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•Amid high debt, corruption, profligacy
•World Bank cautions govt.
•World Bank cautions govt.
WITH the uncertainties surrounding the true state of Budget 2013, reports coming in from within and outside the country have showed that the economy is still pretty much in danger as a result of unbridled spending by government officials in the country's three tiers.
The Central Bank of Nigeria (CBN), the World Bank and the International Monetary Fund (IMF) came out last week with their institutions' respective reports with all pointing to the fact that the country's three tier governments – Federal, State and Local- are consuming so much monies as revenues and debts but with little or no impact on the country's citizenry.
The CBN, last week, reported in its first quarter 2013 report that the total revenue collected by the Federal Government stood at N2. 425.3 trillion in the first three months of 2013but that the fiscal operations of the Federal Government resulted in an estimated deficit of N284.8billion or 2.9 per cent of estimated nominal Gross Domestic Product (GDP) for first quarter 2013, compared with the quarterly budgeted deficit and the preceding quarter's deficits of N276.1billion and N76.9billion, respectively”.
According to the CBN, revenue for the three months showed “a decline of 2.4 and 17.9 per cent below the receipts in the preceding quarter and corresponding quarter of 2012, respectively”.
The report said “at N1. 849.5trillion, oil receipts, which constituted 76.3 per cent of the total, exceeded both the budget estimate and receipts in the preceding quarter by 15.5 and 1.4 per cent, respectively, but declined by 22.2 per cent below the receipts in the corresponding period of 2012.
Giving details of the fiscal operations of the three tiers of government in the country, the CBN said “Of the gross collected revenue during the review quarter, the sum of N1, 366.70 billion (after accounting for all deductions and transfers) was transferred to the Federation Account for distribution among the three tiers of government and the 13 percent derivation fund. The Federal Government received N643.79billion, while the states and local governments received N326.54billion and N251.75billion, respectively.
The balance of N144.62billion went to the 13 percent derivation fund for distribution by the oil-producing states. Also, the Federal Government received N26.72billion from the VAT pool account, while the state and local governments received N89.06billion and N62.34 billion, respectively.
In addition, the sum of N333.81billion was drawn from the Excess Crude Account (ECA), to bridge the short-fall in revenue for the period and was shared as follows: Federal (N152.99billion), states (N77.60billion), local governments (N59.83 billion) and oil producing states (N43.40 billion).
“An additional N106.65billion was also distributed among the tiers of government and oil producing states from the Subsidy Re-investment and the sum of N1, 366.70 billion out of the revenue was set aside for distribution by the three tiers of government and the 13 per cent derivation fund for oil producing states.
Thus, the total allocation to the three tiers of government in the first quarter of 2013 amounted to N2, 008.12 billion. This exceeded the 2013 quarterly budget estimate by 9.3 per cent.
At N908.14billion, the Federal Government retained revenue for the first quarter of 2013 was lower than both the proportionate budget estimate and receipts in the preceding quarter by 11.0 and 1.6 per cent, respectively.
“Total estimated expenditure for the first quarter stood at N1.19292trillion and was lower than the proportionate budget estimate by 8.0 per cent, but higher than the levels in the preceding quarter and corresponding period of 2012 by 5.5 and 8.3 per cent, respectively.
The development (relative to the quarterly budget estimate) was attributed to the delay in capital releases during the review period. A breakdown of the total expenditure showed that the recurrent component accounted for 65.5 per cent, capital component 27.0 per cent, while statutory transfers accounted for the balance of 7.5 per cent.
Further breakdown of the recurrent expenditure showed that the non-debt component accounted for 77.4 per cent, while debt service payments accounted for the balance of 22.6 per cent.
Thus, the fiscal operations of the Federal Government resulted in an estimated deficit of N284.78 billion or 2.9per cent of the estimated nominal GDP for the quarter, compared with the 2013 benchmark and the preceding quarter deficits of N276.11billion and N207.32 billion, respectively. The deficit was financed mainly from domestic sources.
According to the CBN, “total allocation to state governments (including the Federation Account, 13.0 per cent Derivation Fund and share of VAT receipts) stood at N734.07billion in the first quarter 2013. This represented a decline of 1.0 per cent below the level in the preceding quarter, but an increase of 4.0 per cent above the level in the corresponding quarter of 2012.
Debt
With all these monies and the determination of the Federal and the States to borrow more, the Debt Management Office (DMO) shocked the nation, same week, when it countered complaints on the continued rise in both domestic and external debts, saying it is a good thing for Nigeria.
The DMO argued that the government's future income streams would comfortably address the rising debts.
The Director-General, DMO, Mr. Abraham Nwankwo, said the country's growing debt profile was good, considering the fact that the Federal Government must borrow to meet its obligations.
He said, “It is a good thing for the country because if we need to build roads and we borrow money to build the roads, is it not a good thing? It is a good thing. If you need to build roads and you don't have the resources now and you expect that your future streams of income should be enough to pay the debt, why don't you borrow the money today to build the road?
