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Economy & Politics

Covid-19: Nigerian government explains how it will fund proposed N2.3 trillion stimulus

This is contained in the government’s recently released Economic Sustainability Plan.

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FDI, foreign direct investment, Covid-19: Nigerian government explains how it will fund proposed N2.3 trillion stimulus

The Nigerian Government has released its Economic Sustainability Plan which it hopes will address the economic challenges of the COVID-19 pandemic. The plan was put together by the Economic Sustainability Committee (ESC) assembled by President Muhammadu Buhari. Members of the committee included the Vice President, CBN Governor, 15  Ministers, GMD NNPC, and the Permanent Secretary.

In the report seen by Nairametrics Research, the teams were expected to deliver the following;

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  1. Develop a clear Economic Sustainability Plan in response to challenges posed by the COVID-19 Pandemic;
  2.  Identify fiscal measures for enhancing distributable oil and gas revenue, increasing non-oil revenues and reducing non-essential spending, towards securing sufficient resources to fund the plan;
  3. Propose monetary policy measures in support of the Plan;
  4. Provide a Fiscal/Monetary Stimulus Package, including support to private businesses (with emphasis on strategic sectors most affected by the pandemic) and vulnerable segments of the population;
  5. Articulate specific measures to support the States and FCT;
  6. Propose a clear-cut strategy to keep existing jobs and create opportunities for new ones; and
  7. Identify measures that may require legislative support to deliver the Plan.

READ ALSO: COVID-19: Nigeria needs $50 billion to survive an impending recession

The 76-page report contained recommendations from the committee on what the government should do to bring the economy back on track. Reading through the report, we observe several assumptions made by the committee on the possible effect of COVID-19 oil revenues and the exchange rate. Here are a few;

  • The government opines that if oil revenues averages $30 for the rest of the year, Nigeria will probably earn N88.4b monthly from oil or N1 trillion when annualized.
  • Here is a direct quote from the report: “It is expected that if oil prices average $30 over the rest of the year, oil revenues (assuming Nigerian National Petroleum Corporation reduces Joint Venture operating costs by 20%), would amount to about N88.4 billion monthly. Assuming that non-oil revenues are sustained at the lower level projected in the revised budget estimates, the total allocations to FAAC for the rest of the year would then be around N485 billion a month. This time last year total allocations to FAAC was N669.9 bn monthly. The very steep decline in revenues available for sharing among governments of the federation will have serious implications for wages, overheads, and capital expenditures at Federal, State, and Local Government levels.”
  • The Government budgeted N7.6 trillion from oil revenue for the year while the FG’s portion of the amount is N3.6 trillion.
  • The government in its report also projects Nigeria’s unemployment rate to rise to 33.6% from 23.1% as of September 2018. The Bureau of Statistics is yet to publish unemployment figures since then.
  • Direct quote “Unemployment rate which was 23.1% (or 20.9m people) at the end of 2018 is expected to rise to 33.6% (or 39.4 million people) at the end of 2020 if urgent steps are not taken.”
  • The report also projects Nigeria’s economic growth rate to contract between 4.4% and 8.91% “depending on the length of the lockdown period, the potency of the economic plans that are put in place, and, in particular, the amount of stimulus spending.”

The one year plan basically focuses on achieving mass employment and mass domestic production, which it claims “are not dependent on importation or foreign exchange expenditure.”

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READ ALSO: The Silver linings of COVID-19

Their proposal

The ESC, therefore, decided to adopt the use of a stimulus package which it referred to as a “time tested approach to fighting a recession” even though a stimulus was not used the last time Nigeria experienced a recession in 2016.

In proposing a package the committee claimed it explored 4 scenarios based on an average oil price of $30 for the rest of the year.

