The nation’s finance minister, Zainab Ahmed, says the coronavirus pandemic and falling oil prices are set to force the economy into negative growth.
Ms. Ahmed made the comments after the National Economic Summit meeting in Abuja on Thursday.
“On the economy, COVID-19 has resulted in the collapse in oil prices,” she said. “This will impact negatively, and the impact has already started showing on the federation’s revenues and on the foreign exchange earnings.
“Net oil and gas revenue and influx to the federation account in the first quarter of 2020 amounted to N940.91billion. This represented a shortfall of N125. 52billion or 31% of the prorated amount that is supposed to have been realized by the end of that first quarter.”
She added that the economic contraction will multiply the misery of the poor.
“The crisis will only multiply this misery,” she said. “The economic growth in Nigeria, that is the GDP, could in the worst case scenario, contract by as much as –8.94% in 2020. But in the best case, which is the case we are working on, it could be a contraction of –4.4%, if there is no fiscal stimulus. But with the fiscal stimulus plan that we are working on, this contraction can be mitigated and we might end up with a negative –0.59%.”
Plans are ongoing by the Federal Government to review the 2020 budget to reflect an oil benchmark of $20 per barrel.
A report by Reuters quoted the Minister of Finance, Budget and National Planning Minister, Zainab Ahmed, who disclosed this on Tuesday during a web conference about the impact of low oil prices on Nigeria’s economy.
A further downward revision will mean that the Federal Government has now dropped the benchmark from an initial $57 per barrel to $30.
The report said Mrs Ahmed also intimated on plans by FG to cut oil production to 1.7 million barrels per day (mbpd), from the 2.1 mbpd previously proposed in the budget.
“We are in the process of an amendment that is bringing down the revenue indicator to $20 per barrel.”
Other key highlights from the conference include; plans to defer debt service obligations to 2021 and beyond until macro conditions improve.
An 80% drop in estimated net oil & gas revenue available for Federation Account Allocation Committee (FAAC) distribution to N1.1 trillion against the N5.5 trillion previously earmarked.
A marginal drop in Customs projected revenue to N1.2 trillion in 2020 from the previous N1.5 trillion.
While the amount accruable to the federation account is now projected at N3.9 trillion from the initial N8.6 trillion.
The government is also looking at providing support for the aviation sector as part of measures to alleviate the impact of COVID-19.
The Minister of Finance, Budget and National Development Zainab Ahmed, explained on Thursday why Nigeria was not among 25 countries recently granted debt relief by the International Monetary Fund (IMF).
Quoting the IMF, she said the relief was for the “poorest and most vulnerable” IMF members.
And “since Nigeria is not indebted to the IMF, there is no outstanding debt obligation to be forgiven,” Ahmed said on her official Twitter page.
She said Nigeria had applied for new financing at the IMF and the country’s application “is under consideration and receiving attention.”
“The new application is for financing under the Rapid Financing Initiative (RFI),” the Minister said.
“Nigeria is entitled to access up to 100% of its quota under the Rapid Financing Initiative (RFI). Our current financial position at the IMF is public information on International Monetary Fund website.”
On Monday, the IMF had announced immediate debt relief for 25 poor countries – most in Africa, but also in the Middle-East – to help them free up funds to fight the coronavirus pandemic.
The Federal Government has sought the approval of the National Assembly for an intervention fund to tackle the COVID-19 pandemic in the country.
Minister of Finance, Budget and National Planning, Zainab Ahmed met with NASS leadership on Saturday over an Executive proposal to establish a N500 billion COVID-19 Crisis Intervention Fund.
Zainab, with senior officials from her ministry, held the meeting with the President of the Senate, Ahmad Lawan and Speaker of the House of Representatives, Femi Gbajabiamila.
The meeting which held at the National Assembly was also attended by the Deputy Senate President, Ovie Omo-Agege, Deputy Speaker of the House, Idris Wase and some other principal officers from both chambers.
According to a statement issued by the Special Adviser to the Senate President on Media, Ola Awoniyi, the meeting was a follow-up to one held last week Wednesday between the National Assembly leadership and members of the Presidential Committee which was set up for the management of the COVID-19 crisis.