“Nigeria's debt is sustainable. Moreover, government has over the past four years taken additional initiatives to make it even more sustainable than it used to be. And this is in terms of being prudent, fiscal consolidation, reducing the fiscal deficit, and reducing the amount borrowed domestically yearly as is seen in the annual budgets.”
The external debt alone rose by $143million in the first quarter of 2013 to $6.67billion from $6.527billion at the end of last year, during which it rose consistently throughout.
The development caused analysts, including the Governor of the Central Bank of Nigeria, Mr. LamidoSanusi, to warn that it was not in the nation's best interest.
In December 2012 at the Honorary International Investment Council Conference in London, Sanusi argued that if the existing level of borrowings from big nations continued, the huge debt profile would place “undue burden on posterity.”
“We are borrowing more money today at a higher interest rate, while leaving the heavy debt burden for our children and grandchildren,” he had said.
But reacting to the warnings, Nwankwo said experts should cross-check their facts before commenting on the debt profile.
He said, “We will encourage all Nigerians, when they are making statements, to always try to convey some meanings, realities, facts and figures, which other parties can use in business and intelligent discussions.
“So, in practical terms, yes Nigeria's debt, compared to what it was last year, is growing. But also Nigeria's economy is growing. I challenge you to go and look up what was Nigeria's Gross Domestic Product.”
Motion without Movement
But the World Bank has stated in a publication titled, 'Nigeria Economic Report', that a decade of high economic growth had not translated to much welfare improvement for the generality of the country's citizens.
According to the bank, the country needs to find a formula that will enable the wealth of the nation to cascade to the generality of the populace through rapid creation of jobs.
The report states, “Nigerian economic statistics reveal a puzzling contrast between rapid economic growth and quite minimal welfare improvements for much of the population. Annual growth rates that average over seven per cent in official data during the last decade place Nigeria among the fastest growing economies in the world.
“This growth has been concentrated particularly in trade and agriculture, which would suggest substantial welfare benefits for many Nigerians. It is imperative that Nigeria finds a recipe to unlock rapid growth and job creation in a larger part of the country, as well as to increase standards of education, health and other social services to enable its citizens to find gainful employment in the emerging growth poles.”
In a similar report, the International Monetary Fund had said although the high growth rate had been sustained for a decade, unemployment remained high.
IMF had said, “Strong growth on the order of six per cent a year has been sustained over the last decade, but the official unemployment rate has increased over the period and poverty remains high.
“To make growth more inclusive, the authorities initiated a comprehensive programme in 2012, prioritising macroeconomic stability and reforms to boost competitiveness and productivity, especially in labour-intensive sectors.
“Initial outcomes have been generally favourable although progress in some areas has been slower than originally envisaged.”
The Central Bank of Nigeria (CBN), the World Bank and the International Monetary Fund (IMF) came out last week with their institutions' respective reports with all pointing to the fact that the country's three tier governments – Federal, State and Local- are consuming so much monies as revenues and debts but with little or no impact on the country's citizenry.
The CBN, last week, reported in its first quarter 2013 report that the total revenue collected by the Federal Government stood at N2. 425.3 trillion in the first three months of 2013but that the fiscal operations of the Federal Government resulted in an estimated deficit of N284.8billion or 2.9 per cent of estimated nominal Gross Domestic Product (GDP) for first quarter 2013, compared with the quarterly budgeted deficit and the preceding quarter's deficits of N276.1billion and N76.9billion, respectively”.
According to the CBN, revenue for the three months showed “a decline of 2.4 and 17.9 per cent below the receipts in the preceding quarter and corresponding quarter of 2012, respectively”.
The report said “at N1. 849.5trillion, oil receipts, which constituted 76.3 per cent of the total, exceeded both the budget estimate and receipts in the preceding quarter by 15.5 and 1.4 per cent, respectively, but declined by 22.2 per cent below the receipts in the corresponding period of 2012.
Giving details of the fiscal operations of the three tiers of government in the country, the CBN said “Of the gross collected revenue during the review quarter, the sum of N1, 366.70 billion (after accounting for all deductions and transfers) was transferred to the Federation Account for distribution among the three tiers of government and the 13 percent derivation fund. The Federal Government received N643.79billion, while the states and local governments received N326.54billion and N251.75billion, respectively.
The balance of N144.62billion went to the 13 percent derivation fund for distribution by the oil-producing states. Also, the Federal Government received N26.72billion from the VAT pool account, while the state and local governments received N89.06billion and N62.34 billion, respectively.
In addition, the sum of N333.81billion was drawn from the Excess Crude Account (ECA), to bridge the short-fall in revenue for the period and was shared as follows: Federal (N152.99billion), states (N77.60billion), local governments (N59.83 billion) and oil producing states (N43.40 billion).
“An additional N106.65billion was also distributed among the tiers of government and oil producing states from the Subsidy Re-investment and the sum of N1, 366.70 billion out of the revenue was set aside for distribution by the three tiers of government and the 13 per cent derivation fund for oil producing states.
