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CAC Faces Operational Shutdown

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CAC Faces Operational Shutdown

CAC faces operational shutdown as Reps suspend its funding

The continued existence of Corporate Affairs Commission (CAC) hangs in the air as the House of Representatives committee on finance has threatened to shut down the commission’s operation.

The lawmakers also ordered the budget office of the federation not to provide funds to the commission until the finances of CAC has been checked.

The committee gave the directive on Tuesday during the interactive session on the 2022-2024 Medium-Term Expenditure Framework (MTEF).

Factors behind the threat

Lawmaker, James Faleke, who is the chairman of the panel, had queried the CAC for their failure to generate revenue higher than the commission’s expenditure.

It was gathered that the CAC had been underperforming in terms of turnover in four years, from 2016 financial year to 2019, and first quarter of 2021.

A breakdown of its turnover shows that in 2016, CAC revenue was N8.74 billion, but it spent N11.275 billion, a year after, it generated N10.896 billion as revenue, and spent N12.6 billion.

In 2018, CAC reported a turnover of N11.2 billion, while expenditure was N12.2 billion. In the following year, revenue generated was N12.7 billion, below the N13.790 billion it spent for the year.

For 2020 turnover, the commission’s revenue rose to N19.163 billion, higher than N13.2 billion expenditure for the same year, while in 2021, CAC’s estimated revenue was N20.74 billion, slightly above the N19.28 billion the government-owned entity estimated as expenditure.

But the CAC has generated N3.19 billion as revenue for 2021 first quarter, while it has spent N5.136 billion during the same three months period.

CAC spending money it’s not providing

Faleke queried the Registrar-General of CAC, Garba Abubakar, while faulting the financial operation of the commission. He said the CAC is spending the money it’s not generating.

He said, “When you pay yourself revenue and allowances that take away our revenue, that you ought to have remitted to the government, it is not acceptable.”

Faleke also stated that CAC’s finance department is, “putting figures together so that the money you will remit to the federation account that will help Nigeria will not be there.”

CAC claims gap between revenue and expenditure is strange

In the commission’s defense, Abubakar said settlement of outstanding liabilities gulps the capital of CAC, while Ibrahim Gano, an accountant with CAC, said its strange that the government corporation spent more than what it is generating.

However, he said that is not the true picture of the situation with its expenditure. Gano said the gap is caused by CAC’s accounting system.

In his explanation, Gano said, “Liabilities that are due for a given year were recognised and they were duly impacted on our account. Liability was recognised in our balance sheet.

“So, there was no cash outlay for such transactions, liabilities were recognised in a given year, for example, in 2019, it impacted on the Profit and Loss (P and L), but the payments were actually not done, and as such, liabilities were recognised as liabilities to be paid in the succeeding year.

“For 2021, the possible explanation is apparently because there were payments that were done upfront, for example, housing of staff, staff housing allowances, payment were actually done, but we amortised them over a period of 12 years, so it will impact on your P and L, there is an outlay that a certain amount has been spent. But you take monthly amortisation that are being made, amortisation means expenses.” He said.

CAC accused of cooking it’s accounting books

Member of the finance committee, Sada Soli, accused the CAC of cooking their financials to make it difficult for laymen to understand their financial operation.

Soli said that was why there was confusion with CAC’s accounting system, “Do you know what is cooking in accounting?” He asked the representatives of CAC.

The lawmaker said, “Are you sure that you are not cooking your books because when you cook your books, it is always hard for a layman to understand? That is what we are facing now. If you say that you have generated this, but you have expended this.”

Shutdown of CAC, funding of commission suspended

The committee of finance said it will have to shutdown CAC if it means saving the revenue of Nigeria, as they directed the commission to provide line by line expenditure details from 2018.

Faleke’s commission in its final submission said CAC is borrowing money in advance, to pay for liabilities upfront despite not having the money.

He directed the budget office to invite corporate affairs to its office, but not to have an agreement with them until the committee of finance is done with CAC.

“We are making this clear to you, there should be no budgetary approval for them until we finish with them. If we have to close down corporate affairs to make money for Nigeria, let us do it.”

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Naira depreciates further to N614/$ at parallel market

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Naira depreciates further to N614/$ at parallel market

The Nigerian naira has dropped to N614 against the dollar at the parallel section of the foreign exchange market.

The figure signifies a depreciation of N7 or 1.2 percent compared to the N607 it traded last two weeks.

