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President submits 2021-2023 MTEF to National Assembly

Media reports quoted that the proposal for 2021 targets Non-debt recurrent expenditure of N5.75tn.

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FG to release 30,000 tons of maize to poultry farmers after import ban, President submits 2021-2023 MTEF to National Assembly, public holiday, inflation, President Buhari reappoints Ben Akabueze as DG Budget office,

Recently, President Muhammadu Buhari submitted the 2021-2023 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) to the National Assembly wherein the Federal Government has proposed N12.66tn as aggregate expenditure for the 2021 fiscal year, which is 17% higher than the revised budget for 2020 (N10.81trn). The key underlying assumptions upon which the proposal is based include oil price benchmark of US$40 (2020 revised; US$28), daily crude oil production of 1.86 million barrels (2020 revised; 1.80mbpd) and exchange rate of N360/US$1 (same as 2020 budget).

The President noted that the early submission of the proposal is to enable the National Assembly set the motion for the eventual presentation of the 2021 national budget. We note that this is consistent with the FG’s resolve to ensure the nation’s budget is within the January – December fiscal year referred to as an organic budget calendar. We recall that the 2020 budget which was presented by the President on 8 October 2019 is the earliest presentation date since 2014 while the time interval of 2 months between the presentation date and assent date is also the shortest since 2014.

READ MORE: Jaiz Bank reports 45.3% profit increase in H1 2020, involved in 21 litigations

Although the full details of the document is yet to be made public, local media reports quoted that the proposal for 2021 targets Non-debt recurrent expenditure of N5.75tn (24% higher than the 2020 revised budget of N4.63trn) and capital expenditure of N3.33tn (70% higher than the 2020 revised budget of N1.96trn) and debt servicing cost of N3.12tn (6% higher than the 2020 revised budget of N2.95trn). We think the substantial increaase in Non-debt recurrent is reflective of continued upward pressures on personnel costs given the hike in minimum wage. On the other hand, the expected increase in capital expenditure is an expansionary move to amplify spending on capital projects and support the recovery of the economy.

READ MORE: Debt profile: Bankruptcy looms, Obasanjo warns FG  

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Notably, the fiscal deficit for the 2021 fiscal year was projected at N5.16tn (2020 revised estimate; N5.2trn), which the FG intends to finance with borrowings of N4.28trn while the balance would be from internally generated revenues. In our view, the fiscal deficit stands to increase materially if the crisis becomes prolonged and revenue consolidation measures remain underwhelming. Since the economy slipped into recession in 2016, sub-optimal
performance in revenue targets and ballooning expenditures have forced the government to rely heavily on borrowings to finance its fiscal deficit. This has led to a surge in the nation’s debt burden with its attendant impact on debt servicing costs, raising concerns on debt sustainability. In Q1 2020, debt service to revenue ratio stood at an all time high of 99.2%. With the devaluation of the local currency, we expect pressures from servicing external borrowings to keep debt servicing cost elevated in the medium term. As such, we believe the government will need to take strict measures such as complete elimination of subsidies, consolidation of government agencies with overlapping functions and reduction of public sector scale to curb expenditure.

READ MORE: Trading on Nigerian equities has dropped by 44%


 

CSL Stockbrokers Limited, Lagos (CSLS) is a wholly owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.

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Can Agriculture replace Oil in Nigeria?

To truly diversify from oil and create proper value, agriculture must give birth to an industry.

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Can Agriculture replace Oil in Nigeria?

Over the years, Nigerians have clamored for a diversified economy, that is not over-reliant on crude oil. Recently there have been several talks about agriculture being on the front-burner of our exports.

But the reality is that there is a gulf in difference between the revenue agriculture can bring in and what Oil currently generates. Despite the steady growth in the value of Nigeria’s agricultural exports over three years (2016 to 2018), the country’s agricultural exports to total exports remained below 2%.

READ: Nigeria’s top 10 agricultural exports hit N289.3 billion, as Sesamum seeds, Cocoa top list

Overview

During the period of independence, Nigeria was a major exporter of food to West African nations; Unfortunately, she has morphed into a net importer. With the advent of oil in the 1970s, fiscal and economic policy was one-sided, and the country’s domestic and foreign investments were on oil, at the expense of other sectors of the economy. Inadvertently, Government revenue has increasingly come from oil and remains hostage to volatile oil prices.

