Connect with us

Economy

2023 FG Budget Proposal: LCCI Cautions FG On New N10.57 Foreign Loan

Published

on

LCCI, Ministry Of Foreign Affairs To Host 2023 International Business Conference

…LCCI commends early transmission, consideration, and signing of the federal budgets in recent times

Olushola Okunlade Writes

The Lagos Chamber of Commerce and Industry (LCCI) has cautioned the Federal Government to consider more ‘efficient alternatives’ to borrowings, rather than issuing N10.57trillion new loans to finance a deficit of N10.78 trillion, as proposed in the 2023 budget.

LCCI in a statement issued on Sunday, and signed by its Director General, Dr. Chinyere Almona, cautioned that, while a budget deficit of N10.78 trillion was not out of place, it, however, disagreed with issuing N10.57 trillion new loans, to finance the deficit.

The Chamber, therefore, called on the Federal Government to embrace equity financing, as an exclusive way of funding budget deficits; since it would save the country from paying huge interest payments.

The record 20.5 trillion Naira (or $47.3 billion) proposed expenditure by the Federal Government to run the economy in 2023 reflects the huge needs that exist in critical sectors of the economy. The proposed budget, which is 19% higher than the 2022 budget is expected to take effect from January 2023 to address economic growth, fiscal sustainability, and security.

“It must be noted however that the overall spending proposal of N20.51 trillion reduces to a non-debt spending proposal of N14.21 trillion once you deduct the proposed N6.3 trillion interest payments from the overall spending plan. So, we do not have a N20.51 trillion spending plan on the table. We only have a N14.21 trillion spending plan.”

In 2019, the Southern Swamp Associated Gas Solutions project was commissioned, and the SPDC JV is planning to reduce associated gas flaring further through its Forcados Yokri gas-gathering project, of which large parts are set to be completed in 2022. Despite such efforts to reduce continuous flaring, unfortunately flaring intensity (the amount of gas flared for every tonne of oil and gas produced) at both SPDC- and SNEPCo-operated facilities increased in 2021 owing to short-term operational issues. Flaring from SPDC-operated facilities increased by around 5% in 2021 compared with 2020. The increase was primarily because of the extended outage of the gas compression system in SPDC’s shallow-water operations. The system was restored and became operational from January 2022. Flaring at SNEPCo-operated facilities rose by around 160% in 2021 compared with 2020. This was mainly because of an increase in flaring on the Bonga floating production, storage and offloading (FPSO) vessel. Repairs to a flex-joint on the Bonga FPSO’s gas export riser in the second quarter took longer than expected, in part because of weather conditions. While repairs were under way, the FPSO continued to produce oil and therefore flaring was necessary for safety reasons. The repairs were safely concluded in July 2021. Although flaring intensity levels rose in 2021, SPDC and SNEPCo over the last 10 years have almost halved the combined amount of hydrocarbons they flare from 1.5 million tonnes in 2012 to 0.8 million tonnes in 2021. This reduction is the result of a strict flaring reduction management process and both SPDC and SNEPCo will continue to work in close collaboration with joint-venture partners and the government to make progress towards ending routine flaring of associated gas. NIGERIA LNG EXPANSION UNDERWAY Global demand for LNG continues to grow as the world increasingly seeks reliable supplies of lowercarbon energy. Shell’s investment in Nigeria’s gas infrastructure for export is expected to help 6 This is according to a data provided by global research and consultancy business Wood Mackenzie. the country benefit further from revenues. Shell Gas B.V. and its partners took a final investment decision in 2020 on a new LNG processing unit – known as Train 7 -- at NLNG. The expansion is expected to create around 12,000 jobs for Nigerians during construction and stimulate growth of the local oil and gas service sector, with 55% of engineering and procurement of goods and services being sourced in-country. Train 7 is expected to ensure Nigeria’s continued place as a global player in a lower-carbon energy source. Once operational, Train 7 will add around 8 million tonnes per annum of capacity to the Bonny Island LNG facility, taking the total production to around 30 million tonnes per annum. In 2021, NLNG began awarding procurement and construction contracts. Early works started at the site. The first phase of the worker village is expected to be ready for occupancy in 2022 and the new material offloading facility ready for use by the end of 2022. NLNG’s Train 7 is expected to come onstream in the middle of the 2020s. KEY LICENCE RENEWED FOR DEEP-WATER SNEPCo has interests in four deep-water blocks in the Gulf of Guinea, two of which it operates. Today, nearly one-third of Nigeria’s deep-water oil and gas production comes from the Bonga and the nonoperated Erha fields.6 Since production began in 2005, Bonga alone has produced more than 950 million barrels of oil with the 2021 average oil production per day at 105,000 barrels. The Bonga FPSO vessel has a total production capacity of 225,000 barrels of oil per day and 150 standard cubic feet of gas export per day. In 2021, the availability of the FPSO vessel increased to 80% from 70% in 2020. In addition to Bonga, SNEPCo’s exploration activities have led to several significant discoveries of oil and gas over the last two decades, including the Bolia and Doro fields (Shell interest 55%). Nigeria Briefing Notes Helping to power Nigeria’s economy 13 In the right investment climate, SNEPCo believes that there are opportunities to expand. In 2021 the OML 118 (Bonga) production sharing contract was renewed and the lease extended for 20 years. Bonga North and Bonga South West Aparo (BSWA) oil fields are two such potential opportunities. Bonga North is a proposed tie-back project to the existing Bonga FPSO with Phase 1 comprising 14 wells. BSWA is a development of a new FPSO with Phase 1 comprising 23 wells. SUPPORTING RENEWABLE ENERGY STARTUPS Millions of Nigerians are excluded from the country’s power grid and Shell Companies in Nigeria have established and provided substantial funding for a not-for-profit, impact-investing company called All On. Operating as an independent company, All On works to bring reliable electricity – often from renewable energy sources -- to off-grid urban and rural customers. This support aims to build a solid pipeline of viable businesses that can create the scale required to address Nigeria’s access to energy gap. In December 2019, SPDC and SNEPCo made a significant additional 10-year financing commitment of $160 million in All On, bringing the total commitment to $200 million. By the end of 2021, All On had provided investment capital to over 40 renewable energy start-ups in its portfolio – an increase of more than 30% from 2020. One such company is Infibranches Technologies Limited, to which All On has committed $2 million, which is expected to enable the indigenous technology company to expand sales of solar home systems via its more than 13,000 agent banking partners across Nigeria. With the support of the Rockefeller Foundation, the All On Hub was established in 2020 to provide nonfinancial support and build the capabilities of off-grid energy entrepreneurs. In 2021, the hub supported 81 ventures – nearly double the 41 supported in 2020. Also in 2021, All On, Odyssey Energy Solutions and the Global Energy Alliance for People and Planet launched a $10 million equipment financing facility as part of the DART pilot programme in Nigeria. 7 Hydraulic flying leads support the delivery of hydraulic fluid and/or chemicals between subsea equipment. 8 Subsea trees are an assembly of valves and other components used to monitor and control the production of a subsea well. DART will combine demand pooling, aggregated purchasing of solar equipment, and access to affordable finance to unlock economies of scale for solar companies, achieve cost savings for end-users, and accelerate the growth of the renewable energy sector in Nigeria and beyond. DEVELOPING LOCAL CONTENT AND SKILLS Shell Companies in Nigeria contribute to the growth of Nigerian businesses that can provide technical and support services to the industry. This includes the manufacture of tools and technical kits, the operation of helicopter flights in the Niger Delta, and strategic partnerships between foreign and local companies to stimulate technology transfer and capacity development. While there are government-required programmes in some areas, such as the Nigerian and Community Content Strategy embedded in the Assa North/Ohaji South gas development project, Shell Companies in Nigeria deliberately seek to contract local businesses wherever possible. In 2021, Shell Companies in Nigeria awarded $800 million worth of contracts to Nigerian-registered companies. Of these, 92% were companies with at least 51% Nigerian ownership. SNEPCo has awarded major engineering and construction contracts to companies that are indigenous, have local staff, or possess domestic capabilities in the country. At present, the manufacture and rebuild of hydraulic flying leads7 (HFLs) is being carried out in-country by wholly indigenous companies. Pressure Controls Systems Nigeria Limited, another Nigerian company, continues to refurbish old subsea trees.8 Sometimes, a lack of access to capital hinders Nigerian companies from competing for and executing contracts effectively. Shell Companies in Nigeria have provided access to nearly $1.6 billion in loans to 901 Nigerian vendors under the Shell Contractor Support Fund since 2012. These loans help improve their tendering opportunities.

