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Nigeria May Slip Into Recession as Budget Deficit Hits N30.58trn In Seven Years

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The budget deficit has risen to at least N30.58tn in the last seven years.
This is according to data from budget implementation reports for the third and fourth quarters of 2015; the four quarters of 2016, 2017, 2018, 2019, 2020; the first three quarters of 2021; and the first four months of 2022.
According to Investopedia, a budget deficit occurs when expenses exceed revenue.
An analysis of the reports on the Budget Office of Nigeria’s website revealed that Buhari’s administration had spent at least N54.98tn on budget implementation since its inception but has only financed this spending with N24.39tn, leaving a deficit of N30.58tn.
A breakdown of some of the expenses revealed that the present administration had spent at least N23.66tn on personnel costs, pensions, overhead costs, presidential amnesty programme, other service-wide votes, and special interventions.
A minimum of N14.13tn has been spent servicing domestic and foreign debts, and at least N10.47tn has been spent on capital expenditure.
According to the reports, this deficit financing has been largely financed by government borrowing. The budget implementation report for Q4, 2015 said, “The FGN has arranged to raise short-term credit from the CBN through the mechanism of Ways and Means subject to a ceiling of 12.5 percent of FGN’s revenue.
“This amount will be retired and therefore not considered as new borrowing outside the borrowing approved to finance the budget deficit. However, due to current fiscal challenges, the CBN had agreed to increase the Ways and Means advances threshold hence the FGN’s ability to raise N615.96bn from this source.”
Since allowance for raising the ceiling was made, total borrowing from the CBN has hit N19.01tn in April 2022 from N648.26bn as of June 2015.

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Also, the nation’s total debt profile hit N41.06tn as of March 2022 from N12.12tn, according to the Debt Management Office.
A document titled ‘Public Consultation on the Draft 2023 – 2025 MTFF/FSP’ presented by the Minister of Finance, Budget & National Planning, Mrs. Zainab Ahmed, said, “Revenue generation remains the major fiscal constraint of the federation. The systemic resource mobilization problem has been compounded by recent economic recessions.”

Recently, the Monetary Policy Committee of the Central Bank of Nigeria raised concerns over the nation’s debt sustainability. It said the Federal Government’s debt profile was worrying and noted that there was a need for it to urgently diversify its revenue base.
Commenting on the story, economists stated that a high deficit was not good for the economy and might cause inflation, recession, and slow down growth.
Speaking to a reporter, an economic expert, and seasoned academic at the University of Uyo, Professor Akpan Ekpo, said, “This shows that expenditure has eclipsed the revenue, because they have to borrow, which is why there is a deficit.
“They can’t raise enough domestic resources to finance spending. That gap is a deficit. Talking about GDP, by the rules, it should not be more than a certain percentage of GDP, but it has exceeded that. And when you borrow, you have expectations of borrowing because if you are not transparent, we don’t know what you are borrowing for.
“If you are borrowing to finance recurrent and overhead, it is not good for the economy. If you borrow to finance capital projects, in the long run, even if you have a deficit, it will have a positive multiplier effect. The deficit, if it is used to finance recurrent, is problematic to the economy.

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“One way of solving that is to raise more of domestic revenue or cut down on expenditure that is not needed, especially, the cost of governance. There is a need to check the expenditure profile and cut down on it. Or we could do expenditure switching, where unimportant items are switched with important items.
“We are spending more than we can raise resources and we are not spending it on hard infrastructure.”
Associate professor of Economics at the Pan-Atlantic University, Lagos, Olalekan Aworinde, added that the deficit was being financed by either government borrowing, sales of government properties, or printing money.
According to him, any of these options had implications for the economy. He stated, “Loans can be good and can be bad. A loan is good if it is used for productive expenditure, but if it is used for recurrent expenditure or consumption expenditure, this is not bringing back any returns.
“If the component of this deficit is majorly recurrent expenditures, it shows that we are unlikely to have any growth. There isn’t going to be any revenue coming out from there. The implication of this is that we are likely going to have stunted growth. Stunted growth in the sense that we are not likely going to have an increase in the total values of goods and services that are produced in the country.
“If care is not taken, we are likely going to slide into recession.”
He added that financing the deficit through sales of government properties would mean the government was reducing its asset base, which did not speak well for the economy.

NPO

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JUST IN: Air Peace Suspends Flights To South Africa Over Aviation Fuel, Visa Delay

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Air Peace

Citing the increasing cost of aviation fuel and scarcity as well as the delay in the issuance of visa to intending passengers, Air Peace has suspended its flights to South Africa.

The suspension, which takes effects from August 22, is for a period of 60 days, the Airline said in a notice.