“What we are proposing is an establishment of a N500 billion COVID-19 Crisis Intervention Fund.
“This Fund that we are proposing, that should be created, will involve mopping up resources from various special accounts that the government, as well as the Federation, have, to be able to pull this N500 billion,” Zainab said.
Speaking further, the Minister said in addition to the identified special accounts from where the money will be drawn as loans, the proposed intervention fund is also expected to be sourced from grants being expected and loans from multilateral institutions.
“Our general view is that this crisis intervention fund is to be utilised to upgrade healthcare facilities as earlier identified.
“The Federal Government also needs to be in a position to improve health care facilities not only in the states but to provide intervention to the states,” she stated.
Zainab explained to the lawmakers that the fund if approved, will also take care of special public work programmes currently being implemented by the National Directorate of Employment (NDE).
On his part, the Senate President said the meeting was in fulfilment of an earlier promise to provide support as the need arises in this time of crisis.
“I think coming to us for those loans is critical because we are in an emergency and time is of the essence. So, we must work as expeditiously as possible to ensure that we place the request before the National Assembly.
“I think the time has come for us to redefine the implementation of the Social Intervention programme, probably going out to communities to give them N20,000 per person might not be the best way to go. It is still an effort, but I think we need a better approach that will be more efficient,” Lawan said.
The Federal Government is proposing a review of the oil benchmark for the 2020 budget from an initial $57 to $30 per barrel due to the impact of the coronavirus pandemic and the plunge in international oil prices on the nation’s economy.
In a meeting with the leadership of the National Assembly on Wednesday, Minister of Finance, Zainab Ahmed, explained that prior to the COVID-19 and oil price decline, the Nigerian economy was already fragile and vulnerable.
She added that the impact of the pandemic put increasing pressure on the Naira and foreign reserves as the crude oil sales receipts declined and the country’s micro-economic outlook worsened.
Ahmed disclosed that the Federal Government has undertaken cuts to revenue-related expenditures for the Nigerian National Petroleum Corporation (NNPC) for several projects included in the 2020 Appropriation Act passed by the National Assembly in December, 2019.
“Prior to COVID-19 and Oil price decline, the Nigerian economy was already fragile and vulnerable.”
She also told the leadership of the National Assembly that budgeted revenues for the Nigeria Customs Service have been reduced from N1.5 trillion to N943 billion “due to anticipated reduction in trade volumes; and privatization proceeds to be cut by 50 per cent, based on the adverse economic outlook on sales of the Independent Power Projects (IPPs) and other assets.”
Similarly, Ahmed disclosed that the Federal Government has undertaken cuts to Revenue-related expenditures for the Nigerian National Petroleum Corporation (NNPC) for several projects included in the 2020 Appropriation Act passed by the National Assembly in December, 2019.
“The Federal Government is working on Fiscal Stimulus Measures to provide fiscal relief for Taxpayers and key economic sectors; incentivize employers to retain and recruit staff during the economic downturn; stimulate investment in critical infrastructure; review non-essential tax waivers to optimize revenues, and compliment monetary and trade interventions to respond to the crisis,” the Finance Minister disclosed.
Meanwhile, President of the Senate, Ahmad Lawan, said that an immediate review of the 2020 budget and Medium Term Expenditure Framework is imperative, particularly against the backdrop of the impact of the coronavirus pandemic on the global economy.
“If we have to review the budget itself, we have to consider the MTEF/FSP. Even in sickness, we need the government to provide services. The impact of COVID-19 is well known to all of us in terms of health and the economy. Here, we will be talking of revenues that we estimated to fund the budget 2020. Because the oil price has gone so low due to the impact of COVID-19, the Minister of State should be able to tell us where we will be in the next six months or so.
“We should have concepts that can deliver fast and are sustainable. Anything that we do that cannot provide succor and relief to our people will lead to catastrophe,” the Senate President warned.
The Minister of Finance, Budget and National Planning, Zainab Ahmed, says Nigeria may have to review the 2020 budget following the outbreak of the Coronavirus Disease (COVID-19).
