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FAAC disbursement drops by 25.2% in January

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taxes, tax, IMF, business, FAAC disbursed N617billions in April, as South-South scoop N72billions, VAT, Finance Minister, Zainab Ahmed says Nigeria VAT collection rate is low, NBC, Rite Foods, others to pay new tax as FG identifies new revenue streams ,,Finance Minister reveals how World Bank, AfDB pushed FG into requesting Chinese loan 

The National Bureau of Statistics has released the report for the Federation Account Allocation Committee (FAAC) disbursements, covering January 2019.

The report shows that the sum of ₦649.19 billion was shared among the Federal, States and Local governments in Nigeria. This amount disbursed by FAAC shows a drop from ₦812.76 billion shared for December, representing a 25.2 per cent reduction in revenue allocation for the month of January.

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Components of FAAC

The amount disbursed comprised of ₦547.46 billion from the Statutory Account, ₦100.76 billion from Valued Added Tax (VAT) and ₦976.53 million exchange gain differences

From the reports, the federal government received a total of ₦270.17 billion, States received a total of ₦178.04 billion and Local governments received ₦133.83 billion. Following the 13 percent derivation fund, the oil-producing States shared the sum of ₦45.36 billion.

Similarly, the revenue generating agencies such as Revenue generating agencies such as Nigeria Customs Service (NCS), Federal Inland Revenue Service (FIRS) and Department of Petroleum Resources (DPR) received ₦4.69 billion, ₦4.04 billion and ₦8.04 billion respectively as the cost of revenue collection

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What each tier got

Further breakdown of revenue allocation distribution to the Federal Government of Nigeria (FGN) revealed that the sum of ₦216.57 billion was disbursed to the Federal Government of Nigeria consolidated revenue account; ₦4.81 billion shared as share of derivation and ecology; ₦2.43 billion as stabilization fund; ₦8.15 billion for the development of natural resources; and ₦5.82 billion to the Federal Capital Territory (FCT) Abuja.

Highest and lowest state recipients 

At the states level, Delta received the highest revenue disbursement (₦17.36 billion) for the month of January, followed by Akwa Ibom (₦14.46 billion), Rivers (₦12.21 billion), Bayelsa (₦10.73 billion) and Lagos (₦9.75 billion). Also, Kano received ₦6.79 billion, Edo (₦5.40 billion), Katsina (₦5.17 billion) and Ondo (₦5.15 billion).

On the other hand, Ogun, Cross River, and Osun States received the lowest revenue allocation for the month of January with ₦3.17 billion, ₦2.91 billion and ₦1.73 billion respectively

Revenue drops as oil price declines to $62.8

The Nigerian government financial system operates a structure where funds flow to the three systems of government from the federation account. The Federation Account serves as the central pocket through which governments across all levels fund developmental projects as well as maintain their respective workforce. The Flow of Revenue into the Federation Account included oil revenues and related taxes, revenues generated from the Nigerian Customs Service trade facilitation activities, company income tax (CIT), any sale of national assets, surplus and dividends from State Owned Enterprises.

The fall in government revenue was attributable to the fall in revenue of crude oil export sales and non-mineral revenue. Recent statistics from the Central Bank of Nigeria (CBN) shows the decline in the price of crude oil. The fall in the price of crude oil is also coupled with the decline of barrels of crude oil sold. According to the Director, Department of Petroleum Resource (DPR), Mr. Mordecai Ladan,

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“The oil and gas industry seemed to be under a new threat, THERE IS A renewed dislike and global war against fossil fuels and the quest for renewable and cleaner energy”.

“As sweet as Nigeria’s crudes are renowned to be globally, we have recently lost our most-valued customers and our gas buyers are themselves now competing with us in the same market space as suppliers”

As a result, there has been a reduction in the oil revenue for the period under review. On the other hand, the revenue collected from Value Added Tax (VAT) collected for the month increased from ₦88.39 billion to ₦96.73 billion in December 2018.

