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Fiscal Responsibility Act binding on states

By Anthony Areh 

The Fiscal Responsibility Commission on Wednesday, urged State government to implement the fiscal responsibility Act, 2007 for accountability and transparency. 

Mr. Victor Muruako, the Acting Chairman of the Commission, disclosed this during a one-day workshop organized by the Commission in collaboration with CISLAC and OXFAM in Port Harcourt. 

Muruako said that the workshop with the theme “Policy Framework  For Strengthening Fiscal Transparency,  Prudence and Accountability at Sub-National was to ensure effective implementation of the fiscal Act, 2007 at the federal and state levels in the country. 

He said that the retreat was to identify gaps and institutional challenges  among other issues that have weakened the capacity of fiscal responsibility  

initiatives at the sub-national level to effectively execute  the mandate. 

“We are glad to report that there is a growing commitment to transparency and accountability at all levels, though gradually, we have got a number of the states to embrace this culture. 

“Presently, 17 states have passed the law and set up their fiscal responsibility agencies. 

“We call on other states to buy into this project to enable them run their services without waiting for the monthly federal allocations to run their states,”he said. 

Muruako stated that the Commission would henceforth check on commercial banks that grant loans carelessly to some sub-national governments without approval from the  commission as required by the fiscal  responsibility Act.2007. 

“He said that such loans henceforth must follow due process or the Commission will have no option than to invoke the provision of the law against the erring entity. 

Mr. Auwal Ibrahim Rasfanjani, the Executive Director Civil Society Legislative Advocacy Centre, (CISLAC) said that the group is fully in support of the mandate of the fiscal responsibility commission to ensure transparency and accountability and reduce losses alleged in the country through public institutions. 

Rasfanjani stated that the unbridled borrowing culture at all levels of government as well as incapacity of the regulator to use hammer of sanction to defaulters, and a clear evidence of misappropriation of public funds by public office holders would ruin the economy of the country. 

“It does not make sense that we borrow recklessly and also spend recklessly, it is not in any way to our best interest as a country,” he said. 

Furthermore, Mr. Henry Ushie, the Lead EveniT Up Campaign, representing the Country Director of OXFAM, Mr Constant Tchona, urged government at all levels to look inward and harness the mineral resources in their states than waiting for the monthly allocations from the centre. 

FEC approves N13.08trn budget proposal for 2021

By Tanko Mohammed 

The Federal Executive Council (FEC) on Wednesday in Abuja approved budgetary proposal of N13.08trillion for 2021 fiscal year, the Minister of Finance, Budget and National Planning, Hajiya Zainab Ahmed, said in Abuja on Wednesday. 

She reported the decision as part of the outcome of the Council meeting. 

She explained that the total aggregate revenue projected for the 2021 budget was N7.89 trillion with a deficit of N4.48 trillion. 

According to the minister, the total capital expenditure projected in the budget is 29 percent of the aggregate expenditure, saying the 29 per cent is an improvement over the 24 percent projected in budget 2020. 

“We have a total aggregate revenue of N7.89 trillion and also an aggregate expenditure of N13.08 trillion for 2021. 

“There’s a fiscal deficit of N4.489 trillion, this represents 3.64%, slightly above what is required by the Fiscal Responsibility Act of 3% and also to report that the total capital expenditure that is projected in the Budget is 29% of the aggregate expenditure. 

“This is an improvement over the 24% that we had in the 2020 Budget, but slightly below the 30% that we targeted in the economic recovery. 

“Just to clarify that the 1.86 million barrels per day crude oil production includes 400,000 condensate, so we have complied with the OPEC quota, which is placed at about 1.5 million barrels per day. So the 1.46 is in meeting with the OPEC quota,’’ she said. 

The minister disclosed that the performance of the 2020 budget, as at July for revenue, was 68 per cent, while its performance for expenditure was 92 per cent. 

“The performance of the 2020 Budget as at July, for revenue, was 68 per cent We had a 68 per cent revenue performance prorated to July. 

