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7 Northern States Declared Bankrupt In Nigeria

7 Northern States

7 Northern states, one oil-producing state declared bankrupt in Nigeria

7 Northern states and one Southern state have been declared bankrupt based on their internally generated revenue in comparison with their Federal Accounts Allocation (FAA).

Jigawa, Katsina, Adamawa, Yobe, Niger, Taraba and Benue were tagged insolvent states alongside oil-producing Bayelsa State by the Annual State Viability Index (ASVI) of Economic Confidential.

The status of the states were determined by percentage arrived at when their IGR and FAA was compared, and states with IGR of less than 10 percent of their federal allocation are classified insolvent.

Bayelsa topped the list of the poorest states in Nigeria as it received a total of N152.54 billion as FAA in 2020, but generated only N12.18 billion as IGR – this represents 8.0 percent of earnings from FAA.

Jigawa State came next with IGR of N8.6 billion in contrast to the N107 billion it received as allocation during the same period – this represented 8.1 percent of total earning.

Katsina recorded 8.8 percent after generating N11.3 billion against the N130 billion federal allocation.

Adamawa received N91 billion of FAA, but could only generate N8.3 billion IGR, putting the differences at 9.1 percent.

Yobe state recorded N7.7 billion IGR, but got N84 billion federal allocation – this represented 9.2 percent in total receipt.

Niger State was next with 9.6 percent as its internally generated revenue was put at N10.5 billion compared to N109 billion of FAA.

Taraba generated N8.1 billion as IGR, but was given N82 billion from federal allocation, putting its difference in earnings at 9.8 percent.

Benue completed the list with IGR of N10.46 billion, far below the N106 billion it received as FAA, representing 9.8 percent last year.

Best performing states in Nigeria

Lagos state topped the list of best performing states in Nigeria as its IGR, N418 billion, surpassed its N299 billion federal allocation, putting its earnings difference at 139 percent in 2020.

Rivers State came next with N117 billion to comparison to the N198 billion secured from the FAA – this represents 58 percent difference.

Ogun State finished last year with N50 billion as internally generated revenue, falling below the N88 billion FAA it received, but its revenue difference stood at 57 percent.

Kaduna State is fourth on the list, obtaining N124 billion federal allocation, while generating N50 billion IGR, representing 40 percent difference.

Oyo made the list with 29.7 percent difference having generated N38 billion in IGR, but received federal allocation to the tune of N127 billion.

Anambra State’s internally generated revenue was put at N28 billion, but it got N94 billion as federal allocation, representing 29.6 percent in earnings.

More problem for the seven insolvent states

The seven states are believed can’t survive without federal allocation, which is set to drop following a Rivers State court ruling that the Federal Government is not authorised by the constitution to demand and collect non-import value added taxes.

Justice Stephen Pam, who presided over the ruling stated that the Concurrent Legislative List of the constitution empowered only states and its agent(s) to collect non-import vat within their region.

This will reduce the tax revenue shared by FG to states by N1.64 trillion if the ruling stands, and it will reduce the total allocation of low-income generating states like Bayelsa, Katsina, Adamawa, Yobe, Niger, Taraba, Benue, Kano and others.

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UK’s Truss defends economic plan that sent pound tumbling

UK’s Truss defends economic plan that sent pound tumbling

British Prime Minister Liz Truss on Thursday defended her economic plan and shrugged off the negative reaction from financial markets, saying she’s willing to make “difficult decisions” to get the economy growing.

In her first public comments since the government’s announcement of billions in uncosted tax cuts roiled markets and drove the pound to record lows, Truss said Britain was facing “very, very difficult economic times.” But she said the problems were global and spurred by Russia’s invasion of Ukraine.

She spoke after the Bank of England took emergency action Wednesday to stabilize U.K. financial markets and head off a crisis in the broader economy after the government spooked investors with a program of unfunded tax cuts, sending the pound tumbling and the cost of government debt soaring.

Truss told BBC local radio that “we had to take urgent action to get our economy growing, get Britain moving and also deal with inflation.”

“Of course lots of measures we have announced won’t happen overnight. We won’t see growth come through overnight,” she said. “What is important is that we are putting this country on a better trajectory for the long term.”

In a series of interviews, Truss said her government’s decision to cap energy bills for households and businesses would help tame inflation and help millions of people facing a cost of living crisis.

