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Economy

Subsidy: FG borrowing to import fuel, says Finance Minister

Ahmed, States, tariff
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The Federal Government has said it sometimes borrows funds to buy petrol as the country continues to incur rising fuel subsidy bills.

The government also confirmed that there was a possibility of global economic recession this year, but stressed that Nigeria’s foreign exchange reserves were healthy enough to withstand the shocks.

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The Minister of Finance, Budget and National Planning, Zainab Ahmed, disclosed this on Tuesday on the sidelines of the World Economic Forum in Davos, while speaking during an interview with Arise TV.

In the interview, monitored by our correspondent in Abuja, the minister also stated that the Federal Government at some point had to borrow funds to buy Premium Motor Spirit, popularly called petrol, despite the huge subsidy spending on the commodity.

Ahmed again insisted on ending the fuel subsidy regime, while adding that would be done gradually from the second quarter of this year by the current government.

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She said the government would be able to increase the revenue performance on the 2022 figure, as well as reduce the debt service to revenue ratio.

“We also have to exit fuel subsidy, because that is also a very significant contributory factor. You can look at it in two ways – it is revenue that would have come to the government but it doesn’t because it has been spent on fuel subsidy,” she said.

The minister added, “But also, where there is nothing for the government to buy the refined petroleum products, we have to borrow to buy the petroleum products. So if you take that out, that’s about N3.25tn, that is a significant relief.”

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Explaining why the fuel subsidy was not removed in June 2022 despite the plan of the government to halt it at the time, Ahmed said it was a decision that was taken by the government due to the lingering impact of the COVID-19 pandemic and heightened inflation.

“Removal of fuel subsidy at that time would have increased the burden on the citizens, and the President does not want to contemplate a situation where measures are taken that further burdens the citizenry,” she stated.

Ahmed added, “So the decision was to extend the period from June 2022 to 18 months, beginning from January 2022. So in June 2023, we should be able to exit. The good thing is that we hear a consistent message that everybody is saying this thing needs to go and that it is not serving the majority of Nigerians.

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“I listened to some of the new leaders campaigning for the next round of leadership in the country and they are saying they will get rid of it very quickly.”

Asked whether it would be possible to halt the fuel subsidy regime in June this year, Ahmed replied, “What will be safer is for the current administration, maybe at the beginning of the second quarter, to start removing the fuel subsidy.”

This, she said, was because the gradual removal of subsidy would not be so harsh, as when removed at once.

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“The idea for us in the budget is that the cost of subsidy should not exceed that N3.23tn. So whether it is done completely by June or July or whatever is the process, the cost is capped,” Ahmed stated.

Recession this year

She further stated that the ambitious N10tn revenue target of the Federal Government, as projected in the 2023 budget, would be met, based on various measures that had been put in place.

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Commenting on the possibility of a global economic recession, she said, “Clearly there is going to be a decline in growth. And why we are having this decline in growth because of the sustained economic impact of the COVID-19 pandemic.

“We’ve seen the resurgence of COVID-19 in some developed economies, especially China, and also the effect of the Russia-Ukraine war that is having a global impact.

 

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“The quantitative easing that is being implemented by central banks across the world also contributes to the high cost of interest, resulting in the high inflation rate, and which means people’s spending power is weakened. So these are all indications that there will be a global recession.”

The minister was made to understand that in 2008 when there was a global recession, Nigeria’s foreign exchange reserves were in excess of $60bn and the country was able to withstand the impact of that recession.

Asked if the country would be able to withstand another recession this year, going by its current reserves, Ahmed replied in the affirmative.

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She said, “It is true that’s our reserves during the first global recession. Our reserves are now down to $34bn, and that is still a healthy level. It means we are able to meet at least six months of imports and other expenses into the country.

“It means we can withstand another global shock if we are able to carry through a coordinated response between the monetary, fiscal as well as trade authorities. We have learnt a lot from the experience that we went through during the COVID and it shows that when we plan well we can actually withstand the shocks.

“You’ll recall that Nigeria’s economy did go into recession during the COVID but it was a short-lived one because of that coordinated response, which had not just government, but also the private sector contributing to the effort.”

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She added, “Also, at that time we were able to scale back on some categories of government spending to enable us to invest more in the healthcare sector. So with the right policies we can weather another global recession.”

