Business
Nigeria’s Debt Service Hits N1.94trn, Overwhelms Revenue by N310bn
Nigeria’s Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed on Thursday sounded the alarm bells as she revealed that the country’s debt service cost in the first quarter (Q1) 2022 was N1.94 trillion, N310 billion higher than the actual revenue received during the period.
Also, Ahmed projected a total of N6.72 trillion as full-year budget for petrol subsidy payment in 2023, if the country decides to continue with the policy that had been identified as a drain on the economy.
It also emerged on Thursday that the federal government spent more to service debt in the first quarter (Q1) of 2022, than the actual revenue it earned during the same period.
The Minister of Finance disclosed these when she unveiled the Medium Expenditure and Fiscal Strategy Paper (MTEF-FSP) in Abuja.
With debt service cost outstripping the country’s revenue, it is a clear indication of dangers ahead and policymakers must be more than willing to implement the much-needed reforms to save the economy.
The minister explained: “The aggregate expenditure for 2022 is estimated at N17.32 trillion, with a pro rata spending target of N5.77 trillion at the end of April.
“The actual spending as of April 30th was N4.72 trillion. Of this amount, N1.94 trillion was for debt service, and N1.26 trillion was for personnel costs, including pensions.
“As at April, N773.63 billion had been spent on capital expenditure. As of April 2022, FGN’s retained revenue was only N1.63 trillion, 49 per cent of the pro rate target of N3.32 trillion.”
She affirmed that the federal government’s share of oil revenue was N285.38 billion, representing 39 per cent performance while non-oil tax revenues totalled N632.56 billion — a performance of 84 per cent.
Ahmed also projected that should subsidy end in June 2023, based on the federal government’s earlier timeline, the sum of N3.36 trillion would be required to meet the financial obligations associated with subsidising the product.
The government explained that the Nigerian National Petroleum Company (NNPC) Limited, which on Tuesday officially transitioned into a fully commercial entity, would bear the cost of subsidy on petrol for the first six months of the year.
Ahmed noted the government was projecting fiscal outcomes in the medium term under two scenarios based on the underlying budget parameters/assumptions.
Ahmed explained that under the first scenario, which she described as, “business as usual” assumes that the subsidy on premium motor spirit (PMS) estimated at N6.72 trillion for the full year 2023 would remain and be fully provided for.
According to her, the second scenario was that, “petrol subsidy will remain up to mid-2023 based on the 18-month extension announced early 2021, in which case only N3.36 trillion will be provided for.”
The minister stated that both scenarios have implications for net accretion to the Federation Account and projected deficit levels.
On the import of NNPC’s transition to a limited liability company, she explained that the company would no longer be contributing to the monthly Federation Account, but would take care of subsidy for the first six months of 2023.
She said: “The new arrangement has indicated that NNPC will not be contributing monthly to the Federation Account as they used to in the past. But NNPC will be paying royalties, dividends and taxes. So, while the revenue might not be monthly, we will work on an arrangement on how this will be paid. And it is possible to work out an arrangement where the payments could be monthly or quarterly.
“NNPC has been paying for subsidy, but they are doing it on behalf of the federation, on the cost of the federation, even though they are the ones that have been paying.
“So, when they generate revenue, instead of remitting the revenue they are using part of the revenue or all of them to fund the subsidy. That has been the arrangement and that is what will continue to be in place until we exit the first time scenario one.
“So I was just saying that a new arrangement regime, NNPC will not be contributing to FAAC (Federation Account Allocation Committee) on a monthly basis, but NNPC will still be paying taxes, royalties and dividends.
“We will be engaging the NNPC on how we expect this to come. We can negotiate how these remittances will be done on a quarterly basis for example. But let me also say that prior to the NNPC transiting, for about eight months, we have not been receiving any revenues.”
However, the minister expressed hope that the emergence of new refineries would fully lay to rest the issue of subsidy.
Providing further details of the 2023-2025 MTEF-FSP, Ahmed noted that the projections deviated from the projections in the National Development Plan (NDP) 2021-2025., adding that they have been updated based on a combination of current realities and a modified medium term outlook.
