Buhari Writes Reps, Seeks Approval of N4trn As Petrol Subsidy For 2022

A file photo of President Muhammadu Buhari used to illustrate the story.

 

President Muhammadu Buhari is seeking an increase in the provision for petrol subsidy for 2022 from N442 billion to N4 trillion. 

The Nigerian leader has therefore written to the House of Representatives for a review of the 2022 fiscal framework.

The Speaker of the House of Representatives, Femi Gbajamila, read the letter, titled “Submission of the Revised 2022 Fiscal Framework” during plenary on Thursday. 

Buhari in the letter dated April 5, cited the rising market price of crude oil heightened by the Russian-Ukraine war.

“As you are aware, there have been new developments both in the global economy as well as in the domestic economy which have necessitated the revision of the 2022 Fiscal Framework on which the 2022 Budget was based,” he said.

“These developments include spikes in the market price of crude oil, aggravated by the Russian-Ukraine war, significantly lower oil production volume due principally to production shut-ins as a result of massive theft of crude oil between the production platforms and the terminals.”

READ ALSO: Buhari Redeploys Mohammed Abdullahi As Minister Of Environment

According to him, the adjustments to the 2022 fiscal framework include a rise in the estimated crude oil price benchmark from $62 per barrel to $73 per barrel. 

“A reduction in the projected oil production volume by 283,000 barrels per day, from 1.883 million barrels per day to 1.600 million barrels per day,”  Buhari’s letter read. 

‘70 Million Litres Is Impossible’: Saraki Challenges FG On Fuel Consumption Claims

 

Former Senate President, Bukola Saraki, has faulted the Federal Government’s claims that the country is consuming over 70 million litres of fuel.

He disputed the claims during his appearance on Channels Television’s Sunday Politics while addressing the issue of fuel scarcity and the suffering it brought upon Nigerians.

Read Also: What Buhari Said About Fuel Subsidy In Proposed Amended 2022 Budget (FULL TEXT)

“If you remember then in 2011 when I moved the motion, we talked about how we were consuming 30 to 35 million litres a day and we said at that time that it was even too much.

“We took steps and made recommendations following my motion and the then-government took certain steps that resulted in the government seeing a reduction in subsidy by $500 million… now to say today that we are spending three trillion, is definitely not adding up.

“How can anybody see Nigerians go through this? Now I’m told that we consume 70 million litres. It’s not possible.

“We cannot be consuming more than 30-45 million litres. There’s no doubt that those litres of fuel are going across the border and the government is turning a blind eye. It is not possible,” he asserted.

NNPC Has Requested N3trn As Fuel Subsidy For 2022 – Finance Minister

A file photo of an attendant filling the fuel tank of a car.

 

The Nigerian National Petroleum Corporation has requested the sum of three trillion naira (N3,000,000,000,000) as fuel subsidy for 2022.

Minister of Finance, Budget, and National Planning, Mrs. Zainab Ahmed, disclosed this to State House correspondents after the Federal Executive Council meeting which was chaired by President Muhammadu Buhari on Wednesday.

“In 2022, because of the increased crude oil price per barrel in the global market, now at $80 per barrel, and also because NNPC’s assessment is that Nigeria is that the country is consuming 65.7 million litres per day, that we would end up with an incremental cost of N3 trillion in 2022,” the minister added.

According to Mrs Ahmed, by implication, the Federal Government will have to make an incremental provision of N2.557 trillion in order to meet subsidy requirements which currently averages about N270 billion per month.


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Buhari Never Directed Removal Of Petrol Subsidy, Says Lawan


 

The finance minister further disclosed that only N443 billion is presently available in the 2022 budget meant to accommodate subsidy from January to June.

She also stated that the current realities on the ground including lack of structures, for now, has necessitated the NNPC to make the request.

That request, she revealed, was considered by the council, which has directed the ministry to approach the National Assembly for an amendment to the fiscal framework as well as the budget.

APC Welcomes Suspension Of Petrol Subsidy Removal

No Need For Panic Buying, Over 1bln Litres Of Petrol In Stock – NNPC
File photo

 

The All Progressives Congress (APC) has welcomed the Federal Government’s suspension of the planned removal of subsidy on petroleum products.

