The Federal Government (FG) of Nigeria has announced that it would commence deducting the N614 billion budget support facility from state governments this month.
The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed made this disclosure in Abuja on Tuesday while presenting the draft 2020 to 2022 Medium Term Expenditure Framework and Fiscal Strategy Paper.
The details: The Minister stated that the indebted states would start getting direct debits from their monthly Federation Account Allocation Committee (FAAC) disbursements. According to Ahmed, deductions would be made from the states’ monthly federal allocations and directly remitted to the Central Bank of Nigeria.
Ahmed’s statements read: “The recovery process for us is to deduct from the Central Bank of Nigeria FAAC allocation to the states and then we remit to the CBN and we are going to start these remittances by the next FAAC which will hold in two weeks’ time.
“There will be no requirement for us to consider the FSP implementation. We do that as a matter of wanting the states to stay on the path of fiscal sustainability but it will not be a condition for the deduction. We will deduct direct at source and remit to the CBN.
“The N614 billion bailout funds to states is not going to form part of the revenue for funding the budget, it was a loan which was advanced by the CBN and the repayment will be made to the CBN.”
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Speaking further, Ahmed disclosed that the conditional budget support was provided by the CBN to help states pay salaries, gratuities and pensions. CBN provided N650 billion in loans at 9% interest for two years.
Zainab stated that since the Ministry of Finance only helped in disbursements with documented approval by the Presidency, the money belongs to the CBN and must be paid into CBN account.
Challenging Outlook: While delivering updates on the outlook of the Nigerian economy, Zainab warned that Nigerians should brace up as the 2020 to 2022 fiscal years would be challenging with respect to revenue generation and rapid growth in personnel costs.
However, she assured that the government was ready to take firm decisions in order to address rising personnel cost. She said, “Any government staff not captured in the Integrated Payroll and Personnel Information System (IPPIS) by October 2019 should forget their salaries.
“In 2020, the Federal Government plans to cut a whooping N1.16 trillion off capital expenditure from N2.92 trillion in 2019 to N1.76 trillion in the proposed 2020 budget.
“This will then see capital expenditure dropping to 21% of total expenditure in 2020 compared to 32 per cent in the 2019 approved budget.”
Mrs Ahmed also warned that the “Africa Continental Free Trade Area (AfCTFA) could create a nightmare situation for the country unless the right policies and actions were implemented expeditiously to improve Nigeria’s economic competitiveness.
Recent Development: In August, the Minister of Finance, Budget and National Planning, briefed State House correspondents at the end of the National Economic Council, that the FG had concluded plans to recover the N614 billion budget support (bailout fund) given to states, as a committee that would facilitate the recovery had been constituted.
- Ahmed disclosed that each of the 35 states that benefitted from the facility would pay back the equivalent of N17.5 billion.
- In an earlier publication on the bailout fund by Nairametrics, it was disclosed that FG had deducted an accumulated sum of N122.4 billion from the monthly allocation due to thirty-five (35) states between January and July 2019.
What it means: Since the announcement, there were indications that state governors have been jittery, as this may put them in big financial strain.
- Meanwhile, further concerns will arise as the FG is all out to recover the bulk of bailout fund from the states once and for all.
- The latest move also establishes the fact that there is paucity of funds for the FG, as the Minister expressed concerns over the Nigerian economic outlook.
Covid-19: Pfizer, BioNTech’s vaccine ready before end of the year
BioNTech is in partnership with Pfizer to develop a coronavirus vaccine.
The Chief Executive Officer (CEO) of German biotech firm, BioNTech, has announced that the company and New York-based pharmaceutical giant, Pfizer’s Inc’s COVID-19 vaccine candidate is expected to be ready to obtain regulatory approval by the end of 2020.
The German biotech firm which is in partnership with Pfizer to develop this coronavirus vaccine is confident that it will be ready for regulatory approval by the end of the year.
