.9 billion on petrol subsidy in 2024- NNPCL
It was however noted by Biztellers.com.ng, that although subsidy is back in effect, the main reason for that is the increasingly weak state of the Naira and the country’s extreme dependence on products importation. Also unlike the previous subsidy era, where several oil marketers were getting free subsidy refunds for unverified product importation, this subsidy era is witnessing only one importer, the NNPCL, which in effect is the sole receiver of government subsidies.
Yemie ADEOYE
INSPITE of the official position of the Nigerian government that the controversial petrol subsidy is gone for good as announced by the President on assumption of office, the state owned Nigerian National Petroleum Corporation Limited, NNPCL has disclosed that petrol subsidy is still fully operational in Nigeria, although, under a different identity.
Umar Ajiya, Chief Financial Officer at the NNPCL, disclosed that it cost the company a staggering N7.8 trillion (US$4.9) to cover this price gap in the first seven months of 2024.
Rather than simply referring to these claims as subsidies, he stated that the company is merely managing the price difference in petrol imports on behalf of the federation, stressing that this should not be misconstrued as a return to subsidy payments.
This revelation has reignited discussions on whether the NNPC is indirectly offering subsidies, a concept typically defined as selling a product below its cost price.
Documents reviewed by Biztellers.com.ng showed that the term “subsidy” was used extensively in official correspondence between the NNPCL and the presidency, particularly in reference to the “shortfall.”
Recall that President Bola Tinubu reportedly approved NNPC’s request to utilize the 2023 final dividends due to the federation to offset these costs.
However, during a media briefing on Monday about the company’s 2023 audited financial statements, Ajiya refuted claims that the NNPC is involved in any subsidy scheme.
Ajiya further disclosed that the Nigerian government owes the NNPC N7.8 trillion ($4.9 billion) in subsidy-related debts for the period from January to July 2024.
In furtherance of his clarification to the News Agency of Nigeria (NAN), Ajiya insisted that no subsidy payments have been made to any marketer in the last nine years, citing the NNPC’s role as the sole importer of petrol under supply contracts.
He said, “In the last eight to nine years, NNPC Ltd. has not paid anyone a dime as a subsidy; no kobo has been disbursed by NNPC Ltd. in the name of subsidy. No marketer has received any payment from us for subsidy.”
“What has been happening is that we have been importing PMS, which has been landing at a specific cost price, and the government tells us to sell it at half price. So the difference between the landing price and that half price is a shortfall.
“And the deal is between the Federation and NNPC Ltd., to reconcile, sometimes they give us money, so there is no money exchanging hands with any marketer in the name of subsidy.”
Ajiya remained silent on how much of the $4.9 billion could have been remitted to the federation account if the NNPC had not been covering the “shortfall.”
It was however noted by Biztellers.com.ng, that although subsidy is back in effect, the main reason for that is the increasingly weak state of the Naira and the country’s extreme dependence on products importation. Also unlike the previous subsidy era, where several oil marketers were getting free subsidy refunds for unverified product importation, this subsidy era is witnessing only one importer, the NNPCL, which in effect is the sole receiver of government subsidies.
The Central Bank of Nigeria (CBN) has refuted claims of devaluing the.
Earlier reports suggested that the CBN had devalued the Naira, lowering its exchange rate from N631 to the dollar, compared to the previous day’s rate of N461.60 at the Importers and Exporters (I&E) window.
However, the Central Bank of Nigeria (CBN) released a statement on Thursday through its Acting Head of Corporate Communications, Dr. Isa Abdulmumin, categorizing the report as false information.
In the statement titled ‘CBN Has Not Devalued The Naira’, he said the attention of the apex bank was drawn to the news report by an Abuja based newspaper edition of June 1, 2023, titled “CB Devalues Naira To 630/51”.
However, the CBN stated categorically that the news report was replete with outright FALSEHOODS and destabilizing innuendos, ‘reflecting potentially willful ignorance of the said medium as to the workings of the Nigerian Foreign Exchange Market.’
“For the avoidance of doubt, the exchange rate at the Investors’ & Exporters (I&E) window traded this morning (June 1, 2023) at N465/USS1 and has been stable around this rate for a while.
“The public is hereby advised to ignore the news report by Daily Trust in its entirety, as it is speculative and calculated at causing panic in the market,” the CBN spokesman added.
He, therefore, advised media practitioners to verify their facts from the Central Bank of Nigeria before publishing in order not to misinform the public.
The interest rate in Nigeria has been raised to 18.5 percent, up by 0.5 percent, from 18 percent where it was pegged in March 2023.
The Central Banks of Nigeria’s (CBN) Monetary Policy Committee (MPC) resolved to this effect at its third meeting of 2023 in Abuja, on Wednesday.
Governor, CBN, Godwin Emefiele, made the disclosure in the communiqué of the MPC’s meeting, thereafter.
While engaging the media at the end of the two-day meeting, Emefiele, said the committee voted to keep the asymmetric corridor at +100 and -700 basis points around the MPR.
In the view of the MPC, rising inflation rate is traceable to the high energy cost and challenges around the supply chain, among others, which lie outside the corridors of the CBN.
Emefiele said, “The current trend in price development would continue to be monitored by the bank with greater collaboration with fiscal authority to address the drivers of inflation.”
Biztellers reports that the CBN had effected six consecutive interest rate increases, which has seen the rate move from 11.5 percent in March 2022 to 18.5 percent in May 2023.
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