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How does this affect the economy?

The over-dependence of the Nigerian economy on crude oil for foreign exchange revenue means that external fluctuations in the oil market transit to the economy via the forex markets. Consequently, manufacturers and traders who require forex to purchase their inputs as well as goods, but are faced with a depleting supply of foreign exchange in the country.

The decline in foreign exchange affects government revenue. A fall in revenue affects monthly allocations to state and local government, and this may largely affect some States government not being able to meet both recurrent and capital expenditures’ target. States with very low Internally generated revenue may be forced to still accumulates arrears being owed to the state’s workforce, which may slow down economic activities.

Samuel is an Analyst with over 5 years experience. Connect with him via his twitter handle

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Naira depreciates at 5 years forwards market, now N570 to $1

Nigeria’s 5 years onshore Non-Deliverable forward contract posted its biggest drop by plunging 27% from N413.36 to close at N569.69.

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CBN, MPC, Credit risk, LDR, Central Bank of Nigeria, Devaluation

Nigeria’s 5 years onshore Non-Deliverable forward contract posted its biggest drop by plunging 27% from N413.36 to close at N569.69 a price differential of N156.  The 1-year Non-Deliverable forward contract was down 5% from N394.29 to close at N421.22 a price differential of N26.93.

One month NDF is now N395/$1 suggesting an imminent devaluation in the I&E window which could also impact the current official exchange rate of N360/$1 as well as the BDC rate which was devalued to N370/$1 some weeks back.

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A forward market is an OTC market platform that fixes the price of a financial asset for future delivery. Forward markets are used for trading a range of instruments, especially in the foreign exchange market.  Forward currency contracts are used by traders, investors to lock in a currency’s exchange on a date agreed on.  

Non-Deliverable forwards allow hedging of currencies where fiscal regulators ban foreign access to local currency or the parties want to remunerate for risk without the physical exchange of cash. 

READ ALSO: Possible impacts of last week’s CRR debit on banks’ balances by the CBN

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See changes;

Nigeria’s central bank has been struggling to stabilize Nigeria’s currency exchange rate because of historical low crude prices and the shutdown of economic activities in major cities of Nigeria  

Plunging crude oil prices has negatively disrupted the economy of Africa’s biggest oil producer, just as the onslaught of Covid-19 closed businesses and disrupted human activities of people to contain. Nigeria’s central bank devalued the naira against the dollar in March but is still under pressure to devalue the naira even further amid a scarcity of U.S dollars and poor export earnings. 

READ MORE: External reserves to fall below $30 billion, more forex restrictions expected

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What this means: This depreciation is a clear indication of the supply gap that currently exists in the foreign exchange market. Demand is high but not enough supply to stabilize the exchange rate. As things stand, the CBN will struggle to support the exchange rate as it did in 2017 when it newly introduced the I&E window. Back then, oil prices picked up and the government also received proceeds from its Eurobond offers.

Patricia

The CBN’s expensive rate induced monetary policy also helped keep foreign dollars within Nigeria. The situation has changed from then as oil prices remain depressed and the economy is still reeling from the Covid-19 lockdowns.

There is also likely going to be more depreciation of the naira if things remain the same. Sources with connection to the megabanks inform Nairametrics that as things stand, most local businesses that rely on foreign inputs with significant dollar demand will either have to pivot sourcing locally or go bankrupt.

READ MORE: IMF list unpopular policies CBN must reverse

Meanwhile, the naira had hit N460 last week at the black market (its weakest level in three years), as dollar scarcity crippled the market. The naira was selling at N442 to a dollar at the black market today according to the Everdon bureau de change. The black market rateremains 16% lower than the official exchange rate which is pegged at N360.  

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Nigeria’s top 10 agricultural exports attract N206.16 billion in 9-month 

Nigeria’s agricultural export sector experienced strong growth in 2019, according to the latest report released by the NBS.