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  • Scenario 1: With no stimulus, i.e., if we simply stick to our budget the economy will decline by minus 4.40% at best.
  • Scenario 2: With a stimulus of just N500 billion, the economy will decline by minus 1.94%.
  • Scenario 3: With a stimulus of N2.3 trillion, the economic decline will be lower at minus 0.59%.
  • Scenario 4. With a stimulus of N3.6 trillion, there will still be negative growth but only of -0.42%

The committee eventually settled for a variant of scenario 3 which requires a stimulus package of N2.3 trillion. The government explained that the reason for settling for Scenario 3, citing  “the low level of revenues and the importance of monetary stability” as reasons.

How will the stimulus be funded? According to the government it plans to fund the stimulus from three major sources;

Firstly, it claims it will raise N500 billion from Special Accounts. Special Accounts are government accounts approved by the National Assembly where monies are accrued from tax deductions, oil proceeds, or any other source as provided in the law. Examples are the Ecological Funds, Education Trust Fund, Universal Basic Education Fund, etc.

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Secondly, it proposes to raise about N1.1 trillion from what it termed “CBN Structured Lending” which suggests more intervention loans from the CBN. It could also include restructuring existing intervention loans by offering moratorium and lower interest rates which were also captured in the report.

The balance of N334 billion and N302.9 billion respectively will come from “external bilateral/multilateral sources – N334billion and other funding sources – N302.9bn.” These are basically loans and grants from monetary development institutions and rich donor countries.

Upshots

The government has not confirmed if the recommendations included in this report will be adopted. However, several pronouncements from the government indicate this is the direction they plan to follow.

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Patricia

Nairametrics Research team tracks, collates, maintains and manages a rich database of macro-economic and micro-economic data from Nigeria and Africa. Our analysts share some of the data collated on Nairametrics, using formats such as docs, tables and charts etc. The team also publishes research based analysis as articles on a regular basis.

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Economy & Politics

Just in: Suspended EFCC boss, Ibrahim Magu, finally released from detention

Magu’s lawyer confirmed his release from the custody of the DSS.

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EFCC to help AMCON recover bad debts

The suspended acting Chairman of the Economic and Financial Crime Commission (EFCC) has been released from police custody after about 10 days in detention.

According to a monitored report, this was confirmed by his lawyer, Tosin Ojaomo, who said that the EFCC boss is no longer under custody.

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The suspended EFCC boss was invited by the presidential probe panel headed by Ayo Salami, a retired President of the Appeal Court to the Presidential Villa in Abuja on July 6 over allegations bordering on corruption and financial misconduct.

He was later moved to Area 10 Force Criminal Investigation Department (FCID) of the police in Abuja where he has since been detained.

Just earlier today, the Inspector-General of Police, Mohammed Adamu, asked Magu, to direct his bail application to the presidential probe panel.

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This was in response to a request by Mr Oluwatosin Ojaomo, Magu’s legal representative, who asked the IGP to grant bail to his client on self-recognisance after the suspended EFCC chief had spent four days in custody.

But in a letter dated July 14, 2020, and addressed to Mr Ojaomo, the IGP said the police force is not investigating and detaining Magu, so, it cannot grant the bail request.

It also advised the lawyer to redirect his request to the chairman of the presidential probe panel for appropriate action.

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Economy & Politics

OPEC+ to reduce production cuts in August to 7.7 million barrels a day

OPEC+ is preparing to increase production in a period demand picks

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OPEC+ to reduce production cuts in August to 7.7 million barrels a day

The Organization of the Petroleum Exporting Countries (OPEC) and its allies have agreed to increase crude oil supply starting from next month, as demand continues to rise to pre-pandemic levels.

OPEC+ agreed to reduce the daily production cut from 9.6 million barrels a day to 7.7 million barrels a day from August. The reduction in cuts was backed by both Saudi Arabia and Russia, including other participating oil ministers in the virtual conference.

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This comes nearly 3 months of production cuts after oil fell to peak lows in April, last month OPEC production reached its lowest level in nearly 30 years since the gulf war. The decision to taper the previous reduction was expected earlier today as the body also talked on extended production cuts for countries like Nigeria, Iraq, and others for not meeting their production cuts for the months of May to June.