“The performance of expenditure, on the other hand, was 92.3 per cent and that is to say salaries were fully paid, pensions were paid, debt service was made, as well as transfers classified as statutory. 

“In presenting the Budget 2020, we had to report to Council some slight changes that need to be made on MTEF 2021/2023, which has since July been sent to the National Assembly by Mr President. 

“Specifically, the exchange rate is going to be changed from 360 that we initially presented and submitted to Council and to the National Assembly, up to 379. 

“The reason why this is happening is due to the exchange rate movement that the CBN has put in place. 

“Also, there were some slight changes on miscellaneous revenues and signature bonuses after interaction with DPR, which resulted in some increase in revenue,’’ she added. 

The minister stated that the 2021 budget proposal was aimed at enhancing inclusive growth and also to achieve the key objectives of government. 

She said: “The total budget proposal that is made for 2021 is to enable us to attain a more inclusive growth and also to achieve the key objectives of government. 

“These include; stimulating the economy, creating jobs, enhancing growth and creating infrastructural investment, also promoting manufacturing and local production.’’ 

The minister further revealed that the budget assumptions that were presented to Council included the crude oil price benchmark at 40 dollars per barrel; oil production at 1.86 million barrels per day; exchange rate of N379 to $1; GDP growth target of 3 per cent and inflation rate of 11.95 per cent. 

She also expressed the hope that Nigeria’s economy would recover to the path of growth early in 2021, “so the total aggregate revenue that is projected for the 2021 Budget is N7.89 trillion and what is unique about the 2021 Budget is that we have brought in the budgets of 60 government-owned enterprises. 

“If you recall, in 2020 we brought in 10, now we have brought in 60. 

“These 60 exclude NNPC and the Central Bank and the reason being NNPC, a national oil company, internationally national oil companies are not included in the national budget. 

“Also, the CBN is an autonomous body. Only those two are excluded, 60 government-owned enterprises included. 

“That is to say their revenue and all categories of expenditure are now integrated in the Budget.’’ 

On the effect of COVID-19 on the 2021 budget proposal, the minister said provisions had been made in the budget to address such challenges. 

She said: “The 2021 budget has been able to make more provision for human capital development. So, the Ministry of Health for example has its provision almost doubled. 

“The Ministry of Education has a significant increase. The details of the budget will be provided to the country after Mr President submits the budget which we hope might be on the 8th of October. So, the details will be out. 

“And following Mr President’s submission, the Ministry of Finance, Budget, and National Planning will also engage in a world press conference to provide the details. 

“But what is unique about this is that the provision for human capital development, especially health is doubled.” 

Nigerians call for review of revenue sharing formula

By Chris Ndibe 

Participants of Nationwide Sensitisation and Advocacy on Data Gathering and Management, have called for the review of the current vertical revenue sharing formula in the country in the favour of States and Local Government Councils (LGCs). 

The programme was organised by the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC). 

They made the call in a communique jointly signed Mr Lawal Attihiru, a director in the state Ministry for Local Governments, and RMAFC team leader, Mr Ibrahim Bako, respectively issued at the end of the programme on Wednesday in Katsina. 

“That in recognition of the enormous responsibilities of States and Local Government Councils, the current vertical revenue allocation sharing formula should be reviewed in favour of States and LGCs,” the communique said. 

They urged the state government to intensify efforts in making policies and strategies that would increase schools enrollment by mainstreaming the ‘Almajirai’ system into the conventional school system. 

They said that the state-funded community schools should be considered in the enrolment figure of schools since the state provides schools’ funds through the payment of teachers and intervention in infrastructure. 

It said that the state should establish Bureau for Statistics that would be providing credible data base whenever needed. 

The participants also called for setting up Joint Revenue Committee for state and LGCs to harmonise strategies for enhanced revenue collections. 

They urged the state government to step-up strategies to access Stabilisation Funds for the purpose of ameliorating the impact of insecurity challenge on the socio-economic development of the state. 

