19 Jan

Daily Watch – NASS approves MTEF, VP rejects naira float

  • The NBS has released an IGR report for the states covering H1 2016. The report indicates that a total of ₦317.79 billion was generated by the twenty-nine states that have reported their half year 2016 figures. The revenue was generated across the following types – PAYE, Direct Assessment, Road Taxes, Revenue from Ministries, Departments & Agencies and other taxes. Lagos State recorded the highest IGR figure of ₦150.59 billion followed by Ogun State which generated ₦28.15 billion. Nasarawa State, with ₦1.05 billion, generated the lowest revenue for the period under review. Seven states, Abia, Anambra, Bauchi, Ebonyi, Oyo, Rivers and Sokoto, are yet to submit their reports.
  • The National Assembly has approved a revised version of the 2017-2019 Medium Term Expenditure Framework and Fiscal Strategy Paper. The Senate approved all the critical projections in the MTEF/FSP as proposed by the executive, except the oil benchmark, which was increased to $44.5 a barrel from the proposed $42.5. Wednesday’s approval of the MTEF/FSP meant that the Senate and House of Representatives will open debate on the budget as planned on January 24. The Senate’s joint Committee on Finance, Appropriations and National Planning noted that daily oil production had been projected to average 2.2 million barrels per day, 2.3mbpd and 2.4mbpd for 2017, 2018 and 2019, respectively. On the oil benchmark price, the committee noted that the price of crude oil in the international market fell to as low as $25 per barrel mid-January 2016, with an increase to more than $50 per barrel in October of the same year. The committee also said while it approved the projected exchange rate of N305 per dollar for the 2017 fiscal year, “a judicious monetary fiscal policy mix and deliberate government policies to expand the productive base of the economy will be expedient to improve the exchange value of the naira relative to the dollar.”
  • Speaking at the World Economic Forum in Davos, Switzerland on Wednesday, the Vice-President, Yemi Osinbajo has said that the government cannot simply allow the naira to float. He however admitted that the CBN has confidence in floating the local currency. Osinbajo said the government is in talks with the CBN to fully implement the “free-float” foreign exchange policy, but it cannot put a time on the “logical conclusion” of the talks. “We simply can’t allow the currency to float; we have to look at all of the market conditions and all of that. But really, the point we are making is that we must create the environment which will help the Central Bank as well,” Osinbajo said.
  • Aliko Dangote, has shut his new tomato paste plant in Kano due to a shortage of dollars needed to import raw materials, a senior executive has said. This is the second of such closures in months, in a blow to the FG’s drive to diversify the economy. Entrepreneurs say the crisis has been worsened by the central bank’s decision to keep an artificially high exchange rate, which has dried up dollar supplies, forcing firms to buy them on the black market at a 40 percent premium. Dangote’s plant opened only last year amid much talk from officials predicting a new era of Nigeria producing its own tomato paste, displacing costly imports. The dollar scarcity has also forced Dangote to cut down on other food businesses such as flour milling, sugar refining and vegetable oil refining. The tomato plant may reopen once the company is able to source raw tomatoes locally. In November, Erisco Food closed a tomato paste plant in Lagos, eight months after opening it, due to a shortage of hard currency needed to import raw materials. Some 1,500 staff members reportedly lost their jobs. Erisco had hoped the government would support local producers by banning imports of tomato paste, as it had done in the past with cement or some fruits to help manufacturers.
  • The diversion of Nigeria bound cargoes has increased from about 40 percent in 2014 to about 60 percent as at 2016 due to unfriendly import policies. Speaking on behalf of the Maritime Reporters Association of Nigeria, the president of the National Council of Managing Directors of Licensed Customs Agents, Lucky Amiwero, said government’s policies have led to importers shipping their goods through neighbouring ports of Benin Republic, Togo and Cameroon. Amiwero listed some of the items involved as rice, vehicles, ground-nut oil, clothes (both new and fairly used) etc. He explained that goods destined for neighbouring countries without ports that normally come through Nigeria’s ports, now go to neighbouring ports, with the dangerous dimension of Nigerian bound cargoes now going straight to these ports before coming back through unapproved routes. This he continued, has resulted in the country losing revenue accruable to it as well as over stretching Customs officials.