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In a recent report, the National Bureau of Statistics (NBS) claimed that Nigeria earned close to N289.3 billion from the exportation of the top 10 agricultural produce between April 2019 and March 2020. The report asserted that both commodities (sesamum seeds and cocoa) accounted for over 60% of the country’s exports as they are the most sought after internationally. Comparatively, the top 10 agricultural produce made N289.3 billion across three quarters. These figures are relatively low  compared with the Q2, 2020 proceeds of crude oil which stands at N1.6 trillion.

(READ MORE:Africa may lose $4.8 billion in crop exports due to Coronavirus)

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Other commodities

From the above diagram, Oil generated N1.6 trillion in Q2 2020, while the other commodities combined to record about N612 billion in Q2 2020. One trillion naira lesser (considering Oil prices were significantly low during that quarter). A 2018 report from PWC showed that oil revenue accounts for more than 80% of total value of annual Nigerian exports. Ironically, the agriculture industry contributed an estimate of 25% to total GDP in 2018, while the oil’s share of GDP was 8.6% over the same period. Since the agriculture sector is the largest contributor to Nigeria’s GDP, it has potentials to contribute a larger percentage of our annual export revenue.

Explore the Nairametrics Research Website for Economic and Financial Data

Recommendation

Agriculture toppling Crude oil as our main export might be a tall order, but if we want to truly diversify from oil and create proper value, agriculture must give birth to an industry.

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If agriculture currently employs, say, one million Nigerians; the agro-allied industry can employ five million in the value chain. In a monetary context, if Nigeria produces cocoa beans, which recorded over N30billion revenue in 2018, an industry that processes cocoa to chocolates & beverages would produce double the revenue or more.

Oil would be the main commodity for a long time, but it is possible to create more financial values from other commodities.

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CBN Vs NESG: Waving the white flag for the benefit of Nigerians

As Nigerians face up to what is likely a fresh round of recession, all stakeholders in the economy must come together to ensure that our economic recovery plans are well thought through, backed by empirical data.

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CBN Vs NESG: Waving the white flag for the benefit of Nigerians, Exchange Rate Unification: CBN devalues official rate to N380/$1, Nigerian banks have written off N1.9 trillion impaired loans in past 4 years, CBN sandbox operations, Stirling Trust Company Limited

On Monday, September 7th, 2020, the Nigerian Economic Summit Group (NESG) published a press release titled “Matters of Urgent Attention”, in which it x-rayed the state of the national economy and expressed a number of reasoned concerns over the poor state of performance of some critical economic indicators affecting the country. Treatises like the release have become, for several years now, a common feature of the country’s dialogue on the economy.

They serve an extremely useful purpose because these publications permit individuals and organisations that embark on this course, not only the opportunity to ventilate important, topical, subjects in the widest possible manner but also to enable those views to come to the attention of several organs of governance responsible for policy formulation and implementation.

READ: CBN allows banks to pay winnings, salaries for 7 banned betting & gaming companies

It is also the case that the reaction to these exercises would often be gauged by the credentials of the author whose antecedents will, typically, determine the depth and appreciation of the reading audience. That thermometer reading, therefore, is dictated by credentials of the author. The more accomplished; the greater the interest in the contents. This, it appears, is what happened following the public circulation of the NESG press release.

The Nigerian Economic Summit Group (NESG) is a private sector-led think tank that was incorporated in 1996 as a not-for-profit organization to promote economic reformation and policy advocacy that positions the Nigerian economy for sustainable growth and global competitiveness. For 24 years, it has provided a platform for bringing together private sector leaders and senior public sector officials to collaborate and dialogue on the imperatives of deepening the Nigerian Economy.

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READ: No foreign exchange for food and fertilizer importers – Buhari

Comprising some of the most influential economic and financial actors outside the government, its views, in the past and now, have conveyed some of the most incisive commentary on the economy of Nigeria. As such, it has become very highly respected. Understandably, therefore, its comments were always likely to attract both attention and comment with all kinds of flavours.

The Press Release, importantly, commended the efforts of the Federal Government at creating short term jobs across all facets of the economy as well as recognized the willingness of the Federal Government to work with the private sector in the design and implementation of national economic development plans.