According to a statement by the APC, it is commendable that the Federal Government took into consideration the fact that the removal of subsidy at this time will heighten inflation and cause undue hardship on the citizenry.

While asserting that programmes and policies of government are meant to benefit the people, the APC said that if the timing of the planned subsidy removal would cause hardship on citizens, then a review was necessary.

READ ALSO: FG To Make Additional Provisions For Fuel Subsidy Beyond June – Finance Minister

“We commend President Muhammadu Buhari for always putting the welfare and well-being of Nigerians first as he has serially displayed in the implementation of programmes and policies of this administration.

“In line with the new Petroleum Industry Act (PIA), the Federal Government is already putting in place measures, particularly boosting our local refining capacities to reduce the country’s reliance on expensive import of refined petroleum products.

“This will in due course usher in the eventual and full deregulation of the country’s petroleum sector”.

The APC commended the cordial and healthy relations between the executive and the 9th National Assembly which it says has ensured good governance.

“Nigerians have been the ultimate beneficiaries as displayed in the positive outcomes of the meeting between Minister of Finance, Budget and National Planning, Dr. Zainab Ahmed, and the Senate President, Ahmad Lawan on the suspension of the planned subsidy removal,” the party added.

NEC Asks Nigerians To Wait Till June For Decision On Subsidy

 

The National Economic Council (NEC) has asked Nigerians to wait till June for a decision to be reached on the removal of fuel subsidy.

Nasarawa State Governor, Abdullahi Sule, said this while briefing the press at the end of the first NEC meeting for 2022 held in Abuja on Thursday.

“We did not make any presentation on this because there has not been a decision. But in reality, all of us, Nigerians, know that there is now the Petroleum Industry Act (PIA) and NNPC has now become a limited liability company,” the governor said after the 122nd NEC meeting.

“So, NNPC will run differently. So, if the Ministry of Finance provides for six months, you probably can understand part of the reasons for the provision of six months is before NNPC fully takes off and at that moment, that’s when decisions would be made.”

Governor Godwin Obaseki of Edo State, who also spoke after the meeting, noted that N2.1 trillion was spent last year on fuel subsidy payments. The payments, he said, could have been used to fund other development efforts.

“Because of payment of subsidy, NNPC was unable to put that money into FAAC for distribution, which means less money going to the states and less money going to the federal government,” Obaseki added.

The NEC meeting was chaired by Vice President Yemi Osinbajo and attended physically by state governors, government officials as well as officials of the World Bank.

Also on the agenda was the launch of the Nigeria COVID-19 Action Recovery and Economic Stimulus programme (NGCARES).


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Buhari Never Directed Removal Of Petrol Subsidy, Says Lawan

Removing Fuel Subsidy Will Push More Nigerians Into Poverty – Abdulsalami


Pushing Millions Into Poverty

General Abdulsalami Abubakar, a former Head of State, is the Chairman of the National Peace Council.
General Abdulsalami Abubakar, a former Head of State.

 

NEC’s comment is the latest in the debates over plans to remove subsidies on fuel.

On the same day, a former Head of State, Abdulsalami Abubakar, said a hike in fuel price will push millions of Nigerians into hardship.

Abdulsalami made the comment during the 19th Daily Trust Summit held in Abuja and noted that Nigerians are already facing hardship on multiple fronts.

“All of these have disrupted the fragile value chains across the country, and negatively impacted the ability of Nigerians to produce, process, and distribute food,” he said, months after the Federal Government disclosed it will remove subsidy.

“The result is a continued rise in the prices of food items, beyond the reach of many Nigerian families.

“On top of all these, fuel prices are expected to rise significantly in the coming months as announced last November by the NNPC. We all know when this happens, as the government has planned, it will push many millions deeper into poverty.”

The plan to remove subsidy has also gotten pushbacks from the organised labour who argue that it is ill-advised with the minimum wage pegged at N30,000.

Late last year, the National Association of Nigeria Students (NANS), had also warned that it will shut down the country if the Federal Government removes subsidy which will see fuel go for about N320 per litre.

“Nigeria will be shut down should the Federal Government attempt to remove the fuel subsidy as allegedly being proposed,” NANS President, Adedayo Asefon said.

“It is merely an attempt to add a new dimension of economic woes upon Nigerians through this removal of fuel subsidy.”

