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Nigeria’s budget deficit hits N30.58tn in seven years

Buhari Okays Seplat’s Acquisition Of Exxon Mobil Shares

Budget deficit has risen to at least N30.58tn in the last seven years.

This is according to data from budget implementation reports for the third and fourth quarters of 2015; the four quarters of 2016, 2017, 2018, 2019, 2020; the first three quarters of 2021; and the first four months of 2022.

According to Investopedia, a budget deficit occurs when expenses exceed revenue.

An analysis of the reports on the Budget Office of Nigeria’s website revealed that Buhari’s administration had spent at least N54.98tn on budget implementation since its inception but has only financed this spending with N24.39tn, leaving a deficit of N30.58tn.

A breakdown of some of the expenses revealed that the present administration had spent at least N23.66tn on personnel costs, pensions, overhead costs, presidential amnesty programme, other service-wide votes, and special interventions.

A minimum of N14.13tn has been spent servicing domestic and foreign debts, and at least N10.47tn has been spent on capital expenditure.

According to the reports, this deficit financing has been largely financed by government borrowing. The budget implementation report for Q4, 2015 said, “The FGN has arranged to raise short-term credit from the CBN through the mechanism of Ways and Means subject to a ceiling of 12.5 per cent of FGN’s revenue.

“This amount will be retired and therefore not considered as new borrowing outside the borrowing approved to finance the budget deficit. However, due to current fiscal challenges, the CBN had agreed to increase the Ways and Means advances threshold hence the FGN’s ability to raise N615.96bn from this source.”

Since allowance for raising the ceiling was made, total borrowing from the CBN has hit N19.01tn in April 2022 from N648.26bn as of June 2015.

Also, the nation’s total debt profile hit N41.06tn as of March 2022 from N12.12tn, according to the Debt Management Office.

A document titled ‘Public Consultation on the Draft 2023 – 2025 MTFF/FSP’ presented by the Minister of Finance, Budget & National Planning, Mrs Zainab Ahmed, said, “Revenue generation remains the major fiscal constraint of the federation. The systemic resource mobilization problem has been compounded by recent economic recessions.”

Recently, the Monetary Policy Committee of the Central Bank of Nigeria raised concerns over the nation’s debt sustainability. It said the Federal Government’s debt profile was worrying and noted that there was a need for it to urgently diversify its revenue base.

Commenting on the story, economists stated that a high deficit was not good for the economy and might cause inflation, recession, and slow down growth.

Speaking to our correspondent, an economic expert and seasoned academic at the University of Uyo, Professor Akpan Ekpo, said, “This shows that expenditure has eclipsed the revenue, because they have to borrow, which is why there is a deficit.

“They can’t raise enough domestic resources to finance spending. That gap is deficit. Talking about GDP, by the rules, it should not be more than a certain percentage of GDP, but it has exceeded that. And when you borrow, you have expectations of borrowing because if you are not transparent, we don’t know what you are borrowing for.

“If you are borrowing to finance recurrent and overhead, it is not good for the economy. If you borrow to finance capital projects, in the long run, even if you have a deficit, it will have a positive multiplier effect. The deficit, if it is used to finance recurrent, is problematic to the economy.

“One way of solving that is to raise more of domestic revenue or cut down on expenditure that is not needed, especially, the cost of governance. There is a need to check the expenditure profile and cut down on it. Or we could do expenditure switching, where unimportant items are switched with important items.

“We are spending more than we can raise resources and we are not spending it on hard infrastructure.”

Associate professor of Economics at the Pan-Atlantic University, Lagos, Olalekan Aworinde, added that the deficit was being financed by either government borrowing, sales of government properties, or printing money.

According to him, any of these options had implications for the economy. He stated, “Loans can be good and can be bad. A loan is good if it is used for productive expenditure, but if it is used for recurrent expenditure or consumption expenditure, this is not bringing back any returns.

“If the component of this deficit is majorly recurrent expenditures, it shows that we are unlikely to have any growth. There isn’t going to be any revenue coming out from there. The implication of this is that we are likely going to have stunted growth. Stunted growth in the sense that we are not likely going to have an increase in the total values of goods and services that are produced in the country.

“If care is not taken, we are likely going to slide into recession.”

He added that financing the deficit through sales of government properties would mean the government was reducing its asset base, which did not speak well for the economy.

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Nigeria’s Inflation Rate Surges To 19.64%

Nigeria’s Inflation Rate Surges To 19.64%

The country’s Consumer Price Index (CPI), which measures the level of price change in goods and services, hit 19.64 percent in July 2022 from the 18.60 percent recorded in the last month.

This means a 1.82% month-on-month hike, according to the (CPI) report for July 2022 released by the National Bureau of Statistics (NBS) on Monday.

“On a month-on-month basis, the Headline inflation rate in July 2022 was 1.817 %, which was 0.001% higher than the rate recorded in June 2022 (1.816 %),” the NBS added.

“The percentage change in the average CPI for the twelve months period ending July 2022 over the average of the CPI for the previous twelve months period was 16.75%, showing a 0.46% increase compared to 16.30% recorded in July 2021.”

According to the NBS report, the country’s urban inflation increased by 2.08% to 20.09% in July 2022 from 18.01% in July 2021. On the other hand, the rural inflation rate reached 19.22% from 16.75% in the corresponding period of 2021.