Speaking at the end of weekly Federal Executive Council meeting which was presided over by the President Muhammadu Buhari on Wednesday, the Minister noted that the Federal Government is worried over the disease because it has negatively affected the nation’s revenue.
Ahmed, who noted the current price of crude oil is 53 per cent, below the administration’s benchmark, stressed that the government is monitoring the situation.
“We are concerned because it does have an impact on revenue. The current crude oil price of 53 per cent is below the benchmark. So what we are doing is we are studying the situation. When the budget was passed, we are committed to doing a mid-term review.
“Then we may need to do an adjustment to the budget through working together with the National Assembly,” she stated.
The minister, however, revealed that the nation’s oil production had increased between two million barrels and 2.1 million barrels per day.
“I will also like to inform this meeting that the crude oil production is now at 2million barrels per day and in some days it has even moved to 2.1million barrels per day.
“So that in itself would be a cushion. But all the same, we are not taking any measures now until we have a reasonable period within which we make a review,” she added.
Six Economic Community of West African States (ECOWAS) countries have rejected the move by eight other francophone nations in the region to adopt the Eco common currency.
Nigeria, Gambia, Ghana, Liberia, Sierra Leone, all English-speaking countries and Guinea, the only francophone country, faulted the move by Benin, Burkina Faso, Guinea-Bissau, Ivory Coast, Mali, Niger, Senegal, and Togo who had agreed to change the name of their common currency, CFA francs to Eco.
At an extraordinary meeting of the Ministers of Finance and Economy, and the Governors of Central Banks in the West African Monetary Zone on Thursday, Mrs. Zainab Ahmed said that the declaration is not in line with the decisions of ECOWAS Heads of States.
“While the meeting applauds the decision of the francophone West African countries to the link, the meeting also noted with concern, the declaration by his Excellency, Alassane Ouattara, Chairman of the authority of the Heads of States and Governments of the West African Economy and Monetary Union on the 21st December 2019 to unilaterally rename the CFA francs as eco by the year 2020.
“WAMZ Convergence council wishes to emphasize that this action is not in line with the decision of the authorities of the heads of states and government of ECOWAS for the adoption of the eco as the name of an independent ECOWAS single currency.”
At the end of the meeting, delegates recommended that an extraordinary general meeting of ECOWAS heads of state and governments in the West African Monetary Zone be convened to discuss the matter.
“The council reiterates the importance for all ECOWAS member countries to adhere to the decisions of the ECOWAS authority heads of states and government towards the implementation of the revised roadmap of the ECOWAS single currency programme.
“The council recommends that an extraordinary summit of the authority of the heads of state and government of the WAMZ member state be convened soon to discuss this matter and other related issues.”
In December 2019, the adoption of Eco common currency by the eight francophone countries was lauded by the International Monetary Fund (IMF), showing readiness to engage with the regional authorities, owing to its proven track record in the conduct of monetary policy and external reserve management.
Ghana had in December, lauded the move and said that the country is determined to do whatever they can to join the Member States of UEMOA soon.
The Federal Government has said that the increase in Value Added Tax (VAT) from 5 to 7.5 percent will take effect from February 1, 2020.
This was disclosed by the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed on Thursday, during the inauguration of the Chairman and Board members of the Federal Inland Revenue Service (FIRS) in Abuja.
Mrs. Ahmed stated that the Finance Act had made provisions support Micro, Small and Medium Enterprises (MSMEs) and soften the effect of the VAT rate increase on companies in a bid to increase employment and boost the economy.
“I want to state that one of the key provisions in the finance act 2019 that have elicited a lot of interest is the increase in the VAT from 5% to 7.5%, and to remind us all, the finance bill has made copious provisions to improve the ease of doing business; so we have a category of companies that have turnover of 25% and below that will be paying no taxes at all, and also we have reduced tax rates for companies that have turnover from 25 million to 100 million from 30% to 30%.
“The essence of this is to encourage formalization of businesses from the informal sector and also to encourage businesses to grow and become more productive, thereby increasing employment and also meeting the commitment of Mr. President to remove 100 million Nigerians out of poverty over the next 10 years.