Bureaux De Change operators (BDCs), popularly known as ‘abokis’, who spoke to TheCable in Lagos on Tuesday, said they purchase the greenback at N608/$, make a gain of N6, and then sell at N614.

At the official market, the naira also depreciated by 0.21 percent to close at N421/$ on Monday, according to information obtained from FMDQ OTC Securities Exchange — a platform that oversees official foreign-exchange trading.

Nigeria operates multiple exchange rate windows ranging from the importers and exporters window (I&E) window, where forex is traded between exporters, investors, and purchasers of forex, the SMEIS window where forex is sold to importers, and others.

International organisations such as the World Bank and the International Monetary Fund (IMF) have constantly advised the Central Bank of Nigeria (CBN) to unify the official and parallel market exchange rates.

But Godwin Emefiele, the CBN governor, had said that despite advice offered by IMF and the World Bank, developing economies such as Nigeria had the liberty of adopting “homegrown solutions to their economic problems.

According to him, the managed floating exchange rate, which allows the CBN to intervene in the market when there is a supply shock, would be in place as long as supply exceeds demand.

“They want us to free the exchange rate. And you do know that this has some impacts on the exchange rate itself,” he had said.

“When you allow that to happen, you will have an uncontrollable spiral on the naira.

“But what managed float means is that we have some measures in place to help control the spiral.”

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FG, states in trouble, as NNPC again fails to remit, despite N470.61bn revenue

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FG, states in trouble, as NNPC again fails to remit, despite N470.61bn revenue

These are challenging times for the federal and state governments as one major source of income to the federation account seems to be totally cut off.

On Monday, The National Petroleum Company Limited (NNPC) revealed it failed to remit monies to the federation account in May 2022 despite making N470.61 billion.

This is the fifth straight month NNPC has failed to credit the federal account while exporting crude at an average price of $100 per barrel.

Details of the June FAAC report obtained by The Harmattan News showed NNPC since the start of the year made N1.897 trillion, over N234.1 billion more than the expected revenue.

Sadly, however, NNPC said all the revenue had gone into various expenditure which includes petrol subsidy, oil search, Pipeline Security & Maintenance cost, National Domestic Gas Development and Nigeria Morocco Pipeline cost among others.

As expected, the bulk of the expenditure, N1.27 trillion, went toward recovery (also known as petrol subsidy).

In fact, NNPC said it has budgeted another N617 billion for petrol subsidy in June.

The report reads: “The Value Shortfall on the importation of PMS recovered from May 2022 proceeds is N327,065,907,048.06 while the outstanding balance carried forward is N617bn .”

“The estimated Value Shortfall of N845,152,863,012.97bn (consisting of arrears of N617bn plus estimated May 2022

Value Short Fall of N227,721,200,478.23) is to be recovered from June 2022 proceed due for sharing at the July 2022 FAAC Meeting,” it added.

The development means states have a tough road ahead and will have to look inwards to cover for the drop in federal allocations.

Already, some states have announced plans to slash workers’ salaries over dwindling income.

Kano Sate has already announced plans to slash workers’ salaries, following in the foot steps of the Ekiti State government that announced civil servants’ and political appointees’ salaries will be slashed in response to the present economic reality in the country.

Ekiti went further to suspend minimum wage implementation with no date of resumptions.

The Harmattan News had recently reported that pension contribution from governments dropped to a 16-year low in the first quarter of 2022.

From recent developments, it is more likely the figure will tank further.

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Nigerian govt to auction N225bn bond as search for funds continues

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Nigerian govt to auction N225bn bond as search for funds continues

Federal government bonds worth N225 billion would be auctioned today, Monday, June 20, 2022, by the Debt Management Office (DMO) at the primary market.

The debt instrument is being sold by the central government to raise funds to finance the 2022 budget deficit and in today’s exercise, the DMO is offering the notes in three tenors.

The debt office is anticipated to sell the FGN bonds at double digits to make the asset class more attractive to investors.

In a circular published on its website and obtained by The Harmattan News, all three maturities are re-opening, meaning they are from the previously sold bonds.

The circular noted that N75 billion worth of a 10-year bond with maturity in 2025 would be offered for sale at the auction. Another N75 billion worth of a 10-year note maturing in 2032 is up for grabs and N75 billion worth of a 20-year instrument with maturity in 2042 would be sold.

Intending subscribers would be expected to reach out to primary dealer market makers to buy the bonds for N1,000 per unit subject to a minimum subscription of N50 million and in multiples of N1,000 thereafter.

The interest would be paid by the government semi-annually, while the bullet repayment will be done on the maturity date.

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