Thus, the total allocation to the three tiers of government in the first quarter of 2013 amounted to N2, 008.12 billion. This exceeded the 2013 quarterly budget estimate by 9.3 per cent.
At N908.14billion, the Federal Government retained revenue for the first quarter of 2013 was lower than both the proportionate budget estimate and receipts in the preceding quarter by 11.0 and 1.6 per cent, respectively.
“Total estimated expenditure for the first quarter stood at N1.19292trillion and was lower than the proportionate budget estimate by 8.0 per cent, but higher than the levels in the preceding quarter and corresponding period of 2012 by 5.5 and 8.3 per cent, respectively.
The development (relative to the quarterly budget estimate) was attributed to the delay in capital releases during the review period. A breakdown of the total expenditure showed that the recurrent component accounted for 65.5 per cent, capital component 27.0 per cent, while statutory transfers accounted for the balance of 7.5 per cent.
Further breakdown of the recurrent expenditure showed that the non-debt component accounted for 77.4 per cent, while debt service payments accounted for the balance of 22.6 per cent.
Thus, the fiscal operations of the Federal Government resulted in an estimated deficit of N284.78 billion or 2.9per cent of the estimated nominal GDP for the quarter, compared with the 2013 benchmark and the preceding quarter deficits of N276.11billion and N207.32 billion, respectively. The deficit was financed mainly from domestic sources.
According to the CBN, “total allocation to state governments (including the Federation Account, 13.0 per cent Derivation Fund and share of VAT receipts) stood at N734.07billion in the first quarter 2013. This represented a decline of 1.0 per cent below the level in the preceding quarter, but an increase of 4.0 per cent above the level in the corresponding quarter of 2012.
Debt
With all these monies and the determination of the Federal and the States to borrow more, the Debt Management Office (DMO) shocked the nation, same week, when it countered complaints on the continued rise in both domestic and external debts, saying it is a good thing for Nigeria.
The DMO argued that the government's future income streams would comfortably address the rising debts.
The Director-General, DMO, Mr. Abraham Nwankwo, said the country's growing debt profile was good, considering the fact that the Federal Government must borrow to meet its obligations.
He said, “It is a good thing for the country because if we need to build roads and we borrow money to build the roads, is it not a good thing? It is a good thing. If you need to build roads and you don't have the resources now and you expect that your future streams of income should be enough to pay the debt, why don't you borrow the money today to build the road?
“Nigeria's debt is sustainable. Moreover, government has over the past four years taken additional initiatives to make it even more sustainable than it used to be. And this is in terms of being prudent, fiscal consolidation, reducing the fiscal deficit, and reducing the amount borrowed domestically yearly as is seen in the annual budgets.”
The external debt alone rose by $143million in the first quarter of 2013 to $6.67billion from $6.527billion at the end of last year, during which it rose consistently throughout.
The development caused analysts, including the Governor of the Central Bank of Nigeria, Mr. LamidoSanusi, to warn that it was not in the nation's best interest.
In December 2012 at the Honorary International Investment Council Conference in London, Sanusi argued that if the existing level of borrowings from big nations continued, the huge debt profile would place “undue burden on posterity.”
“We are borrowing more money today at a higher interest rate, while leaving the heavy debt burden for our children and grandchildren,” he had said.
But reacting to the warnings, Nwankwo said experts should cross-check their facts before commenting on the debt profile.
He said, “We will encourage all Nigerians, when they are making statements, to always try to convey some meanings, realities, facts and figures, which other parties can use in business and intelligent discussions.
“So, in practical terms, yes Nigeria's debt, compared to what it was last year, is growing. But also Nigeria's economy is growing. I challenge you to go and look up what was Nigeria's Gross Domestic Product.”
Motion without Movement
But the World Bank has stated in a publication titled, 'Nigeria Economic Report', that a decade of high economic growth had not translated to much welfare improvement for the generality of the country's citizens.
According to the bank, the country needs to find a formula that will enable the wealth of the nation to cascade to the generality of the populace through rapid creation of jobs.
The report states, “Nigerian economic statistics reveal a puzzling contrast between rapid economic growth and quite minimal welfare improvements for much of the population. Annual growth rates that average over seven per cent in official data during the last decade place Nigeria among the fastest growing economies in the world.
“This growth has been concentrated particularly in trade and agriculture, which would suggest substantial welfare benefits for many Nigerians. It is imperative that Nigeria finds a recipe to unlock rapid growth and job creation in a larger part of the country, as well as to increase standards of education, health and other social services to enable its citizens to find gainful employment in the emerging growth poles.”
In a similar report, the International Monetary Fund had said although the high growth rate had been sustained for a decade, unemployment remained high.
IMF had said, “Strong growth on the order of six per cent a year has been sustained over the last decade, but the official unemployment rate has increased over the period and poverty remains high.
“To make growth more inclusive, the authorities initiated a comprehensive programme in 2012, prioritising macroeconomic stability and reforms to boost competitiveness and productivity, especially in labour-intensive sectors.
“Initial outcomes have been generally favourable although progress in some areas has been slower than originally envisaged.”
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