Finance
IMF to scrutinise Nigeria’s 2016 budget—Lagarde
….Backs Buhari’s fight against corruption
…Says with right policies, Nigeria has no reason to borrow
ABUJA — There were indications that the 2016 Appropriation Bill may be subjected to further scrutiny and amendments by the International Monetary Fund, IMF, despite being already presented to the National Assembly for legislative action.
Managing Director of IMF, Ms Christine Lagarde, who is visiting Nigeria, told newsmen in Abuja, yesterday, that the multilateral financial institution would be discussing the budget next week with Nigerian officials.
Lagarde responding to question on the 2016 budget said: “A team of economists is going to come here (Nigeria) next week to review and audit (the bill) and have a good discussion with the government authorities to really assess whether the financing is in place, whether the debt is sustainable, whether the borrowing costs are sensible and what strategy must be put in place in order to address challenges going forward.”
The IMF boss, who held meetings with the Central Bank of Nigeria, CBN; Finance Minister, Mrs. Kemi Adeosun, as well as a closed door sessions with President Muhammadu Buhari and Vice President Yemi Osinbajo, had refused to comment directly on the content of the 2016 Appropriation Bill because there are procedures at the IMF that must be followed.
She noted that she will continue to have discussions with Nigeria’s Finance Minister and CBN Governor on issues of fiscal discipline, financing, monetary policies and the degree of flexibility, because despite “Nigeria being a vibrant and large economy still has to deal with a lot of poor people with a lot of inequality. Those two components should certainly always be the drivers of reforms, whether it is looking at subsidies, how they are structured and how they can be faced out.”
Don’t strangulate poor Nigerians
Following the dwindling oil prices that have apparently affected the national income of most countries, the IMF boss warned the Federal Government not to strangulate poor Nigerians with rigid economic policies.
She also stated that it was concerned by the condition of teeming population of poor Nigerians who would be affected by the rigidity of policies, stressing the need to inject fiscal discipline in the policy formulations.
According to Lagarde, her mission to Nigeria was not connected to the negotiations of any loan with any kind of conditionalities but to have discussion on the economic reforms and objectives of the present government.
A lot has changed in Nigeria
Recalling the tremendous progress Nigeria has made in its democratic process, Lagarde said a lot had changed in the country since she last visited four years ago.
She said: “I was in Nigeria four years ago and in four years, many things have changed. That has been the topic of our discussions with President Buhari and his team. Looking back four years ago, massive democratic change has occurred in this country peacefully. Nigeria has become the largest economy in Africa, certainly the most populated and with a very attractive market.
“But things have changed in a more complicated way in the sense that the source of revenue to the government of Nigeria which was predominantly oil has seen its price divided by more than half and the financing cost around are beginning to rise if only because the economic situation in the United States has improved and interest rates will begin to rise. Added to which emerging countries economies are decelerating their growth.
Not here to negotiate loan
“First, let me make it clear that I’m not here nor is my team in this country to negotiate a loan with conditionalities. We are not into programme negotiations and frankly at this point in time, given the determination, resilience displayed by the President and his team, I don’t see why an IMF programme will be needed. So, of course, discipline is going to be needed, of course, implementation is going to be key for the objectives and the ambitions to serve the country well, in order for it to be actually sustainable.
“We believe that with very clear primary ambition to support the poor people of Nigeria, there could be added flexibility in the monetary policy, particularly if as we think, the price of oil is likely to be possibly low for longer, because clearly the authorities should not deplete the reserves of the country, simply because of rules that will be exceedingly rigid. I’m not suggesting that but that rigidity be totally removed but some degree of flexibility will be enough.
“We have excellent discussions with Buhari and we discussed the challenges ahead stemming from oil price reduction. The necessity to apply fiscal discipline and the need to also respond to the population needs while addressing the Medium Term specifics of improving the competitiveness of Nigeria and yet also focusing on the short term fiscal situation which requires that revenue sources be identified in order to compensate the shortfall resulting from oil price decline.
“Oil is not the major contributor to the Nigerian GDP, it is only about 40 per cent but it is a big source of revenue for the government.
To discuss budget next week
“We discussed with the President, Vice President and the Minister of Finance and Minister of Budget how more efficiency, more transparency, better accountability, enlarging the base of revenue could actually contribute to sound budget going forward.
“It is not for me here and now to actually approve or comment on the budget because we have procedures in the IMF under which a team of economists is going to come next week actually to do what we call the Article 4 which is to review….good discussion with partners, IMF on one hand, country’s authorities on the other hand to really access whether financing is in place, whether the debt is sustainable, whether the borrowing cost are sensible and what strategy put in place in order to address challenges going forward.
On war against corruption
“But what I certainly mentioned to Mr. President was that his fight and his determination to fight corruption and his determination to bring about transparency and accountability at all levels of the economy are very important agenda item and very ambitious goal that needed to be deliberated upon which he, himself is definitely committed to as he indicated this morning and as he inspires his team members.
“With that I am going to have more discussions with the finance minister, with Governor of Central Bank. We will be discussing issue of fiscal discipline, financing monetary policies and the degree of flexibility, all that with the fact that Nigeria with a vibrant large economy still has to deal with poor people, a lot of inequality and those two components should certainly be the drivers of reforms, whether it is looking at subsidies and how they are structured and how they can be phased out, whether it is monetary policy and the flexibility needed and knowing what effect it has on the poor, all, of those are ambitions that we could quickly recognize and support.”
IMF backs Buhari’s war against corruption
The IMF MD, who was flanked by the Minister of Finance, Mrs Kemi Adeosun, at the beefing also lauded the anti-corruption fight of President Buhari, saying that the course would engender the needed transparency and accountability in the financial system of the country.
“But what I certainly mentioned to Mr. President was that his fight and his determination to fight corruption and his determination to bring about transparency and accountability at all levels of the economy are very important agenda item and very ambitious goal that needed to be deliberated upon which he, himself is definitely committed to as he indicated this morning and as he inspires his team members,” she said.
Ministers’ll give accounts of funds —Buhari
Meanwhile, President Buhari has said that his ministers will render accurate account of every kobo they spent in their respective ministries.
He also said that his administration will enforce regulations to stop financial leakages and adopt global best practices in generating more revenue to mitigate the effect of dwindling oil prices on the Nigerian economy.
The president, who gave the assurance when he received the IMF boss at the Presidential Villa said that his administration will enforce greater discipline, probity and accountability in all revenue generating agencies of the Federal Government.
He said: “We have just come out of budget discussions after many weeks of taking into consideration the many needs of the country, and the down turn of the economy with falling oil prices and the negative economic forecasts.
“We are working very hard and with the budget as our way forward, we will do our best to ensure that our country survives the current economic downturn.
“We have also told all heads of Ministries, Departments and Agencies of government that on our watch, they will fully account for all funds that get into their coffers.”
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.
Banking
CBN Denies Currency Devaluation
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.
Banking
BREAKING: CBN Increases Interest Rate By 0.5%
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.