“On a month-on-month basis, the food inflation rate in July was 2.04%, this was a 0.01% insignificant decline compared to the rate recorded in June 2022 (2.05%),” the agency equally noted in its latest report.

“This decline is attributed to a reduction in the prices of some food items like Tubers, Maize, Garri, and Vegetables.

“The average annual rate of food inflation for the twelve-month period ending July 2022 over the previous twelve-month average was 18.75%, which was a 1.42% points decline from the average annual rate of change recorded in July 2021 (20.16%).”

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Nigeria’s SEC says its Capital Market Master Plan is protecting investors, enhancing market confidence

Nigeria’s SEC says its Capital Market Master Plan is protecting investors, enhancing market confidence

Nigeria’s Securities and Exchange Commission (SEC) has stated that its Capital Market Master Plan (CMMP) initiative is promoting transparency, protecting investors and enhancing market confidence.

The SEC stated this in a statement on Sunday in Abuja, disclosing the success of the scheme in the last 8 years, according to NAN.

It said the 10-year CMMP was launched in November 2014 to reposition Nigeria as an attractive investment destination.

What they are saying

The SEC disclosed that the plan was launched to make Nigeria a viable investment destination and critical facilitator of capital formation for accelerated growth and development.

It added that initiatives launched under the scheme include direct cash settlement, regularisation of multiple subscriptions, and introduction of the electronic dividend management system and dematerialisation of share certificates.

The commission also stated that it was ready to hold its second Capital Market Committee (CMC) meeting for exchange of ideas among market stakeholders.

  • The meeting would be an avenue to provide feedback to the SEC on how to continuously address challenges, improve market operations and enhance its regulatory framework.
  • ”It is an industry-wide committee comprising members of SEC, representatives of capital market operators, trade groups and other stakeholders.
  • During the meeting, issues on implementation of the ten-yeah CMMP, Fintech roadmap, the commodities trading ecosystem roadmap and matters relating to the economy will be discussed,” the SEC said.

In case you missed it

  • Recall Nairametrics reported in May, that the Securities and Exchange Commission (SEC) had released new rules for Digital Assets as part of its effort to regulate digital/virtual assets such as Bitcoins and NFTs.
  • This is contained in a recently released document titled, “New Rules on Issuance, Offering Platforms, and Custody of Digital Assets” essentially legalizing digital assets such as cryptocurrencies in Nigeria.
  • SEC said Digital Asset players will now include Digital Asset Offering Platforms (DAOPs), Digital Asset Custodians (DACs), Virtual Assets Service Providers (VASPs), and Digital Assets Exchange (DAX).
  • The rules apply to all platforms that support the trading, exchange and transfer of virtual assets, all issuers and sponsors of virtual/digital assets, including international and non-residential issuers and sponsors; and any operator that aggressively targets Nigerian investors.

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E-payments in Nigeria hit N204.5 trillion between January and July 2022 – NIBSS

E-payments in Nigeria hit N204.5 trillion between January and July 2022 – NIBSS

The Nigeria Inter-Bank Settlement Systems (NIBSS) has said that transactions worth N204.5 trillion were performed electronically in Nigeria between January and July this year through the NIBSS Instant Payment platform (NIP). This shows a 40% increase in e-payments in the country when compared with N145.8 trillion recorded in the same period last year.

The surge in electronic transactions shows that more Nigerians are embracing the cashless policy of the Central Bank of Nigeria (CBN).

According to NIBSS, the value of e-payment recorded was a reflection of the increase in the volume of deals within the period. The NIP volume rose to 2.7 billion in the seven months, showing a 42% increase over 1.9 billion recorded in the same period last year.

Data provided by NIBSS

Monthly analysis

  • An analysis of the 7 months data just released by NIBSS showed that the NIP platform recorded N26.6 trillion transactions in January. Year on year, this was a 43.7% increase over N18.5 trillion recorded in the same month of last year.
  • Similarly, in February, deals worth 27.2 trillion were sealed over the electronic platform. Compared with February 2021 when N18.3 trillion was recorded, this represented 48.6% growth.
  • In March, the platform recorded N31.8 trillion in transactions, a 44.5% increase over the N22 trillion recorded in the same month last year.
  • The value of transactions on the NIP platform stood at N29.2 trillion in April this year. This also shows a 41.6% increase over the N20.6 trillion recorded in April 2021
  • In May, the value of e-payment transactions stood at N29.6 trillion, a 43% increase compared with N20.7 trillion recorded in the same period last year.
  • The NIP transactions rose to N31.7 trillion in June 2022, a 37% growth over N23.1 trillion posted same time in 2021.
  • The data for July also reflected a 31% increase from N22.4 trillion last year to N29.3 trillion this year.

The NIBSS Instant Payments (NIP) is an account-number-based, online-real-time Inter-Bank payment solution developed in the year 2011 by NIBSS. It is the Nigerian financial industry’s preferred funds transfer platform that guarantees instant value to the beneficiary.

According to NIBSS, over the years, Nigerian banks have exposed NIP through their various channels, that is, internet banking, bank branch, Kiosks, mobile apps, Unstructured Supplementary Service Data (USSD), POS, ATM, etc. to their customers.

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