Daily Trust reports that domestic airlines had been forced to adjust their schedules over the recurring scarcity of Jet fuel as well as the skyrocketing price of the product.

But added to this, according to Air Peace, was delay by the South African authorities to issue visa to prospective passengers which was said to be affecting the load factor on Air Peace’s flight to Johannesburg.

Air Peace in the notice expressed optimism that the issues which warranted the suspension would have been addressed before October.

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It said, “We hereby inform the flying public that effective from August 22, 2022, our Johannesburg flight operations will be suspended till October 8, 2022.

“This development is regretted but has become inevitable due to the delayed issuance of South African visas to travellers, worsening forex crunch and the increasing cost of aviation fuel as well as its scarcity.

“However, having informed the South African High Commission in Lagos of the effects of the difficulty in getting SA visas by Nigerians, which consequence is the abysmally low passenger loads on our flights to and from Johannesburg, we believe that the situation will have improved within the next 60 days. Hence, our willingness to resume operations on the October 8, 2022.

“Passengers whose flights are affected have the option of rescheduling to fly before August 22, 2022 or from October 9, 2022. Passengers can also request a refund…

“We apologise for the inconveniences caused and will keep the public updated while we hope the situation improves.”

Daily Trust

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Davido, Tuface, Ned Nwoko, others on alert as Ferrari recalls nearly every car

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Super-rich Nigerians and celebrities who drive Ferrari will have to surrender their Italian luxury sports car to the manufacturer to fix a major problem.

Ferrari has discovered a big stopping problem, with 19 of its models dating back to 2005 reportedly at risk of a potential brake failure, according to the National Highway Traffic Safety Administration (NHTSA).

Some of those known to have the super luxury car in Nigeria are singer Davido; former Arsenal and Super Eagles sensational striker Kanu Nwankwo; rapper and billionaire daughter DJ Cuppy; Ned Nwoko with his Nollywood wife, Reginal Daniels, and another famous ex-Super Eagles player Obafemi Martins.

MotorTrend, an online auto journal, on Monday reported the NHTSA filing as indicating that the issue had to do with the brake fluid reservoir cap which “may not vent properly, creating a vacuum inside the brake fluid reservoir, and resulting in a brake fluid leak that may lead to a partial or total loss of brake function.”

According to the NHTSA recall report, a whopping 23,555 Ferraris are implicated and will need to be serviced.

Owners are expected to receive messages from Ferrari with instructions for proactive repairs before September 24, 2022.

Considering the average price of a Ferrari is at least hundreds of thousand dollars, some quick math proves billions of dollars worth of Ferraris are potentially defective.

The report said Ferrari would replace the brake fluid reservoir cap and update the software in the affected vehicles to provide for a different warning message if the vehicle should lose sufficient brake fluid.

In the meantime, if your Ferrari flashes a “low Brake Fluid” warning, NHTSA directs you to pull off of the road as soon as it is safe to do so and have the car immediately towed to a Ferrari service centre.

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Buhari overrules NNPC, approves Seplat’s acquisition of ExxonMobil’s $1.3bn assets

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President Muhammadu Buhari has approved acquisition of ExxonMobil shares in the United States by Seplat Energy Offshore Limited.

Special Adviser to the President on Media and Publicity, Femi Adesina, in a statement on Monday said his Buhari granted the approved as Minister of Petroleum Resources, and in consonance with the country’s drive for Foreign Direct Investment in the energy sector.

He said Exxon Mobil had entered into a landmark Sale and Purchase Agreement with Seplat Energy to acquire the entire share capital of Mobil Producing Nigeria Unlimited from Exxon Mobil Corporation, Mobil Development Nigeria Inc, and Mobil Exploration Nigeria Inc, both registered in Delaware, USA.

There had been opposition from the NNPC Ltd, and the Akwa Ibom State Government which hosts most of the assets earlier on the transaction but the ministerial approval puts this to rest.

Adesina added that the President had given ministerial consent to the deal, considering the extensive benefits of the transaction to the Nigerian Energy sector and the larger economy.

He said the President, in commitment to investment drive in light of the Petroleum Industry Act, granted consent to the Share Sales Agreement, as requested by the parties to the transaction, and directed that the approval be conveyed to all the parties involved.

The presidential spokesman said Exxon Mobil/Seplat would carry out operatorship of all the oil mining licenses in the related shallow water assets towards production optimization to support Nigeria’s OPEC quota in the short term as well as ensure accelerated development and monetization of the gas resources in the assets for the Nigerian economy.

Adesina said President Buhari also directed that all environmental and abandonment liabilities be adequately mitigated by Exxon Mobil and Seplat.

The deal worth about $1.3bn will take a 40 per cent stake in four OMLs, including over 90 shallow-water and onshore platforms and 300 producing wells.

 

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