She said: “In the MTEF, real GDP growth is projected at 3.75 per cent in 2023, from a revised projection of 3.55 per cent for 2022. Growth is expected to moderate to 3.30 per cent in 2024 before picking up to 3.46 per cent in 2025.
“The inflation rate is projected to average 17.16 per cent in 2023, up from the revised average of 16.11 per cent for 2022.
“Upward pressure on prices is expected to be driven by the current and lag effect of the global price surge due to the Russia-Ukraine war, domestic insecurity, rising costs of imports, exchange rate depreciation, as well as other supply-side constraints.”
Providing further insight into the MTEF-FSP, the minister disclosed that the aggregate expenditure for 2023 were predicated on two scenarios of N17.99 trillion and N16.98 trillion.
The first scenario of N17.99 trillion projected for 2023, which is N669.82 billion or 3.9 per cent higher than the 2022 budget of N17.32 trillion (Inclusive of Government Owned Enterprises) is based on the non-provision for ministries, departments and agencies’ capital expenditure beyond multilateral/bilateral loan- funded and project-funded projects.
“In this scenario, given the severely constrained fiscal space, it is not feasible to make any provision for MDAs’ capital expenditure in 2023 beyond multilateral/bilateral loan- funded and project-funded projects. The FGN’s 2023 aggregate expenditure is estimated at N16.98 trillion, which is N337.05 billion (1.9%) lower than the 2022 budget,” she said.
In the second scenario, Ahmed said: “The FGN’s 2023 aggregate expenditure is estimated at N17.99 trillion, N699.82 billion (3.9%) higher than 2022 (Inclusive of GOEs). The sums of N20.29 trillion and N22.73 trillion are projected to be spent by the FGN in 2024 and 2025 respectively.”
Oil price benchmark for 2023 was predicated on $70, $66 and $62 per barrel in 2023, 2024 and 2025 respectively
Oil production is also based on 1.69 million, 1.83 million and 1.83 million barrels per day in 2023, 2024 and 2025 respectively.
The projected exchange rate for 2023 was pegged at N435/$ as against N410.15 in 2022.
Of the projected revenue of N6.34 trillion revenues in 2023, only N373.17 billion or 5.9 per cent is coming from oil-related sources while the balance of N5.97 trillion is to be earned from non-oil sources.
Responding to questions on subsidy, the Minister of State, Finance, Budget and National Planning, Mr. Clem Agba said the federal government subsidies PMS to the tune of between N600-N700 per litre, adding that this should not be allowed to continue.
Agba said if the trend was allowed to continue full stream till the end of next year, nothing would be left for capital expenditure.
He said: “There is still a huge subsidy because the cost of production of PMS is in the neighborhood of about 600 to 700 naira per litre. Right now, Nigeria is the only country in the world that is selling at about N165 or N200.
“If you call your friends or brothers in the States or in Europe or in other African countries, you will know that PMS is currently being sold at a range of between N800 to N1000 per litre.
“I think that the time to remove the subsidy was yesterday. We are only eating away our future and that is what some people call a consumption economy. Finally, it is difficult to understand a situation where citizens say that they want an omelette and then when the government wants to break eggs so that they can produce, they say don’t break the eggs.
“So, it’s a decision that Nigerians will have to take because if you look at scenario one, it means that we will not have any capital expenditure in 2023. Simple.
“There’ll be no capital expenditure at all, and taking care of recurrent expenditure will be a huge challenge.”
Business
Businesses count losses amid power outage in Bauchi, Gombe, and Jigawa
Business owners in Bauchi, Gombe and Jigawa are recording losses due to week-long blackout ocassioned by vandalism of the power transmission line in parts of northern Nigeria.
The sudden disruption in electricity supply in the past days, also affected essential services such as water, sanitation, street lighting and healthcare delivery as most hospitals have been operating without light.
Some of the affected businesses including shop keepers, millers and artisans, who spoke while reacting to a survey by the News Agency of Nigeria (NAN), described the situation as “pathetic”.
The survey examined the perennial collapse of national grid and the need for alternative power supply in the country.
Rice millers in Gombe had decried the impact of the erratic power supply on their businesses.
A Miller, Musa Arab, at Nassarawo Industrial Layout in Gombe, said the trend was crippling their operations as they relied on electricity supply from the grid to process paddy.
