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Oil no longer a determinant for Nigeria’s economic growth-DMO

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…Says Govt Policies Will Strengthen Naira, Foreign Reserves

By Gbenga KOSOKO

LAGOS-THE fluctuations in global crude oil prices would no longer be a determinant for Nigeria’s economic growth if ongoing government policies are allowed to continue unhindered.
The to Director-General Debt Management Office (DMO), Dr. Abraham Nwankwo made this assertion recently even as he stated further that the naira and foreign exchange reserves will recover in the coming years as the impact of government’s economy diversification plan begins to crystalise in the economy.
DMO DG, Dr. Abraham Nwankwo

DMO DG, Dr. Abraham Nwankwo

Speaking  at a Breakfast Meeting with Finance Correspondents Association of Nigeria (FICAN) in Lagos at the weekend, Dr. Nwankwo said governments’ efforts at revalitalising the agriculture sector, solid minerals, manufacturing and taxation will have massive impact on the economy in the next three to five years.

He said with government’s diversification project in full gear, Nigeria’s economic growth and development will no longer be determined by movement in the prices of crude oil.
He said a lot of revenues will be derived from taxation going, adding that the country’s low comparative tax revenue to Gross Domestic Product (GDP) ratio which stands at about seven per cent, against 18 per cent average in most developing countries,  would be improved on as the country begins to gain strength in production.
He said that by simply paying taxes by individuals and corporate bodies, government can secure the needed fund for major developmental projects.
“You can see that in the manufacturing sector, some factories are operating below capacity. But with the ongoing implementation of President Muhammadu Buhari policy on diversification of the economy and revatilising the  power infrastructure, the sector will pick up and create more jobs for the people,” he said.
Nwankwo said achieving self-sufficiency in power will enable government generate more income; companies will be able to pay more taxes, thereby helping government diversify its revenue bases.
“In the next five to seven years, solid minerals will be exported. It is possible that in the next five to seven years, the whole picture of Nigeria will be a complete turnaround because of government’s economy diversification plan. The difference between Nigerian and other countries facing similar economic challenges is that those countries do not have the same opportunities we have in Nigeria. Nigeria is near 100 per cent idle capacity, meaning the flexibility to grow the economy is high,” he said.
He urged Nigerians not to be depressed because of drop in crude oil prices. “We have no reason to be depressed just because crude oil price is down. We have to see the varieties of opportunities available for the country to grow the economy based on a well-diversified and sustainable manner. We as responsible stakeholders in the economy, should emphasise these opportunities,” he said.
“Indeed in other countries, the major source of revenue is taxation. Taxation should also be explored. Government should be able to sustain itself with taxation revenues. Now with the better tax compliance, and effective sanctions for defaulters, we have a room to boost public revenue from taxation,” Dr. Nwankwo stated.
The DMO boss said government has made significant progress in agriculture adding that in the next five to seven years, Nigeria would have reduced its reliance on imported foods, tackled unemployment and created huge jobs for the people because production is synonymous with job creation.
He said the 2016 budget focus is to address structural challenges in the economy while providing the enablement to create diversification and self-sufficiency growth.
“This is the first time that the budget specified that all borrowed funds will be for capital expenditure. The sharing of internal and international borrowing is almost 50/50. We have been borrowing locally, but we have to take advantage of the relatively low cost of funds externally. We do not want to borrow too much from the domestic economy, so that we do not crowd-out the domestic environment,” he said.
He said that given the challenges the economy is going through, much depends on what the media reports. “The media is critical, because what the media tells the international community will determine investment flows into the country. It is our responsibility to continue working hard to ensure the resilience our economy exhibited is sustained, until we achieve the turnaround that will come with diversification,” he said.
Nwankwo said the Nigeria economy is not supposed to be oil dependent given the level of natural resources abundant in the country. “We have to remind ourselves, that in the first instance, our economy was not supposed to be dependent on oil, yes, historically, oil revenues, has dominated our foreign exchange earnings up to 90 per cent and above, and public revenue about 70 per cent, but for many years, oil has contributed less than 20 per cent to the GDP,” he said.
He said the Manufacturing, Commerce emerging sectors like Entertainment, Music, Nollywood and ICT contribute over 80 per cent to the GDP and should be supported.
FICAN Chairman, Babajide Komolafe, praised the efforts being made by the DMO to support government’s diversification effort.
He said the role of DMO in economic development cannot be over emphasized, adding that FICAN will continue to support the DMO to achieve its goals within the economy.

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. 

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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.

 

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Banking

CBN Denies Currency Devaluation

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CBN Pegs Interest Rate at 14%

 

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.

 

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Banking

BREAKING: CBN Increases Interest Rate By 0.5%

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CBN Pegs Interest Rate at 14%

 

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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