N10tn revenue projection

Reacting to concerns that the Federal Government’s revenue projection of over N10tn for 2023 was too optimistic, Ahmed stated that a lot of measures were on the ground to realise this target.

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She said, “I will say that if you look at the numbers, the performance of the 2022 budget, you will see that the oil and gas sector contribution was about 35 per cent, while the non-oil sector had the largest contribution.

“But not only that, the non-oil sector contribution outperformed the budget by a very large proportion, for example, Company Income Tax outperformed the budget by 158 per cent.

“So there are some foundational measures that have been taken that have enabled the non-oil sector revenue to grow on a consistent basis, and not just by a little number, but a quite significant number.”

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Ahmed further pointed out that the oil sector’s contribution which was minimal in 2022 was looking good to pick up in 2023.

“The measures that the government has taken, a combined effort of security and intelligence agencies’ work, have resulted in improving production in the oil and gas sector, and it looks like it would continue,” she stated.

The minister added, “Most of the fields that were previously not producing at the levels that they were supposed to produce, can now produce at maximum capacity. And also, oil price in the international market is still at a very reasonably high level.

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“We are also doing a lot to encourage investments in gas, so as to get incremental streams of income that will come from that sector. So we should be able to meet this. We’ve also introduced some new excise duties and some taxes, the full effect of which we will see in 2023.”

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Economy

JUST IN: CBN To Reverse Naira Swap, Cash Withdrawal Limit Policies

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The Coalition of Northern Groups (CNG) has demanded for the immediate reversal of the cash withdrawal limit policy of the Central Bank of Nigeria (CBN) and the time-frame for the exchange of old Naira notes.

According to the coalition, Nigerians should no longer be expected to continue to tolerate the high-handedness of the Governor of the CBN, Godwin Emefiele, which is already pushing the nation to the brinks.

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In a statement by CNG spokesperson, Abdul-Azeez Suleiman, on Friday in Abuja, he described the insistence of the CBN Governor on a short deadline for the Naira swap and limit for cash withdrawal as insensitive, irrational, unthoughtful and a clear recipe for disaster.

The statement reads: “The CNG finds it curious that an individual appointee of government would assume such arrogant larger than life status to push harsh difficult conditions on an entire nation just to achieve his personal desires.

“It is important for Emefiele to begin to accept the reality that no one owns Nigeria and Nigerians and that the nation is angry and would not be expected to tolerate, accommodate or condone destructive actions by officials who choose to play God”, Suleiman stated.

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CNG also warned that there is already a raging national anger over the mass sufferings brought about by the new regime of economic policies that are clearly not working.

“Already, confusion has set in, millions of households were going hungry, businesses were closing down with palpable anger mounting all across the country.

“It is the peak of official impunity to insist on the imposition of and implementing a financial policy in an unstable economic environment that lacks the necessary infrastructure to operate it.

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“Based on this, the CNG hereby categorically rejects in its totality any further attempt to throw the nation into confusion by a single individual’ rigidity, whoever that individual may be.

“We condemn with all our might the suspicious rigid desperation by Emefiele to implement these policies without ensuring the intensification of public enlightenment about the cashless system so that everybody will be acquainted with the system, since there is a high rate of illiteracy.

“We reject these ignoble policies sought to be imposed on Nigerians without government providing uninterrupted power supply and adequate communication link. ‘The imposition of these policies without addressing the issue of network failure is also suspicious, smacks of a hidden agenda and therefore unacceptable.

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“Finally, the CNG holds that it is unacceptable for a single individual to be allowed to hold the entire nation to ransom in the pursuit of his personal political agenda having lost the bid to contest the presidency.

“And for the avoidance of doubt the CNG may be left with no option than to join the calls for a nationwide sustained protest if the CBN fails to make the new naira notes available and readily accessible,” the group added.

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Economy

Redesigned Naira Notes: ICPC Nabs Bank Official over Sabotage

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By Emma Onuwa

The Independent Corrupt Practices and Other Related Offences Commission officials have nabbed a bank official in one of the commercial banks in Deidie a suburb in the Federal Capital Territory for alleged sabotage.

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This is in continuation of its clampdown at elements frustrating efforts in making the redesigned Naira notes available to members of the public.