The co-Founder and CEO of BioNTech, Dr Ugur Sahin, said that several hundred million doses could be produced even before approval and over 1 billion by the end of 2021, according to a wall street journal report.
The experimental vaccine which has shown a lot of progress against the fast-spreading respiratory illness in early-stage human testing is expected to move into a large trial stage that will involve 30,000 healthy participants later this month while waiting for regulatory approval.
According to an earlier report from Reuters, Pfizer and BioNTech are getting set to produce up to 100 million doses of the vaccine by the end of the 2020 and another 1.2 billion doses by the end of 2021 at sites in Germany and the United States.
It can be recalled that earlier this week, U.S. vaccine specialist, Novavax said in its statement that it will receive $1.6 billion from the federal government to support the development of its Covid-19 vaccine candidate as a new member of the government’s Operation Warp Speed (OWS) program, which aims to accelerate the development of a vaccine.
Guinea Insurance Plc gives optimistic Q3 earnings forecast in spite of COVID-19
Note that some companies have had to revise their earnings estimates due to pandemic.
Guinea Insurance Plc is being very optimistic, having projected a 78.6% rise in gross premium written to N1.8 in Q3 2020, up from N1 billion during the comparable period in 2019. The insurer also forecasted a profit after tax of N185.8 million for the period, indicating an expected better performance compared to N735 million loss recorded in Q3 2019.
The earnings forecast, which was sent to the Nigerian Stock Exchange earlier today, also estimated that reinsurance expense for Q3 will be at N337.5 million. Claims expenses, underwriting expenses, and other operating experiences were equally put at N331.3 million, N292.6 million, and N692.2 million, respectively.
Note that this forecast is coming amid the negative economic impacts wrought by the Coronavirus pandemic. But while a growing list of companies (including Guinness Nigeria Plc) has downgraded their 2020 earnings and profitability forecasts, Guinea Insurance is expecting growth and that is good.
In Q1 2020, Guinea Insurance Plc reported gross premium written OF N207 million and a profit after tax of N12.6 million. The company’s consolidated half-year 2020 financial has not been released and is expected sometime between this month and next month.
The company’s share price ended today’s trading on the Nigerian Stock Exchange at N0.20. Year to date, this stock has not recorded any price movement.
Manufacturers declare support for unification of exchange rate
Ahmed urged the CBN to tackle activities that made speculators manipulate the multiple exchange rates.
The President of the Manufacturers Association of Nigeria (MAN), Mr Mansur Ahmed, announced on Friday that the recent CBN unification of Nigeria’s exchange rate is a welcome development that will boost investor confidence in Nigeria.
He said the exchange rate unification will enable stable planned production for manufacturers in Nigeria leading to economic growth, adding that the Manufacturers Association had urged for an exchange rate unification to enable a market-friendly business environment in Nigeria.
“Clearly, this is a welcome development and a laudable initiative that has come at the right time. This is more so, particularly, now that the economic outlook is gloomy in light of the impact of the ravaging COVID-19 pandemic that has culminated in uninspiring macroeconomic situations,” he said.
He revealed that the World Bank had attributed Nigeria’s falling Foreign Direct Investment (FDI) to the multiple exchange rates as investors felt a “manipulation of the foreign exchange market.”
“The unification will also boost investors’ confidence, control rising inflation, and promote transparency, entrench better exchange rate management and eradicate distortions to the barest minimum,” he added.
He urged the CBN to tackle activities that made speculators manipulate the multiple exchange rates like “round-tripping” which he says expand the inflows of foreign investment into the economy.
He called on the Central Bank to implement 2 strategies to ensure a smooth transition into a unified exchange rate system.
“The first is to limit the short-term pains until efficiency gains materialize by responding swiftly with an inward-oriented rescue guideline while the second should seek to boost the pace at which such efficiency gains materialize,” he said.
He advised, it’s necessary the CBN “submit all the instruments of exchange rate determination” towards a free-market approach.