“The effective date for the VAT increase from 5-7.5% will be the 1st of February 2020,” she stated.
President Muhammadu Buhari last week, signed the 2020 Finance Bill into law after it had announced plans in September 2019, to review the VAT through consultations at various levels in the country.
Nigeria’s recent border closure drill has been linked to the recent rise in headline inflation which is currently at 11.61 per cent as of October 2019.
The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, briefed State House Correspondents after the Federal Executive Council (FEC) meeting in Abuja, that recent figures from the Nigeria Bureau of Statistics (NBS) were noticed since September.
She explained that the increase in food inflation witnessed in September and October is linked to the increase in prices of food, propelled by the border closure.
“Headline inflation declined for several months before we noticed an uptake in the last two months and now headline inflation is at 11.61 percent as at the end of October.
“The slight increase between September and October is due to increases in food inflation ascribed to increase in prices of cereals, rice, and fish.
“Part of the reason is the border closure; the closure is very short and temporary and the increase is just by 2 basis points,” she explained.
Mrs. Ahmed pointed out that discussions with neighbouring countries on the border closure have advanced and the Federal Government is expecting every party to respect the protocols they are all committed to.
She stressed that the government is making sure that the economy does not suffer once the African Continental Free Trade Area Agreement (AfCFTA) comes into effect.
“The border closure is temporary; we have really advanced on the discussion between ourselves and our neighbours and we expect that the outcomes of those discussions and agreement are that each party will respect the protocols that we all committed to and then the borders will be open again.
“What we are doing is important for our economy as we signed on to the AfCFTA, we have to make sure that we put in place, checks to make sure that our economy is not overrun as a result of the coming into effect of the AfCFTA and that’s why we have this border closure to return to the discipline of respecting the protocols that we are all committed to.”
Minister of Finance, Mrs Zainab Ahmed says the Federal Government has secured a $3bn loan from the World Bank.
According to the Finance Minister, the loan is to be used for reforming the nation’s power sector.
Mrs Ahmed who announced the approval of the loan at a news conference to wrap up the World Bank/IMF annual meetings in Washington DC explains that the loan is expected to improve power supply in the country.
The Minister of Finance, Mrs Zainab Ahmed has said that the proposed increase in Value-Added Tax (VAT) from 5 to 7.5 per cent will be more beneficial to state governments and Local Government Areas (LGAs) in the country, many of which are already facing difficult conditions.
This was disclosed in a statement issued by the Minister’s SA on Media and Communication, Yunusa Abdullahi on Friday.
According to Mrs Ahmed, the proposal is subject to legislative intervention by the National Assembly who will have to amend the Revenue Act to reflect the proposed increase.
She added that the increase will exempt the basic necessities such as food, medicines and education.
“The benefit of an increase in VAT is, therefore, more beneficial to state governments and Local Government Areas (LGAs) in the country, many of which are already facing difficult conditions. The proposed increase in VAT is therefore expected to create additional fiscal space.
“The proposed increase is however subject to legislative intervention by the National Assembly who will have to amend the Revenue Act to reflect the proposed increase.
“The existing VAT Act exempts the basic necessities such as food, medicines and education which therefore minimises the impact on the poor and vulnerable segments of the Nigerian society from the burden thereof. It is expected that the exemptions will be maintained in the amended Act.”
Mrs Ahmed maintained that if the increase is correctly implemented, it could bring in huge revenues for the country and reduce fiscal deficit burden.
“It is gladdening that the VAT increase if correctly implemented, could bring in huge revenues, which would actually reduce the fiscal deficit burden.
“The government’s borrowing programme could then ease and certainly the financially affected states and local governments could later focus on issues like poverty reduction, healthcare and power generation and transmission.
“According to the industry experts, the VAT increase, if enforced properly, forms part of the fiscal consolidation strategy for the country. It could, in fact, help address the fiscal deficit problem and the revenues estimated to be collected could actually mean lowering of the fiscal deficit burden for the government across board.”
The Federal Government on Wednesday said that consultations will begin at all levels on the increase from 5 – 7.5 per cent.