NaijaBlitzNews reports that the spokesperson of the Independent Corrupt Practices and Other Related Offences Commission Mrs Azuka Ogugua stated this in a statement to newsmen in Abuja on Friday.

The bank official, who is the Branch Service Head of Stanbic IBTC Bank, Deidei Branch, Abuja, was taken into custody for her deliberate refusal to upload cash into the branch’s Automated Teller Machines (ATM) even when the cash was available, and people were queuing at the ATMs.

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When the ICPC monitoring team stormed the bank at about 1:30pm to ensure compliance, and demanded explanation as to why all the ATMs were not dispensing cash, it was informed by the branch’s Head of Operations that the bank just got delivery of the cash.

However, facts available to the ICPC operatives indicated that the branch took delivery of the cash around 11:58am and either willfully or maliciously refused to feed the ATMs with the cash.

Against this backdrop, the ICPC team compelled the bank to load the ATMs with the redesigned Naira notes and ensured that they were all dispensing before arresting the culprit.

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Investigations are still ongoing, and the Commission will take appropriate actions as soon they are concluded.

In a related development, the ICPC Compliance Team in Oshogbo has busted an FCMB in Osogbo, Osun State where some ATMs were loaded with cash with their wrappers un-removed, thus preventing the cash from being dispensed. The Team therefore directed that the wrappers be removed, and the cash loaded properly.

However, when a follow-up visit was undertaken the following day to ascertain the level of compliance, the Team discovered that one of the ATMs was still loaded with the wrappers un-removed.

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The Operation Manager of the Bank was arrested and taken in for questioning.

Similarly, seven Point of Sale (POS) operators as well as a security guard were arrested during the ongoing exercise in Osun State for charging exorbitant commissions for cash. Investigations however, revealed that they got the money from Filling Stations that collect new notes from fuel buyers, but they then resell the cash to the public at exorbitant rates.

The arrested persons are helping the Commission with information to assist investigations to bust the syndicates involved in the hoarding or sales of the redesigned notes.

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END.

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Economy

Naira Swap: Buhari begs Nigerians for 7 days to solve cash crunch

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*Promise to crackdown on saboteurs

By Francesca Iwambe

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President Muhammadu Buhari had urged citizens to give him seven days to resolve the cash crunch that has become a problem across the country from the policy of the Central Bank of Nigeria to change Naira notes with new ones.

Buhari made this pledge while playing host to the Progressive Governors Forum who came to the Presidential Villa to seek solutions to the cash crunch which they said was threatening the good records of the administration in transforming the economy.

The president says he will revert to the CBN and the Minting Company after which a decision will be taken.

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According to a presidential statement after the meeting ,President Buhari said the currency re-design will give a boost to the economy and provide long-term benefits while expressing doubts about the commitment of banks in particular to the success of the policy.

“Some banks are inefficient and only concerned about themselves”, said the President, “even if a year is added, problems associated with selfishness and greed won’t go away”.

The President said when he considered giving the approval to the policy, he demanded an undertaking from the CBN that no new notes will be printed in a foreign country and they in turn gave him assurances that there was enough capacity, manpower and equipment to print the currency for local needs.

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He said;” I have seen television reports about cash shortages and hardship to local businesses and ordinary people and gave assurances that the balance of seven of the 10-day extension will be used to crackdown on whatever stood in the way of successful implementation.

“I will revert to the CBN and the Minting Company. There will be a decision one way or the other in the remaining seven days of the 10-day extension,” the President assured.

The Governors told the President that, while they agreed that his decision on the renewal of currency was good and they are fully in support, its execution had been botched and their constituents were becoming increasingly upset.

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They told the President that, as leaders of the government and party in their different states, they were becoming anxious about a slump in the economy and the series of elections that are coming. They requested the President to use his powers to direct the concurrent flourish of the new and old notes till the end of the year.

The President said when he considered giving the approval to the policy, he demanded an undertaking from the CBN that no new notes will be printed in a foreign country and they in turn gave him assurances that there was enough capacity, manpower and equipment to print the currency for local needs.

He said he needed to go back to find out what was actually happening.

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President Buhari told the Governors that, being closer to the people, he had heard their cries and will act in a way that there will be a solution.

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