In addition to calling for re-evaluation and re-tooling of the country’s security architecture to address the dire challenge of in-country insecurity; raising the emphasis on reopening national borders because of the negative impact its protracted closure has had on free flow of legitimate trade among sub regional economies, NESG’s analyses touched on various policies, decisions and actions of a number of other key national institutions, including, majorly, the Central Bank.

It expressed deep concern with what it described as CBN’s opacity in managing foreign exchange transactions; loan disbursements regarding its special purpose monetary interventions, and price fixing without providing adequate clarity on policy objectives; trends and practices which are not in tandem “with evolving developmental roles of central banks around the world especially as it concerns resource allocations”.

(READ MORE:NESG’s allegations, malicious attempt to tarnish the economic recovery program- CBN)

Fairly swiftly thereafter, NESG also published a letter it had written to the President, in which it specifically raised issues with some of the provisions of the bill for an Act to repeal the Banks and Other Financial Institutions Act (BOFIA) 2004, and to re-enact it and other matters connected therewith, 2020. Although the BOFIA Act has been 29 years in the making, it had been recently passed by both houses of the National Assembly and was awaiting presidential assent when NESG appealed to the President for intervention.

NESG ‘s contention was, among other things, that certain proviso’s in the amended Bill, if not “deleted or amended, may be inimical to the fulfilment of the mandate of formulating and implementing policies and programmes which attract foreign and domestic investments”. Among other issues, it highlighted specifically, sections 2(5) (a) and (b), 12(6) and 57(1) and (2), which, respectively, extends CBN’s regulatory oversight outside the scope of “banking business”; grants it immunity from restorative orders and promotes overreaching by the Central Bank. NESG concluded that these policies and interventions, if assented to by the President as is, over-regulates the economy and gives sweeping powers to the CBN Governor, which are prone to abuse.

READ: CBN claims no immunity for Emefiele as it fires back at NESG

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The CBN, in its well-publicized response debunked the claims made by NESG, and in defense of its economic policies over the last 5 years explained that “access to credit is listed among the three major challenges faced by farmers and businesses in Nigeria”, hence, it was vital for it to “address an area that it had sufficient ability to impact upon, while the Federal Government seeks to address issues such as access to electricity and logistics”. On the allegation that its lending process is devoid of a proper framework, it stated that recipients of intervention funds from CBN go through “extensive” due diligence process supervised by participating financial institutions (PFI), followed by additional assessment process by the CBN before disbursements are provided.

However, in its response, the Central Bank resorted to the use of vitriolic, derisive and even contemptuous language that, almost regretfully, personalized a hugely important dialogue. It was language that, potentially, may have caused the CBN to dip below its exalted status as a foremost regulatory institution in Nigeria. Aside painting NESG as an irritant, CBN’s argument may have recorded limited success in fully addressing the concerns raised. Whilst the CBN has every right to defend the integrity of its policies against what it perceives as an “ignorant or malicious” attack and false claims by the NESG, the comportment and communication of the response presents a cause for apprehension, especially, given the gravity of the issues at stake.

With most economic indicators pointing southward; rampant and widespread insecurity in the midst of insurgency; domestic and international terrorism; banditry and proliferation of arms which has led to softened sovereignty in some parts of the country; endemic corruption; runaway inflation: poverty and illiteracy; food crisis and insecurity; burgeoning unemployment; community clashes with attendant rise in brigandage and carnage; needless to say, the fault lines of our nationhood has never been more barely exposed as they currently are. Our depiction as the “poverty capital of the world” is because millions of our citizens continue to wallow in despondent poverty and disease over the effect of some of the negative consequences of the economic policies about which NESG – and, it has to be said, many others before them – have spoken to.

(READ MORE:FG directs 9,000 filling stations to install gas facilities)

What appears to have now transpired is that important and crucial dialogue about the quite serious problems we, as a nation, are now confronted with, ran the unfortunate risk of being “diverted” and supplanted by a “collision of intellectual egos”. To be clear, we, the National Association of Seadogs, Pyrates Confraternity do not believe that to score points, it is permissible to rely on assertions that are either flawed or out rightly untrue. Nor do we consider that it is acceptable – or permissible – that the reading audience should be misled by self-serving or manipulated interpretations of issues being discussed.