But the Nigerian government has insisted it can no longer continue paying subsidies for fuel which, according to President Muhammadu Buhari, take a huge chunk of revenue.

 “Today, we have 60 per cent less revenues; we just cannot afford the cost. The second danger is the potential return of fuel queues – which has, thankfully, become a thing of the past under this administration,” Buhari stated at the first-year Ministerial Performance Review Retreat held in September.

In lieu of the subsidy, the government also plans to give a N5, 000 transport grant to about 40 million poor Nigerians to cushion the impact.

However, the Senate President, Ahmed Lawan, said on Tuesday that Buhari did not direct the removal of subsidy.

“He didn’t tell anybody that we should go remove petroleum subsidy. And those of us who represent the people know how people are already stressed over and again . . . it is going to be too much for them,” Lawan said after a meeting with the Nigerian leader.

Buhari Never Directed Removal Of Petrol Subsidy, Says Lawan

A file photo of an attendant filling the fuel tank of a car.

 

The Senate President, Ahmed Lawan on Tuesday said that President Muhammadu Buhari has not directed anyone in his administration to implement the removal of petroleum subsidy.

He stated this after meeting with the President in his office, disclosing that he met Buhari to convey the concerns of his constituents on various issues including the proposed removal of subsidy.

Briefing State House correspondents in Abuja, the Senate President said that lawmakers are worried about the agitations and protests across the country on the matter, which prompted the discussion with the President.

READ ALSO: Work Ongoing On Review Of 1999 Constitution – Lawan

“He didn’t tell anybody that we should go remove petroleum subsidy. And those of us who represent the people know how people are already stressed over and again . . . it is going to be too much for them,” Lawan said.

Lawan further questioned the claim that Nigerians consume a hundred million litres of the Premium Motor Spirit (PMS) daily.

The Senate President explained that while it is impossible to consume that much within the boundaries of the country alone, there is a need to critically investigate to discover the truth.

Speaking further, he blamed the smuggling of petroleum products on the failure of the government to contain the menace, a situation that has pushed the burden of payment on the ordinary citizen.

He said, “I know and I agree that the subsidy is very heavy. But I think we must never transfer the burden to the citizens. I believe that we need to look at the quoted figure of maybe 100 million liters that people claim we’re consuming.

“Is it real? I mean is it either under-recoveries of subsidy? Is it really 100 million liters per day? How on earth are we consuming that? We need to look at this critically and see how we can find the truth.

“I am not convinced that within the boundaries of Nigeria we are consuming 100 million liters, probably neighbouring countries may be benefiting from this. Can’t we do something about it? It is a failure on us if we are not able to control it.”

Power Generation Now 13,000 MW, Says Garba Shehu

 

The Senior Special Adviser on Media and Publicity, Garba Shehu, has said that Nigeria now generates up to 13,000 megawatts of power.

“We aspire to do 20,000 or 30,000 megawatts of power, and as we speak today, we have over 13,000 availability. It’s remarkable, why don’t we look inwards and put measures in place to use out the 13,000 that is available,” Mr Shehu said on Channels TV’s Sunrise Daily on Friday.

He made the comments while discussing some of the administration’s successes and what it plans to still do in the final lap before 2023.

Read Also: Buhari Determined To Deliver Major Projects Before Leaving Office – Presidency

Mr Shehu also stated that contrary to popular opinion, the President is determined to make the last push for major policies; infrastructure and projects that he believes must be delivered before he leaves.

Speaking further about President Buhari’s plans come 2023 and reacting to some of his comments in a recent interview, Shehu said: “the president can be very casual sometimes in speaking and jovial and jocularly; I think this is what people fail to understand of him. They need to understand how in the first place he was persuaded and pressured to even run in the first instance.

“He had served as governor, minister and military Head of State and that’s the highest it could get. He had retired home and Nigerians came and said you are the right person for this moment, we need you. It took some persuasion.

“So, yes, it is right for the person to say he has given his best and when the time is up, some other person will take over”.

EFCC Boss Continues Testimony In Alleged N1.4bn Oil Fraud Case

A file photo of EFCC Chairman, Abdulrasheed Bawa.