He said the mills were not operational power outage as they could not afford exorbitant pump prices of petrol or diesel to run their machines.
This, he said, reduced the volume of rice supply to the market and posed serious challenge to food security.
“We must invest in power because it is the biggest determining factor for industries to thrive.
“I have over 20 workers in my mill, and we have 100 mini rice mills here, so you can imagine those who have no jobs for the past 10 days.
“Government must go tough on those responsible for the perennial grid collapse because some persons may be benefitting from it,” he said.
Also, Yusuf Ibrahim said the situation might trigger the already fragile inflation, as prices of local varieties would shot up ocassioned by the diminish supply.
He said that some had jerked up their charges to cover the expenses on diesel thereby affecting rice prices.
A check by NAN at the Gombe Main market showed that a 100 kilogramme of rice was sold for between N120,000 and N160,000, as against N110,000 and N150,000, before the blackout.
Mr Usman Sani, a rice dealer, attributed the hike in price to low supply of the produce to the market in spite of the number harvest recorded this cropping season.
He said the prices had decreased slightly at the onset of the harvest, however, it showed sprawling increase due to power outage.
“The price of rice is already dropping as a result of harvest but the trend reverse since the blackout in the past days “ he said.
Ugochukwu Daniel, a bartender in Bauchi, decried the epileptic power supply in the country, adding that lack of durable energy supply would retard Nigeria’s quest to attain social and economic greatness.
Daniel said that she spent much on fuel to run power generator for refrigrator and lightening the beer parlour, to enable her to keep the business running.
He said that businesses could only thrive in an enabling environment with stable electricity supply, to enhance wealth creation and reduce poverty among Nigerians.
“My trade is about chill drinks and it survives on electricity to operate otherwise you will out of bussiness.
“Without electricity there is nothing you can do, and not only business but about everything. We depend on it,” he said.
Similarly, Samuel Adamu, said the persistent power outage had forced him to patronised charcoal for ironing clothes in spite of its high cost and cumbersome processes.
He said that most cleaners in the area had resorted to fabricated iron charcoal in spite of hike in its prices which suddenly jumped from N5,000 to N15,000.
Adamu said the situation also encouraged division of labour in laundry to cut cost and make some gains.
“Presently, I do wash the cloth, and engage someone for ironing. The charge is N300 per set as against N150”.
While advocated development of renewable energies to enhance power supply in the country, Adamu urged security agencies to entensify efforts towards electrical installations in the country.
In the same vein; Mr Muhammad Adamu, Chairman, Jigawa State House Assembly Commitee on Power and Energy, said the Jigawa Electricity Law 2024, made sound provisions to improve power generation and distribution in the state.
This, he said, was an offshoot of the devaluation brought about by the 5th alteration of the constitution, where removed power from the executive legislative list and to the concurrent list.
“It empowered the state houses of assembly to enact laws on power.
“The committee has also carefully pursued the bill and reviewed its structure and the promise it holds for the state power sector, infrastructure and the overall economy of the state.
“The new law will pave way for the establishment of Jigawa Electricity Commission, to regulate the state’s electricity market,” he said.
According to Adamu, the law will protect residents and investors in the energy sector through ensuring prepaid meter installation and possibility of recouping investor’s funds as well as address vandalism.
“The law will lead to provision of reliable, affordable and sustainable power, essential for development of all sectors of the economy, particularly in rural areas,” Adamu said.
“Vandalism will be over because we pay Kano Electricity Distribution Company (KEDCO) money for powered supplies, but whenever there is problem of damages or broken down transformers, it is either the communities or individuals that pay for the repairs”.
Business
Mercedes urges delay of EU tariffs on Chinese electric vehicles
The head of German luxury carmaker Mercedes-Benz, has called for the European Union to de-escalate the dispute with China over tariffs on electric cars.
“We need more free trade instead of new trade barriers.
“That is why it is important to find a solution that suits both the EU and China,” chief executive Ola Källenius told the Monday edition of Bild newspaper.
“The negotiations for this take time. In order not to jeopardise them, the EU should postpone the enforcement of the planned tariffs,’’ he said.
At the start of the month, a majority of EU countries paved the way for additional tariffs of up to 35.3 per cent on battery-powered electric vehicles imported from China.