The communique further said that the state government should demonstrate political will and support to collect taxes from all eligible tax payers irrespective of their status. 

Afreximbank spends $100m on medical resources

By Moses Uwagbale

African Export-Import Bank (Afreximbank) has provided $100 million financing to member states to buy Coronavirus (COVID-19) related medical resources through the Africa Medical Supplies Platform (AMSP).

The President of the bank, Prof. Benedict Oramah, disclosed this in a statement in Abuja on Tuesday.

Oramah stated that the financing to African governments was to support them to address the pandemic.

He said “we are mindful of the challenges many African economies are facing as they work to contain the pandemic.

“With this 100 million dollars overdraft facility, we hope African states would be able to rapidly access diagnostic kits and medical supplies at competitive prices from African suppliers and global markets.”

According to the bank boss, the funding is available to African governments to acquire medical supplies through the AMSP in the form of pre-approved overdraft limits.

He added that “this facility quickens access to critical COVID-19 containment and therapeutic supplies by bridging short term funding gaps that African states may be experiencing.

“The AMSP was launched in June and developed by the African Union’s Africa Centre for Disease Control and Prevention (Africa CDC), Afreximbank and the United Nations Economic Commission for Africa (ECA).

“The development was under the leadership of Mr Strive Masiyiwa of the African Union Special Envoy for COVID-19 procurements.

“The AMSP aggregates medical supplies and serves as unique interface for African governments and NGOs to easily coordinate sourcing.

“Afreximbank facilitates payments on the platform and arranges letters of credit and payment guarantees, allowing participating governments and organisations to minimise the upfront cost of obtaining critical supplies.” 

Mutual funds record 305% growth

By Tanko Mohammed

 Coronation Asset Management on Tuesday said the country’s total mutual funds rose by 305 per cent in four years.

Mr Guy Czartoryski, Head of Research, Coronation Asset Management, disclosed this at the virtual launch of its report titled: “The Shifting Appetite of the Nigerian Investor: From Savings to Mutual Funds.”

Czartoryski said the total Assets Under Management (AUM) of Nigeria’s mutual funds (also known as collective investments schemes) rose by 305 per cent between 2015 and 2019.

He said investors were switching to mutual funds due to lower rates on savings accounts offered by commercial banks.

“As commercial banks progressively offered lower rates on savings accounts, more money switched to mutual funds.

“And the introduction of tech-based savings platforms introduces a new generation of young savers to mutual funds,” Czartoryski added.

According to him, mutual funds are growing rapidly and are quickly becoming the default destination for savings by Nigerians.

He said fixed income funds had picked up rapidly in the past two years, with growth at 59 per cent in the first half of 2020, while total value of money market funds appreciated by 11 per cent.

Czartoryski added that fixed income funds grew, from 2015 to 2019, at a Compound Annual Growth Rate of 82 per cent in inflation-adjusted terms and 111 per cent in nominal terms.

He noted that mutual funds were growing rapidly and becoming the default destination for savings by Nigerians.

“Just as the pension funds began to take off a decade ago, now mutual funds are growing fast.

“Mutual funds are set to become a large part of the savings industry.

“In a few years they may rival Nigeria’s pension funds in size,” he said.

He, however, identified risk management and information on fund performance as challenges facing the mutual fund industry.

“The mutual fund industry in Nigeria faces two challenges and the first is risk management.

“The era of high returns from Nigerian Treasury Bills ended in 2019.

“Today, investors need to invest in a variety of other asset classes to obtain a reasonable return, without becoming totally exposed to any one asset class.

“It means that investment management is more complex and more necessary than before,” Czartoryski said.

He added that there was need for more information on the performance of mutual funds in order to facilitate fund selection by investors and professional advisers.

“Fortunately, the industry and its regulator are moving in this direction, preparing the ground for a hugely expanded mutual fund industry in future, and creating the conditions for a significant capital base for the nation,” he said.