The International Monetary Fund (IMF) has called on Nigeria’s policymakers to develop measures to drive domestic revenue mobilisation in order to reduce fiscal vulnerabilities and create policy space. IMF Resident Representative for Nigeria, Mr. Ari Aisen, said this at the weekend in Lagos, in a keynote address at the Financial Markets Dealers Association (FMDA) quarterly meeting.
The forum, which had the theme, “Nigeria Macroeconomic Developments and Outlook: IMF View,” was hosted by First Bank of Nigeria Limited.
Aisen reiterated the need for Nigeria to permanently remove fuel subsidy in line with the Petroleum Industry Act, and in order to boost revenue.
The IMF chief’s advice came amid indications that the National Assembly might amend the Finance Act once more to address the N11.03 trillion deficit being proposed in the 2023 Appropriation Bill and the country’s increasing debt service cost over revenue. The total budget size is N19.76 trillion.
Chairman, Senate Committee on General Services, Senator Sani Musa (APC Niger East), hinted the possible amendment of the Finance Act yesterday in Abuja while speaking with journalists.
Nigeria is currently facing a severe revenue crisis as it continues to underperform in terms of crude oil production, which is its main source of revenue. THISDAY had reported that with an estimated average oil price of $100 per barrel for the month, the country lost as much as $756 million to shut-ins in July, according to an analysis of data from the Nigerian National Petroleum Company Limited (NNPCL).
Aside the Forcados terminal, which curtailed supply to the tune of 258,000 barrels as a result of the closure of the facility, following reports of a “sheen” in the vicinity of the facility, a number of other facilities had also been negatively impacted. The Nigerian oil sector continued its struggle in the month of August, even as Nigeria played second fiddle again to Angola as Africa’s largest crude producer.
The country is also projecting to spend over N6 trillion of petrol subsidy next year, which had been widely described as a drain on the economy.
Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, had said the government might borrow about N11.3 trillion to fund expenditure in the 2023 budget, as the deficit was projected to be, at most, over N12.41 trillion next year or at least N11.3 trillion, which is over 100 per cent of the N7.35trn deficit for the 2022 fiscal year.
The minister had also sounded the alarm bells, as she revealed that the country’s debt service cost in the first quarter (Q1) 2022 was N1.94 trillion, N310 billion higher than the actual revenue received during the period.
Owing to these fiscal challenges, Aisen advised the government to implement a stronger operational framework, adding that the Central Bank of Nigeria (CBN) should ensure price stability in order to combat inflation in Nigeria. He explained that there was need to broaden growth and ensure private sector recovery.
The IMF chief revealed that Nigeria’s Purchasing Managers’ Index (PMI) stood at 52.3 in August, which was a slight moderation from the 53.2 recorded in July. This, he said, signalled expansion in business conditions in Nigeria’s private sector.
Aisen said with the planned commencement of operations of Dangote Refinery in 2023, the effective implementation of the Finance Act 2021, and the Strategic Revenue Growth Initiative, there would be positive growth in the economy. He stated that in 2022, the economy suffered setbacks, such as high food and energy prices hikes, spending pressure within narrow fiscal space, persisting insecurity, particularly banditry and kidnapping, and monetary tightening in advanced economies.
The IMF resident representative advised the CBN to establish a unified and market-clearing exchange rate to strengthen the country’s external position, saying, “There should be complementary macroeconomic and structural policies to preserve competitiveness gains from any exchange rate adjustment.”
He noted that to safeguard financial stability, there was need for regulatory vigilance, timely actions against undercapitalised banks, and introduction of additional macro-prudential instruments.
Aisen expressed concerns over the structural challenges in Nigeria, stating that more efforts are needed to reduce corruption vulnerabilities. He said there was need for an improvement in government efficiency, civil service reforms, and accountability of COVID-19 spending.
He said developments in the country called for bold trade and agricultural reforms for inclusive recovery.
Aisen added, “We are facing high inflation all over the world. Interest rates in the major economies have risen significantly.
“The Federal Reserve in the United States has hiked interest rates; probably next week, we will see another hike of at least at 75 basis points. The market is expecting it because inflation came a little higher than expected in the beginning of the week. The stock market has been very volatile, not just in the US, but across the world.
“The Chinese economy is not growing at very high rates. Europe is facing a difficult moment with the Russian/Ukraine war and with natural gas.
“So the international environment has become much more difficult, risky and volatile. So accessing Eurobond for financing of debt is going to be challenging. It will require much higher interest rates and may not be even feasible.”
NASS May Amend Finance Act to Address N11.03trn 2023 Budget Deficit
There were indications at the weekend that the National Assembly might amend the Finance Act again in order to address the N11.03 trillion deficit proposed for the 2023 national budget.
Chairman of Senate Committee on General Services, Senator Sani Musa, said the amendment would focus on making the various revenue generating agencies to double or triple targets earlier given to them.
Musa said doing so would reduce drastically the size of the proposed budget deficit. He also hinted that the renovation work going at the main chambers of the National Assembly might affect the resumption of plenary tomorrow.
The senator said the resumption would depend on the extent of work done before Tuesday at the temporary chamber being prepared for the legislators. He lamented the huge deficit in the proposed 2023 budget estimates and said it was not healthy for the economy.
Musa said, “The budgets of this country have been in deficit and the only thing we can do is to amend so many things in the Finance Act, so that we would be able to generate more revenues from other sources rather than depending on oil alone and by extension, reduce the size of proposed budget deficit.”
He expressed doubt about the possible resumption of plenary on Tuesday.
The legislator stated, “By now the temporary chambers should have been ready knowing that we are resuming. Initially, we were supposed to resume on the 20th of this month, but there are some little things that need to be done before then.
“But I can assure the general public that this will be done in the shortest time possible and we are going to resume to receive Mr. President to present the 2023 budget.
“You would recall that the 9th Senate has done very well, because this edifice, since it was built, has never been rehabilitated. We are refurbishing it, bringing it back to standard like any other parliament you see around the world.
“The FCT that is doing this job has been up and doing, but we need to push, they need to do more so that we will be able to resume as quick as possible.”
Musa said the general renovation work going on at the National Assembly was overdue and necessary to make the National Assembly meet global standards.
He said, “It is a great achievement for us that we are renovating the National Assembly complex that has been built over 20 years.
“What we read from the newspapers that NASS leadership has not done anything on the licking roof, it is not true.
“This edifice is supposed to be managed and taken care by the FCT, because it is their property. But now we have taken it as a responsibility on us to make sure we renovate it.
“I’m sure that by the time the renovation of the National Assembly chamber is completed, other African countries will come to see and make Nigeria a case study and see how we have improved on parliamentary infrastructure.”
The senate had through its committee on finance kicked against the proposed N11.03 trillion deficit in the proposed N19.76 trillion 2023 budget during interface with the finance minister.
Chairman, Senate Committee on Finance, Senator Olamilekan Adeola (APC Lagos West), told heads of revenue generating agencies at different times to come up with fresh strategies to improve the current revenue targets for the country in the coming fiscal year. Adeola said doing so would reduce the proposed deficit size and loan collections for budget financing.