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Nigeria’s agricultural export sector experienced strong growth in 2019, according to the latest report released by the NBS.

Nigeria’s agricultural export sector experienced strong growth from January to September 2019. The latest report released by the National Bureau of Statistics (NBS) shows that the nation’s top 10 agricultural exports attracted N206.16 billion by the end of September 2019.  

According to the reportNigeria’s top 10 agricultural exports rose by 14.1%, from N180.67 billion in the first three quarters of 2018 (January to September) to N206.16 billion in the corresponding period of 2019.  

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Sesamum seeds top Nigeria’s biggest Agric export 

Based on the Bureau’s report, Nigeria’s major agricultural exports in the first three quarters of 2019 include sesamum seeds (whether or not broken, sesame oil and its fraction), cocoa, cashew nuts, frozen shrimps and prawns, ginger, agro-food items, flowers, and flower buds, and plants used for perfumery and coconuts.  

  • Sesamum seeds have remained Nigeria’s biggest earner of all agricultural exports in the past years. The trend continued into the third quarter of 2019 as N77.04 billion worth of sesamum seedssesamum oil and its fraction were exported from Nigeria.  
  • Further analysis shows that Japan, Turkey, China, Germany, and Vietnam are Nigeria’s biggest markets for sesamum seeds. 
  • The second most exported agricultural goods from Nigeria was cocoa. Nigeria exports fermented cocoa beans, raw cocoa, and natural cocoa butter.  
  • In the first three quarters of 2019, Nigeria exported N66.73 billion worth of cocoa to countries like the Netherlands, Malaysia, Germany, Belgium, and Spain. 
  • Also, Nigeria’s third-biggest agricultural export was cashew nuts, both shelled and unshelled. According to the report, Nigeria exported N45.6 billion worth of cashew nuts between January and September 2019. They were exported to Vietnam, the United States, Russia, Germany, and Italy. 

CBN urged to hand over Anchor Borrowers Programme administration 

[READ MORE: Nigeria’s top 10 agricultural exports hit N152 billion in half-year 2019)

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Other goods on the list of Nigeria’s top 10 agricultural exports chain are frozen shrimps and prawns (N7.46 billion), ginger (N3.34 billion), agro-food items (N1.84 billion), flowers and flower buds (N1.59 billion), plants used for ornamental purposes (N1.59 billion), coconuts in the inner shell (N800.99 million) and cotton (N609.33 million). 

Agric sector in deficit as import continues to drag sector down 

Despite the huge potential in Nigeria’s agriculture sector, the country still imports a large chunk of agricultural goods. According to the NBS report, Nigeria imported N949.8 billion worth of agricultural goods in the period under review.  

Analysis of import and export of agricultural goods shows that the imports are largely more than exports, dragging Nigeria’s agricultural sector’s trade balance in the deficit region. 

  • As of September, Nigeria’s agricultural imports stood at N949.8 billion, while export was put at N401.68 billion. This means that the sector recorded a negative trade balance of N548.17 billion.  
  • Major items imported into Nigeria include wheat (seeds and not in seeds), frozen foods, fish (Mackerel), and crude palm oil among others.  

Despite the improved contribution of the agricultural sector to GDP to 29.25% in the third quarter of 2019, the sector has failed to replicate the growth (3.17%) recorded in the first quarter of the year.  

[READ ALSO: Latest: Top 10 agricultural exports from Nigeria)

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Fear among tomato farmers as Dangote Farms suspends seedlings distribution  

Patricia
  • Clearly, Nigeria’s agricultural sector still needs huge investments and effective policies to achieve its potential. While the government has implemented a plethora of policies, the agricultural sector failed to show much-needed growth.  
  • In order to boost domestic production and stimulate growth in the sector, the government recently restricted foreign exchange for the importation of staple foods and frozen items.  
  • Meanwhile, critics of the government continue to point at billions of naira spent on policies like the Anchor Borrowers Programme (ABP). ABP is a policy targeted at creating a linkage between anchor companies involved in the processing of Agric products and smallholder farmers of the required key agricultural commodities, which has not yielded the much needed positive results. 