However, the risk remains on the strength of a demand recovery as the virus seems to be rebounding in the United States. Saudi Oil Minister, Prince Abdulaziz bin Salman revealed that the extra supply due to the already planned ease of production cuts will be consumed as demand rises. He added that economies globally are beginning to reopen, however, “this is a cautious and gradual process. The recovery signs are unmistakable.”

READ MORE: OPEC launches Annual Statistical Bulletin (ASB)

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Nigeria’s position: OPEC expects the increase in supply to be offset by countries like Nigeria that did not meet full compliance on production cuts. Nigeria will join Iraq and Angola by engaging in a further 842,000 barrels a day of cuts through September. It is still unclear if Nigeria and the other defaulting members would be able to meet production cuts compliance as Nigeria has historically failed to meet production cuts numbers before.

Prince Abdulaziz, who has made it his mission to end the quota cheating that has dogged OPEC+ since its inception in 2016, said these compensation cuts are a crucial principle and the group must resist the temptation to relax.

OPEC+ is preparing to increase production in a period demand picks as Prince Abdulaziz has ensured that no country heats on its production cuts, adding that its essential the group cuts and increases production with one voice. The organization cut production to almost just 10% of global supply which enabled prices to rebound to over $40 after April’s lows.

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Russia says the tapering goes in hand with the current rising demands and expects output hikes to be consumed in markets of OPEC members as it local demands recovers. Saudi Arabia expects flat exports next month as demand rises locally.

 

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Economy & Politics

Over 98% of telecom consumer complaints resolved – NCC

A total of 26,169 complaints were received through all the Commission’s official channels.

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Over 98% of telecom consumer complaints resolved – NCC

Over 98% of the service-related complaints from telecom consumers lodged with the Nigerian Communications Commission (NCC) have been successfully resolved, the commission has stated in a report.

In a press release signed by the Director of Public Affairs, Dr Ikechukwu Adinde, and published on its site, the commission noted that all of these complaints were received between January 2019 and  April 2020, and urged consumers to follow established channels of reporting whenever they have a complaint.

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The commission assured consumers of its commitment to improving the “Quality of Service (QoS) and Quality of Experience (QoE) for both voice and data services for the nation’s over 190 million telecom subscribers”, especially amid the communication challenges imposed by the spread of the Coronavirus.

In the period under review, a total of 26,169 complaints were received through all the Commission’s official channels of communication, and managed by the Commission, out of which 25,575 (98%) were successfully resolved.

“These include 24,481 complaints received through Commission’s Contact Centres; 1,007 complaints received through the NCC Consumer Portal; and 296 others received as written complaints submitted at NCC Head Office in Abuja and at the Commission’s five zonal offices in Lagos, Enugu, Port Harcourt, Kano, and Ibadan. 

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“Complaints also reached the Commission through its official email ([email protected]) while 366 of the complaints were transmitted to the Commission through its social media handles on Facebook, Twitter, Instagram, LinkedIn, and the specially-dedicated Twitter handle for consumer issues (@ConsumersNCC). Also, 19 complaints were also referred to the Commission during the period through the Twitter account of Honourable Minister of Communications and Digital Economy, Dr. Isa Ali Ibrahim Pantami” the release stated.

READ MORE: NCC creates digital economy department to harness technology in Nigeria

The Executive Vice Chairman (EVC) of NCC, the Prof, Umar Danbatta, expressed his delight that consumers are increasingly utilising the complaint channels instituted and noted that efforts are still ongoing to resolve those that may not have been addressed to the consumers satisfaction.

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“It is important to note that Commission’s actions in this regard is in congruence with NCC’s mandate to protect and defend the rights of the consumer, and to give concrete expression to its faith in the consumer as the lifeblood of the telecom sector,” Danbatta said.

He added that given the outbreak of the pandemic, it had become more expedient for TelCos to provide consumers with reliable services in order to cope with the restrictions to physical movement, and the Commission is determined to hold service providers to their responsibilities and reduce the incidence of complaints.

 

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