To the extent that these postures exist in any of the respective parties’ public explanations, we demur and deprecate such conduct and commentary. That said, we maintain the view that NESG and its members, in their capacity as an economic and policy advocacy body, reserve individual and collective rights to comment on matters of the economy; directly criticize and express contrasting opinion about the policies and interventions of the Federal Government and, or its agencies, including the CBN.

The resignation of Chief Executive Officers (CEOs) of 3 prominent Nigerian banks from the Board of NESG coincided uncomfortably with the emergence of these differences between NESG and CBN. Whilst it appears that there may be well-informed reasons for the CEOs actions, it is only logical that there may be those who will see this as having occurred, not without certain influence or pressure connected with sentiments arising out of this situation. As Nigeria’s apex banking and financial regulatory institution, CBN must be mindful of its utterances and comportment, as its body language may inadvertently create an environment that censures instead of extracting value from opposing views, ideas and counsel.

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We are not insinuating any direct link between CBN, NESG and the resignations, but the enormous regulatory and other powers it wields over banks and the speed at which the resignations were effected creates an inescapable wireless connection between the two. These kinds of rancorous conduct, which are inimical to deliberate knowledge integration and management to deepen policy responses, must be avoided in the future. It is critical that the strangulating poverty which threatens average Nigerian families today does not drown in the sea of rhetorical vitriol.

Like all very anxious and concerned Nigerians, we are entitled to – and expect – constructive engagements that will lead to the enactment of economic policies that create production-based jobs so the national economy can grow sustainably. As Nigerians face up to what is likely a fresh round of recession, all stakeholders in the economy must come together to ensure that our economic recovery plans are well thought through, backed by empirical data. The CBN should muster the humility to admit the fact that some of its policies have failed to deliver the expected outcomes and rather than create more jobs, have made the economy more atrophied; impoverishing more Nigerians than it has lifted out of poverty.

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We hereby call on the Federal Government; CBN, NESG, and other well-meaning institutions and stakeholders in the country to focus their energies on activities and commentary that galvanize the immense intellectual capacities that are available to the country to enact policies and intervention that provides very desperately needed socio-economic relief and support to long suffering Nigerians.

Nigerians need jobs, not invectives!

Abiola Owoaje

Nas Capn

National Association of Seadogs

 

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Columnists

Buying signal, Bitcoin whales with 1000 BTC or more continue to rise

Bitcoin approaches its fixed supply of 21 million coins, as the price is expected to go up.

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Investors cashing in big time, as 95% BTC wallets are currently in profit, blockchain technology, Bitcoin giving better returns than the Nigerian stock market, What it will take Bitcoin to hit $100,000?, Buying signal; Bitcoin whales with 1000 BTC or more continue to rise

The number of entities with a balance equal to or above 1000 BTC continues to rise.

The signs are bullish, as we still haven’t broken the upward trend line, despite the dip at the start of September.

BTC crossed above $10,700 on Monday for the first time since September 3rd, and it appears to have been supported by spiking trading volume.

READ: AFDB Investigative panel declares Dr. Akinwunmi Adesina Innocent

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At the time of this report, the flagship crypto traded at $10,687.49 with a daily trading volume of $24.438 billion BTC, price is up 2.7% in the last 24 hours. It has a circulating supply of 18 Million coins and a max supply of 21 Million coins.

 

In the Bitcoin world, investors or traders who own large numbers of Bitcoins are typically called Bitcoin whales. This means a Bitcoin whale would be an individual or business entity (with a single Bitcoin address) owning around 1000 Bitcoins or more.

(READ MORE:Bitcoin stages come-back, as buyers push price above $10,000)

As BTC whales accumulate BTCs, Bitcoins circulating supply reduces, and this can weaken any bearish trend BTC finds itself in. This means that over time, it’s possible that as Bitcoin approaches its fixed supply of 21 million coins, the price of BTC will go up, with BTC’s present demand factored in.

Whales could be anticipating a strong medium to long-term Bitcoin price trend, and are choosing to hold on to BTC in expectation of a bull market.

Much of the recent increase can be attributed to wealthy entities withdrawing their BTC from exchange. Apparently, this is not new wealth – rather, it represents a change in the way Bitcoin whales are choosing to hold their coins.

From a macro level, this increase in the number of BTC whales can be considered bullish.

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