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Nigeria’s Inflation rose to 11.24% in September 2019

Nigeria’s consumer price index, which measures inflation increased to 11.24% in September 2019. This was revealed in the latest inflation report released by [@nigerianstat]

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Nigeria's inflation rate and food price index

Nigeria’s consumer price index, which measures inflation increased to 11.24% in September 2019. This was disclosed in the latest inflation report released by the National Bureau of Statistics (NBS).

According to the NBS report, inflation rose by 0.22% points, higher than the 11.02% recorded in August and 11.08% for July 2019.

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Similarly, food inflation rose to 13.51% compared to 13.17% in the previous month. Also, Core inflation rose to 8.94% from 8.68% recorded in August 2019.

The Food Index

In September 2019, food inflation rose to 13.51% from 13.17% recorded in the previous month. The average change of the food sub-index over the 12 months average was 13.47%, which was 0.01% higher than the average annual rate of change (13.46%) recorded in August 2019.

According to the Bureau, the rise in the food index was caused by increases in prices of bread and cereals, oils and fats, meat, potatoes, yam and other tubers, fish and vegetables.

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On a month-on-month basis, the food sub-index increased by 1.30% in September 2019, up by 0.08% points from 1.26% recorded in August 2019.

Core Inflation

Nigeria’s core inflation, which proxies all items less farm produce, stood at 8.94% in September 2019 as against 8.94%. On a month-on-month basis, the core inflation sub-index increased by 0.89% from 0.67% recorded in August.

Details provided by the NBS showed that the highest increases were recorded in prices of cleaning, repair and hire of clothing, repair of household appliance, hospital services, major household appliances, glassware, tableware and household utensils, spirits, clothing materials, other articles of clothing accessories, garment and repair and hire of footwear.

[READ: Scarcity of imported rice hits major markets, as dealers pack local rice in foreign bags]

Rural and Urban Inflation

The report showed that the urban inflation rate increased by 11.78% (year-on-year) in September 2019 from 11.48% recorded in August, while the rural inflation rate increased by 10.77% in September 2019 from 10.61% in August 2019.

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On a month-on-month basis, the urban index rose by 1.13% in September 2019, up by 0.09 from 1.04% recorded in August 2019, while the rural index also rose by 0.96% in September 2019, up by 0.03 from the rate recorded in August 2019 0.93%.

Patricia

Insights

The latest inflation report implies a fast rise in the prices of overall goods and services in the economy. According to the latest inflation report, it showed that Nigeria’s inflation rose to three months high.

Basically, the country’s inflation rate had dropped from 11.40% in May to 11.02% recorded in August 2019. The drop in inflation rate in August represented the slowest inflation rate recorded in over three years.

  • Meanwhile, the NBS noted in its August inflation report that the border closure had not started to reflect on the economy as the border was only closed on 20th August 2019 with only 11 days of 31days
  • Hence, the rise in inflation suggests that the significant impact of border closure has started to reflect on commodity prices.
  • Recall that since the border closure, Nairametrics reported that prices of food items like rice, frozen chicken, tomatoes and other food items had snowballed.
  • The rise in inflation may not necessarily come as a surprise as analysts expected the rise due to the recent policy measures which include complete closure of the Nigerian land borders.

[READ ALSO: FG orders complete border closure, bans movement of goods]

In the meantime, the latest increase in the inflation rate means the purchasing power of consumers to buy goods and services deteriorated. That is, the ability of consumers to buy the same quantity of goods with the same income level has worsened.

While this affects the consumers, firms producing consumer goods and other services may also witness a slowdown in inventory, as demand is expected to drop, which may affect revenues generated overtime.

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