But it was not that decision that alarmed the markets. It was the government’s announcement on Friday of an economic stimulus program that included 45 billion pounds ($48 billion) of tax cuts and no spending reductions — without an independent economic assessment of the cost and impact.

The Bank of England warned that crumbling confidence in the economy posed a “material risk to U.K. financial stability,” and said it would buy long-term government bonds over the next two weeks to combat a recent slide in British financial assets.

The bank’s former governor, Mark Carney said that the government and the central bank appeared to be pulling in different directions.

“Unfortunately having a partial budget, in these circumstances — tough global economy, tough financial market position, working at cross-purposes with the Bank — has led to quite dramatic moves in financial markets,” he told the BBC.

The pound traded at around $1.08 on Thursday, above its record low of $1.0373 on Monday. It has lost some 4% of its value since Friday.

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Stimulus Packages Provided During Pandemic Triggered Inflation- CBN

The Central Bank of Nigeria (CBN) has attributed the rising inflationary rates to the stimulus packages provided to citizens during and after the pandemic.

It added that although this increased spending, it also created global supply challenges.

CBN’s director, Monetary Policy Department, Hassan Mahmoud, said this on Wednesday at a post-MPC briefing tagged: “Unveiling Facts behind the Figures’’.

The Monetary Policy Committee had on Tuesday, unanimously voted to increase interest rate to 15.5 per cent.

“A lot of households and small businesses were injected with stimuluses; the U.S did two trillion dollars, Nigeria did about five trillion Naira, these increased the ability of people to spend.

“But the supply side could not meet up with the demand because that volume of injection was far more than the regular intake for those economies, this made prices go up,’’ he said.

Mahmoud also blamed the Russian-Ukraine war, as well as the resurgence of COVID-19 in China for the rise in global inflationary trend.

“That region accounts for more than 50 per cent of global commodity supply and 38 per cent of global oil and gas supply. The war resulted in some shortages which made prices go up.

“Then the COVID-19 lockdown in China. The country is the largest importer of commodities across the globe,’’ he added.

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China’s yuan slides to 14-year low against US dollar

China’s yuan slides to 14-year low against US dollar

China’s yuan fell to a 14-year low against the dollar Wednesday despite US central bank efforts to stem the slide after U.S. interest rate hikes prompted traders to convert money into dollars in search of higher returns.

A weaker yuan helps Chinese exporters by making their goods cheaper abroad, but it encourages capital to flow out of the economy. That raises costs for Chinese borrowers and sets back the ruling Communist Party’s efforts to boost weak economic growth.

The yuan fell to 7.2301 to the dollar, its lowest level since January 2008. One yuan was worth about 13.8 cents, down 15% from its March high.

The yuan has exceeded expectations it might fall to 7 to the dollar after the Federal Reserve started aggressive rate hikes to cool inflation that is at a four-decade high. The Fed has raised rates five times this year and says more increases are likely.

By contrast, the People’s Bank of China has cut interest rates to boost growth that fell to 2.2% over a year earlier in the first six months of 2022 — less than half the official 5.5% target.

The yuan is allowed to fluctuate up or down 2% from its starting price each day in tightly controlled trading. That prevents big daily swings, but down days can add up to a big change over time.

To shore up the exchange rate, Beijing cut the amount of foreign currency deposits Chinese banks are required to hold as reserves to 6% from 8% as of Sept. 15. That increases the amount of dollars and other foreign currency available to buy yuan, which should push up the exchange rate.

Still, that reserve cut is unlikely to stop a slide that is driven by “a strong U.S. dollar and the expectation of more Federal Reserve hikes,” said Iris Pang of ING in a report.

“Less aggressive rate hike talk” might help the yuan rally, but it might weaken further “if the Fed maintains its very hawkish tone” into next year, Pang wrote.

Chinese officials have previously promised to avoid “competitive devaluation” to gain an advantage in trade.

The yuan sank in 2019 during trade tension with then-President Donald Trump. That prompted suggestions Beijing was trying to reduce the impact of U.S. tariff hikes, but there was no official confirmation. The currency later strengthened.

Other governments also are struggling to manage capital flows under pressure from Fed rate hikes. On Friday, Vietnam’s central bank raised a key interest rate in what economists said appeared to be an effort to stop an outflow of money in search of higher returns.

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