 

Chairman of the Economic and Financial Crimes (EFCC), Abdulrasheed Bawa, on Monday continued his testimony at the Lagos High Court sitting in Ikeja in the trial of Abubakar Peters and his company, Nadabo Energy Limited, for an alleged N1.4 billion subsidy fraud.

Mr Bawa who is testifying as the fifth prosecution witness concluded his examination-in-chief before Justice Christopher Balogun.

While answering questions from the prosecuting counsel, Seidu Atteh, he shed more light on Exhibit X – the nine-page document tendered in court by the prosecution as the synopsis of the findings of the investigation team.

READ ALSO: Togo, Benin, Niger Paid Nothing For Nigeria’s Electricity In Q2 2021 – NERC

“Page eight is the summary of the findings of our investigations,” he said. “We found out that contrary to the claim of the defendant, as seen on page one that this particular Letter of Credit (LC) no. SPG/DLC/11/0013 is in favour of Ashland Energy SA, the LC is actually in favour of Petrocam Trading PYT Ltd.

“Also, contrary to the claim that MT St. Vanessa had a ship-to-ship transfer with MT American Express, as per page one, our findings, as per page eight, revealed that MT St. Vanessa had a ship-to-ship transfer with MT Evridiki, in which only 4,843.22 MT of PMS was taken offshore Lome as against the claim by the defendant that the vessel took 14,134.58 MT on the same date and same location.

“Our findings further revealed that Staco Insurance Plc issued Certificate of Marine Insurance no. 0047851 dated 25 October 2011 for only $4,780,128 as against the claim of the defendant that $17,205,000 was the value that was insured.

“In summary, our findings revealed that the defendant ought to have been paid only N486, 560,246.15 for importation of 6,505,140.42litres of PMS as against N1,464,961,978.24 paid for claiming to have imported 19,500,000 litres of PMS, thereby obtaining N978,401,732.09.”

Under cross-examination by defence counsel, Osagie Isiramen, Bawa told the court that the EFCC received complaints from the then Minister of Petroleum Resources, Diezani Alison-Madueke, calling on the commission to investigate the entirety of the subsidy regime.

“In addition, we also received complaints from Femi Falana Chambers, as well as civil society groups and other stakeholders in Abuja, as signed by Dino Melaye and others,” he said.

According to him, the EFCC is empowered by Section 7 of the EFCC Establishment Act, “even if it does not receive a formal petition to still carry out investigation on financial matters that it believes may be fraudulent.”

The EFCC chief also told the court that the agency investigated all the companies that participated in the subsidy scheme.

“Some of the marketers that we prosecuted have been convicted by the court, some are still under prosecution, some are still under investigation, and we have recovered billions of naira,” he added.

The case has been adjourned until January 24 and 25, 2022 for the continuation of the cross-examination.

Subsidy Removal Has To Happen For Nigeria’s Economy To Stand – Muda Yusuf

 

Former Director-General of the Lagos State Chamber of Commerce and Industry, Muda Yusuf, has backed the removal of fuel subsidy, saying the move is necessary for the nation’s economy to stand.

Last week, the Minister of Finance, Budget and National Planning, Zainab Ahmed, had announced that the government would remove fuel subsidy and replace it with a monthly N5,000 transport stipend to about 40 million poor Nigerians.

Speaking during an interview on Channels Television’s Sunrise Daily, Yusuf condemned a situation, whereby the Federal Government spends N3 trillion annually on fuel subsidies.

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“For this economy to continue to stand, this is something that has to happen. Look at the macro-economic effects, look at the effect on our reserves, look at the effect on our foreign exchange and more importantly, look at the effect on investments,” he said.

“How can we have a sector as important as the petroleum sector and we have a policy that is practically blocking investments into that sector because that is what this thing is doing.

“We cannot continue with a situation whereby we will be spending close to N3 trillion annually on subsidies and not just because of that, because of the investment, macro-economic implication,” he said.

“We are almost feeding the entire West African sub-region with our PMS. That is not sustainable unless we want to cripple the entire economy.”

File photo of Muda Yusuf

 

He believes the current administration should channel the money being spent on subsidies to primary healthcare, basic education and rural roads.

While noting that the new government’s policy would not be easy on Nigerians, the former LCCI boss said the subsidy removal would have a lot of social implications.