Germany, however, voted against the measure amid concerns over retaliatory actions which could hurt the country’s giant car industry.
The European Commission had pressed for extra tariffs after an investigation accused Beijing of subsidising domestic electric car manufacturers, and thus distorting the market in the EU.
But whether the import tariffs would actually come into force at the beginning of November is still up to the commission.
The plans can still be dismissed if Brussels reaches a solution with China at the negotiating table.
Business
ACCI moves to promote business connections, balance work-life
The Abuja Chamber of Commerce and Industry (ACCI), is taking innovative steps to enhance professional relationships and promote a healthy work-life balance.
The President of ACCI, Dr Emeka Obegolu, said this in a statement on Tuesday in Abuja.
Obegolu said ACCI was committed to creating environments where professionals could connect beyond the confines of traditional boardrooms.
He said the upcoming “Business Meets Golf’’ Tournament epitomises this vision.
“Scheduled for Oct. 18 to Oct 19 at the IBB Golf Club, the tournament will gather industry leaders, top executives, and key decision-makers for a unique networking experience.
“This two-day event aims not only to strengthen business ties but also to foster partnerships that can drive economic growth.
“The ACCI’s initiative reistates the importance of maintaining a balance between professional achievement and personal well-being.
“By encouraging corporate cultures that prioritise relaxation and self-care, the Chamber acknowledges that such balance is vital for productivity and overall success,” he said.
According to Obegolu, the event will feature a range of activities designed to facilitate both business engagement and relaxation.
“Highlights include a Business-to-Business (B2B) cocktail on the first day, followed by the golf tournament and additional networking opportunities on the second day.
“The tournament will culminate in an awards ceremony recognising outstanding golfers among the participants.
“‘Business Meets Golf’ exemplifies our dedication to fostering innovative networking opportunities.
“We aim to create spaces for meaningful discussions that can lead to impactful collaborations,” Obegolu said.
The ACCI boss said in addition to promoting business connectivity, the council aimed to restate the importance of relaxation and a balanced lifestyle.
Obegolu said through events like this, the Chamber continued to play a pivotal role in supporting trade and industry in Nigeria while driving sustainable growth within the private sector.
He said to raise awareness about this landmark event, ACCI was partnering with the News Agency of Nigeria (NAN) and Media Trust Limited, to ensure broad visibility and engagement from leading brands.
The Abuja Chamber of Commerce and Industry (ACCI), is taking innovative steps to enhance professional relationships and promote a healthy work-life balance.
The President of ACCI, Dr Emeka Obegolu, said this in a statement on Tuesday in Abuja.
Obegolu said ACCI was committed to creating environments where professionals could connect beyond the confines of traditional boardrooms.
He said the upcoming “Business Meets Golf’’ Tournament epitomises this vision.
“Scheduled for Oct. 18 to Oct 19 at the IBB Golf Club, the tournament will gather industry leaders, top executives, and key decision-makers for a unique networking experience.
“This two-day event aims not only to strengthen business ties but also to foster partnerships that can drive economic growth.
“The ACCI’s initiative reistates the importance of maintaining a balance between professional achievement and personal well-being.
“By encouraging corporate cultures that prioritise relaxation and self-care, the Chamber acknowledges that such balance is vital for productivity and overall success,” he said.
According to Obegolu, the event will feature a range of activities designed to facilitate both business engagement and relaxation.
“Highlights include a Business-to-Business (B2B) cocktail on the first day, followed by the golf tournament and additional networking opportunities on the second day.
“The tournament will culminate in an awards ceremony recognising outstanding golfers among the participants.
“‘Business Meets Golf’ exemplifies our dedication to fostering innovative networking opportunities.
“We aim to create spaces for meaningful discussions that can lead to impactful collaborations,” Obegolu said.
The ACCI boss said in addition to promoting business connectivity, the council aimed to restate the importance of relaxation and a balanced lifestyle.
Obegolu said through events like this, the Chamber continued to play a pivotal role in supporting trade and industry in Nigeria while driving sustainable growth within the private sector.
He said to raise awareness about this landmark event, ACCI was partnering with the News Agency of Nigeria (NAN) and Media Trust Limited, to ensure broad visibility and engagement from leading brands.
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