N/ASS adopts N305 exchange rate, raises crude oil benchmark for 2017 budget
The National Assembly has adopted N305 to the US dollar as a basis for preparing the 2017 budget, despite fears it is unrealistic. The naira trades at about N500 in the unofficial market.
The adoption of the pegged N305 to the US$ exchange rate is a disappointment to foreign portfolio investors banking on a more flexible exchange rate regime before they invest in the country.
The Senate has however urged the Central Bank of Nigeria (CBN) to close the gap between the official and black market rates. It gave the order while passing the Medium Term Expenditure Framework (MTEF) for 2017 to 2019, which will form the basis for the 2017 budget. In adopting the MTEF, the Senate raised the crude oil price benchmark from N42.5 to N44.5 but left the forecast crude oil production level of 2.2 million barrels per day (mbpd) used in preparing the budget and the MTEF unchanged.
Rising external reserves, which currently stand at US$27 billion, higher crude oil prices and prospects of peace in the Niger Delta, have all raised hopes of a boost in foreign exchange earnings to strengthen the CBN’s capacity to defend the naira.
Vice President Yemi Osinbajo said on Tuesday, 17 January on the sidelines of the on-going World Economic Forum (WEF) that Nigeria needs to close the gap “very soon” between the official and black market rates of the dollar, even though he did not say how this would be done.
“The official and black market naira foreign exchange rates will be “unified” this year, but there is no time-frame for when it could happen,” Reuters quoted Osinbajo as saying.
In approving the MTEF document, however, Ekweremadu expressed concern about the gap.
“We are worried by the huge gap. The Central Bank needs to do something about it and stabilise the currency. We must find a way of bridging the gap and restore investor confidence,” Ekweremadu, read out in the house.
Presenting the report of the Joint Committees on Finance, Appropriations and National Planning, John Enoh, chairman of the joint panel, called on the Central Bank of Nigeria (CBN) to initiate measures that will close the gap between the parallel market and the official exchange rate.
“The sustained and widening gap between the official exchange rate and the parallel market has created several loopholes in the system. However, the recent transition from fixed exchange rate regime to flexible exchange regime appears commendable”, Enoh said.
The upper legislative house also approved the inflation rate of 12.92percent, GDP Growth Rate of 2.50 percent, Gross Federally collectible revenue at N10.407trillion, gross oil revenue N5.010trillion and gross non-oil revenue at N5.127trillion, as proposed in the MTEF.
The Senate also approved the Federal Government’s planned borrowing of N2.321 trillion, comprising of N1.253 trillion in domestic debt and N1.067 trillion in external debts in 2017 but on the condition that the borrowed sums would be project-tied.
Nigeria’s external debt which presently stands at $11.26 billion, has been rising at an average of 9.2 percent per annum, while the domestic debt of the Federal Government stands at $37.44 billion, according to the report.
The Senate also approved the N500 billion comprising of N350 billion, recurrent; N150 billion, capital for the Special Intervention Programme in 2017.
The lawmakers approved N5.122 trillion revenue from the non-oil sector against the sum of N5.749 trillion proposed by the Executive, while urging all the revenue generating agencies to intensify their revenue collections drive in order to boost the non-oil components of the revenue.
Similarly, the legislators adopted N807.57 billion as independent revenue for 2017 against N1.505 trillion initially projected by the Executive.
To achieve this, the National Assembly recommended the review of the legal framework of relevant MDAs and government owned enterprises, with the view to ensure prompt remittance of operating surplus and gross revenues into the Consolidated Revenue Fund (CRF).
According to the lawmakers, “this step may also include repealing of the existing Acts of some agencies which currently allows them to utilise their revenues outside the CRF.”
To ensure the full implementation of the social intervention programmes to the tune of N350 billion and N150 billion proposed for 2017 fiscal year, the Senate and House of Representatives, stressed the need for relevant committees of both chambers to closely and constantly monitor the MDAs on these programmes, to ensure effective, widespread and representative targeting of beneficiaries.
While expressing overwhelming support for the ongoing economic diversification, the National Assembly urged the Federal Government to “implement drastic measures to achieve self-sufficiency and become an exporter of certain agricultural and mining products.
“It further stressed the need to “increase local production of maize, soya, poultry and livestock, so as to achieve self-sufficiency, as well as attracting investments into the solid minerals, tourism and entertainment sectors.”
John Enoh, Chairman of the Joint Committee, presented the report on the floor of the Senate, while Ibrahim Babangida, chairman, House Committee on Appropriation, presented the report on the floor of the House.
On the revenue realised in the 2016 fiscal year, the report disclosed that the Nigerian National Petroleum Corporation (NNPC) remitted a net inflow of N573.356 billion into the Federation Account between January and September 2016 which was slightly above the projected target of N441.283 billion.
On its part, the Department of Petroleum Resources (DPR) remitted a net inflow of N285.729 billion into the Federation Account, lower than the projected collection of N382.219 billion.
For non-oil revenue, the Federal Inland Revenue Service (FIRS) and Nigeria Customs Service (NCS) collected below their projections.
“The collection for corporate taxes, Value Added Tax (VAT) and other taxes for the period of January to October 2016, stood at N2.804 trillion, representing 69 percent of target, while the Nigeria Customs Service collected a total sum of N585.381 billion, representing 62 percent of its target between January to October 2016.
The 2016 budget envisaged borrowing the sum of N1.182 trillion from the domestic markets. However, as at November 2016, the whole sum had already been borrowed. On external borrowing, the African Development Bank (ADB) had approved the sum of $600 million which was expected to be disbursed before the end of 2016,” the report further stated.
On the expenditure side, while noting that the aggregate expenditure fell short of projection since 2011, the report stated that N3.58 trillion out of the N6.06 trillion had been expended on both capital and recurrent.
So far, capital release as at end of October 2016 stood at N753.6 billion (47 percent) which is behind targeted estimates, while recurrent expenditure is N1.686 trillion as at end of October 2016. The sum of N1.094 trillion was expended on domestic and foreign debt service, out of N1.361 trillion appropriated as at September 2016, while personnel cost obligation was fully met during 2016 fiscal year, the report revealed.
The two legislative chambers of the National Assembly are expected to commence debate on the N7.3 trillion budget proposal for 2017 fiscal year, next week, following the adoption of the 2017-2019 Medium Term Expenditure Framework (MTEF) and Fiscal Policy Paper (FSP) on Wednesday.
Kehinde Akintola & Owede Agbajileke
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