One of these, he stated, includes inflationary implications, political costs for the ruling All Progressives Congress (APC) among other challenges.

According to Yusuf, the government has engaged the masses by proposing a minimum of N5,000 per month to about 40 million vulnerable masses .

FG To Make Transport Subsidy Payment Digitally For At Least Six Months

A file photograph of Finance Minister, Zainab Ahmed.
A file photograph of Finance Minister, Zainab Ahmed.

 

The Federal government says its transport subsidy payment of N5,000 to the vulnerable would be transferred digitally for a minimum period of six months and a maximum of 12 months.

This, the government noted, will happen after the removal of fuel subsidy in June 2022 to give people time to adjust.

Minister of Finance, Budget, and National Planning, Zainab Ahmed, made this known on Wednesday while briefing State House correspondents after the Federal Executive Council meeting chaired by President Muhammadu Buhari.

She underscored that as at the last Federation Account Allocation Committee (FAAC) meeting, fuel subsidy costs the country nearly N250 billion per month and three trillion annually as the NNPC remits near-zero naira.

READ ALSO: Buhari Suspends Inauguration Of NNPC Limited Board Indefinitely

According to her, this has made the removal expedient. The support fund upon approval from FAAC for 20-40 million Nigerians will not be done in cash.

She further encouraged states to financially contribute to the N5,000 relief fund to improve the productive abilities of Nigerians.

On Tuesday the minister said Nigeria will remove fuel subsidies by 2022 and replace them with a N5000-a-month transportation grant to the poorest Nigerians.

Speaking at the launch of the World Bank Nigeria Development Update (NDU), the minister said the grant will go to about 30 to 40 million Nigerians who make up the poorest population of the country.

She said the final number of beneficiaries will depend on the resources available after the removal of the fuel subsidy.

Nigeria’s Economic Growth: Removal Of Subsidy, 17 Other Critical Findings Of IMF

In this file photo an exterior view of the building of the International Monetary Fund (IMF), with the IMG logo, is seen on March 27, 2020 in Washington, DC. Olivier DOULIERY / AFP
In this file photo an exterior view of the building of the International Monetary Fund (IMF), with the IMG logo, is seen on March 27, 2020, in Washington, DC. Olivier DOULIERY / AFP

 

The International Monetary Fund (IMF) recently visited Nigeria for a mission that is part of regular consultations under Article IV of the IMF’s Articles of Agreement, in the context of a request to use IMF resources (borrow from the IMF).

Following the visit, the international financial organization made some interesting findings as regards the economic growth of the country.

In its report, the IMF noted that the Nigerian economy is recovering from a historic downturn, benefiting from government policy support, rising oil prices, and international financial assistance.

According to the fund, the authorities’ pro-active approach has contained the COVID-19 infection rates and fatalities.

However, with the emergence of fuel subsidies and the slow progress on revenue mobilization, the fiscal outlook faces significant risks.

The IMF further stated that continued reliance on administrative measures to address persistent foreign exchange shortages is negatively impacting confidence.

The Washington-based organization emphasized that without urgent fiscal and exchange rate reforms, the medium-term outlook faces sub-par growth.

READ ALSO: VP Urges Nigerian Businesses To Step-Up Product Quality For Africa Trade

In proffering some measures that could help the nation’s economy bounce back to stability, the IMF gave 18 inferences following their visit.

Below are the theories posed by the financial institution regarding Nigeria’s growth and economic stability.

1. The economy is recovering from a historic downturn. Helped by government policy support, rebounding oil prices, and international financial aid, Nigeria exited the recession in 2020Q4, earlier than expected. Output rose by 5.4 percent (y-o-y) in the second quarter, mainly reflecting base effects from transport and trade sectors and continued strong growth in the IT sector. However, manufacturing and oil sectors remain weak, reflecting continued foreign exchange shortages, and security and technical challenges.

Headline inflation rose sharply during the pandemic reaching a peak of 18.2 percent y-o-y in March 2021 but has since declined helped by the new harvest season and opening of the land borders. Reported unemployment rates are yet to come down although COVID-19 monthly surveys show the employment level to be back at its pre-pandemic level.

2. The COVID-19 pandemic has been well managed but there is a lasting imprint on the vulnerable. Like much of the Sub-Saharan Africa (SSA), Nigeria underwent a third wave of the pandemic in August 2021.

The authorities’ proactive actions, including a robust infection tracking system and a national strategy for vaccine procurement and rollout, have helped keep infection rates and fatalities lower than in many other countries.

The economic and social impacts of the pandemic have been more daunting with rising food insecurity and an increase in the already-high levels of poverty. Significant progress has been made in vaccine procurement. However, less than three percent of the eligible population has been fully vaccinated reflecting limited vaccine supply, delivery bottlenecks, and high vaccine hesitancy.

3. The outlook is for a subdued recovery. While real GDP is projected to grow by 2.6 percent this year and continue in the range of 2.6-2.7 percent per annum over the medium term, this is just above the population growth rate implying stagnant per capita income in the medium term. Moreover, despite an easing of food prices, inflation is projected to remain in double-digits, absent monetary policy reforms.

There are significant downside risks to the near-term outlook arising from the uncertain course of the pandemic and the domestic security situation. In the medium term, there are upside risks from faster-than-expected reaching of the Dangote refinery’s production capacity along with the effective implementation of the 2021 Petroleum Industry Act in terms of higher manufacturing production and investment in the oil sector.

4. Major reforms in the fiscal, exchange rate, trade, and governance are needed to alter the long-running lackluster growth path.

On the immediate front, fiscal and external imbalances require the removal of regressive fuel and electricity subsidies, tax administration reforms, and installing a fully unified market-clearing exchange rate. Over the medium term, moving away from inward-looking policies through trade, monetary, and foreign exchange reforms, enhancing public trust through governance and fiscal transparency reforms and improving welfare through job creation and agricultural reforms are priorities.

Fiscal policy: Remove fuel and electricity subsidies and implement revenue-based fiscal consolidation

5. The headline fiscal deficit is projected to worsen in the near term and remain elevated over the medium term. Despite much higher oil prices, the general government fiscal deficit is projected to widen in 2021 to 6.3 percent of GDP, reflecting implicit fuel subsidies and higher security spending, and remain at that level in 2022.

There are significant downside risks to the near-term fiscal outlook from the ongoing pandemic, weak security situation, and spending pressures associated with the electoral cycle. Over the medium term, without bold revenue mobilization efforts, fiscal deficits are projected to stay elevated above the pre-pandemic levels with public debt increasing to 43 percent in 2026. General government interest payments are expected to remain high as a share of revenues making the fiscal position highly vulnerable to real interest rate shocks and dependent on central bank financing.

6. The complete removal of regressive fuel and electricity subsidies is a near-term priority, combined with adequate compensatory measures for the poor. The mission stressed the need to fully remove fuel subsidies and move to a market-based pricing mechanism in early 2022 as stipulated in the 2021 Petroleum Industry Act.

In addition, the implementation of cost-reflective electricity tariffs as of January 2022 should not be delayed. Well-targeted social assistance will be needed to cushion any negative impacts on the poor particularly in light of still elevated inflation. Nigeria’s past experiences with fuel subsidy removal, which have all been short-lived and reversed, underscore the importance of building a consensus and improving public trust regarding the protection of the poor and efficient and transparent use of the saved resources.

7. Significant additional domestic revenue mobilization is critical to put the public debt and debt-servicing capacity on a sustainable path. The near-term priorities are to implement e-customs reforms including efficient procedures and controls, develop a VAT Compliance Improvement Program, improve compliance across large, medium, and micro/small taxpayers, and rationalize tax incentives and customs duty waivers.

As the recovery gains strength and compliance improves, Nigeria will have to adopt tax rates compared to its peers in the Economic Community of West African States (ECOWAS) to raise revenues to levels targeted in the 2021-25 National Development Plan.

The cumulative net savings from the recommended measures, after making room for additional social assistance to cushion impacts of reforms, could amount to 5.1 percent of GDP over 2022-26. Such a consolidation would keep public debt below 40 percent of GDP and reduce dependence on central bank financing of the deficit.

8. The mission welcomed the recent passage of the Petroleum Industry Act (PIA) and stressed its timely implementation. The PIA aims to improve administration and governance in the petroleum sector, introduce market-based fuel pricing and attract higher investment.

Preliminary assessments by the IMF and the World Bank suggest that the approved fiscal terms will provide greater incentives to invest in the oil and gas industry but will reduce the fiscal take from new and converted fields.
Exchange Rate Policy: Reduce administrative measures and allow for a market-clearing unified exchange rate

9. The mission welcomed steps taken toward the unification of the exchange rate and stressed the need for further actions. The discontinuation of the official exchange rate is a step in the right direction but continued dependence on administrative measures to address FX shortages sustains uncertainties and increases the risks of a sudden and large adjustment in the exchange rate.

Taking advantage of the favorable global conditions, improving current accounts, and robust oil prices, the mission advised a move to a unified and market-clearing exchange rate without further delays.

To preserve competitiveness, any exchange rate adjustment should be accompanied by clear communications regarding exchange rate policy going forward, macroeconomic policies to contain inflation, and structural policies to facilitate new investment.

10. A further move toward a market-clearing exchange rate will also help build foreign exchange buffers through higher capital inflows. Despite the recent SDR allocation and a successful Eurobond issuance, gross reserves remain significantly below the IMF’s recommended adequacy levels.

Slow FX reforms and uncertainties regarding the ability to repatriate foreign funds have discouraged new capital inflows. With an external position that is assessed to be weaker than implied by Nigeria’s economic fundamentals and desired policies, a narrow export base, and limited capital inflows, the mission recommended preserving foreign exchange reserves through sustainable policies. The mission assessed Nigeria’s capacity to repay the outstanding credit from the 2020 Rapid Financing Instrument (RFI) to be adequate.

11. A more open trade regime is needed to unleash the growth potential brought by the African Continental Free Trade Agreement (AfCFTA). The authorities are committed to implementing the AfCFTA and are working to enhance trade facilitation through the increased use of technology.

However, the overall trade regime continues to be protectionist and restrictive with numerous products prohibited from FX access for imports, including basic necessities and food items, high tariff and non-tariff barriers, and difficult trade logistics.

Building on current efforts to improve port infrastructure and reduce the burden of customs administration, the mission recommended decisive actions to reduce barriers to trade and reliance on import substitution.

Monetary and Financial Sector Policies: Support the recovery but remain vigilant against inflationary and stability risks

12. Monetary policy should remain supportive of the nascent recovery but warrants close monitoring. With the recovery yet to be broad-based, inflation projected to decline, and limited fiscal policy space, monetary policy should remain supportive unless exchange rate pressures intensify, or inflationary pressures resurface.

The mission advised vigilance to prevent possible adverse feedback loops between persistent high inflation and periodic exchange rate adjustments if monetary policy were to become excessively loose. The out-of-cycle and discretionary use of the cash reserve requirement (CRR) continues to pose regulatory and operational uncertainties for the banking system.

13. In the medium term, the monetary operational framework should be strengthened to establish the primacy of price stability. Long-term high inflation in Nigeria is associated with the lack of a well-functioning monetary policy operational framework along with the presence of multiple policy goals.

The mission reiterated its previous advice to (i) modernize the 2007 CBN act to establish the primacy of price stability and (ii) strengthen the monetary transmission mechanism by integrating the interbank and debt markets and using central banks or government bills of short-maturity as the main liquidity management tool.

As the recovery firms up, the CBN also needs to scale back its credit intervention programs as part of a broader monetary structural reform.

14. The banking sector has been resilient thanks to ample pre-crisis buffers. The systemwide NPL ratio has improved, and profitability has been resilient, resulting in capital buffers above the regulatory minimum.

However, stress tests conducted by the authorities show that a severe shock requiring loan reclassification could erode the system’s buffers and there are risks that a part of the restructured loans, which represent less than a quarter of the overall loan portfolio, may eventually become delinquent.

Tighter market liquidity due to CRR debits and restricted access to the CBN discount window may raise bank funding costs going forward and possibly restrict credit growth at individual banks.

15. Financial inclusion continued to improve despite the pandemic but remains considerably below Nigeria’s ambitious inclusion targets. The share of the financially excluded population remains large overall, particularly in rural areas and among women and youth.

The mission recommended prioritizing the provision of financial access points in remote areas and leveraging the new technologies to close the inclusion gap more quickly. The launching of e-Naira bodes strong promises and, over time, could significantly increase financial inclusion and delivery of social assistance if coverage is extended to those with a mobile phone.

16. The mission supported the time-bound debt relief measures currently in place and recommended vigilance to guard against financial stability risks. The authorities are in the process of implementing a suite of Basel II/III instruments in addition to last year’s passage of the new banking law BOFIA.

The mission recommended the following measures to forestall stability risks:
· Expiration of pandemic-related loan restructuring as planned in March 2022 in line with the economic recovery.
· Timely action against the chronically undercapitalized banks and, more broadly, application of the new provisions under the BOFIA to further bolster corporate governance.
· Additional regulation to safeguard sound practices and consumer protection in the growing segment of digital payments and lending.
· Introduction of additional macroprudential instruments to better manage systemic and cyclical risks in the context of Basel III implementation.
· An assessment by the central bank of the impact of the recent launch of eNaira on monetary policy transmission and financial stability.
Structural policies: Increase jobs and worker welfare and strengthen governance

17. Given the large number of projected new entrants in the labor force and stagnant living standards, economic growth needs to increase jobs and improve worker welfare.

With agriculture accounting for almost half of current employment, any job-rich growth will need to rely considerably on this sector at least in the near term. However, the welfare level of agricultural workers, measured by per capita consumption, remains far below other workers reflecting lower productivity. Improving agricultural productivity, which requires increased supply and usage of inputs, initiatives to promote storage and the creation of farm cooperatives to reduce food loss in distribution and higher access to credit will contribute to more jobs, higher income for agricultural workers, food security, and economic diversification given the vast potential in agriculture and agroindustry.

18. There are ongoing efforts to improve transparency and governance, but more is needed to build public trust to implement difficult but needed reforms. On transparency, the national oil company NNPC has published its last two annual statements to better reconcile gross and net oil revenues remitted to the Federation Account and the Corporate registry has started to publish information on persons with significant control in newly established companies.

The government is in the process of presenting whistleblower legislation to the Parliament to facilitate untraceable declarations of corruption. However, perception of corruption remains high regarding the civil service, leading to low tax compliance and buy-in of reforms.

Implementation of transparency and accountability measures committed under the RFI has been slow. Access and quality of information on the COVID-19 spending on the Ministry of Finance’s Transparency Portal have been uneven.

The COVID-19 spending audits are just starting, and the publication of procurement contract recipients is incomplete.

FG To Make Provision For Subsidy In 2022, Says NNPC Boss

A file photo of an attendant filling the fuel tank of a car.

 

The Federal Government will make provision for subsidy in 2022, Nigerian National Petroleum Corporation (NNPC) has said.

NNPC Group Managing Director, Mr Mele Kyari, disclosed this on Wednesday at a public hearing organised by the Senate Committee on Finance on the 2022-2024 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP).

Although no provision was made for fuel subsidy in 2021, he informed the lawmakers that the government had begun a conversation with relevant stakeholders to exit the subsidy regime.

The NNPC chief, however, stated that the process may not be concluded anytime soon, hence the need to reintroduce subsidy in the 2022 budget.

On his part, the Chairman of the Senate Committee on Finance, Adeola Olamilekan, raised a concern about revenue generation to curb borrowing to fund the budget.

The lawmakers also want government agencies to equally focus on revenue generation as they do on spending the government’s money.

The Senate is holding a three-day public hearing on the 2022-2024 MTEF/FSP, as part of processes to prepare the 2022 budget.

MTEF sets parameters with which the budget is prepared, including the borrowing plan of the government as it proposes $57 per barrel as crude price and 1.88 million barrels daily oil production.

On Wednesday last week, the NNPC boss appeared before members of the House of Representatives Committee on Finance for a similar hearing on the 2022-2024 MTEF/FSP.

At the session, he disclosed that Nigeria would stop the importation of Premium Motor Spirit (PMS), popularly known as petrol, when the Petroleum Industry Act (PIA) comes into full effect, and when the Dangote Refinery kicks off operations.

Kyari, who also responded to questions on the Dangote Refinery, justified the Federal government’s equity share in the plant.

According to him, taking equity in Dangote Refinery was well thought out as the nation now has a venture that will ensure the production of millions of litres of petrol in the country.