LCCI also observed that the proposed revenue of N9.73 trillion does not reflect our peak revenue performance of N6trillion in 2021. It is unlikely that we are going to get that N6 trillion in 2022, as we reported only 1.6 trillion in the first four months. How we are projecting N9.73 trillion in revenue in 2023 is therefore a mystery. Even if we are lucky enough to generate the N9.73 trillion, we must also discount the N6.3 trillion projected interest payments out of it to leave us with a N3.43 trillion net revenue against the N14.21 trillion non-debt spending. This explains why the President is proposing a deficit of N10.78 trillion.

LCCI indicated that while nothing is wrong with the N10.78 trillion deficit, everything is wrong with the plan to issue N10.57 trillion (N8.8 trillion in new commercial loans and N1.77 trillion drawdown on bilateral and multilateral loans) new loans to finance the deficit, at a time that we are already placed on the watchlists of some of our foreign bondholders, and the world is still trying to process our president’s well-publicized call for debt cancelation at the last United Nations General Assembly.

“It is the exclusive use of debt to finance deficits that got us into a situation where we cannot keep the revenue we are earning today, as we use the bulk of our revenue to settle interest payments, and it is increasingly not enough to cover the interest payments. In the 2022 year-to-April, the interest payments were more than the revenue, and it is most unlikely that the revenue will be more than interest payments in the full-year 2022 or even in 2023.”

“It is comforting that the 2023 budget is still at the proposal stage. It behooves all well-meaning stakeholders to make constructive inputs to the Presidency and the National Assembly now. Can we consider more efficient alternatives to new borrowings? Can we issue equity to finance the deficit instead of using debt? Can we break from the path in which the Federal Government only approaches the debt markets at home and abroad and never approaches the equity market at home or abroad? Investors invest in debt. But they also invest in equity.”

“Our approach should not be to continue issuing only debt, especially with the increasingly unbearable burden of interest payments that exposes our fiscal vulnerability. Massive equity financing is the choice we should all urge the Federal Government to consider now. Nigeria should henceforth use equity financing as an exclusive way of funding budget deficits. If we embrace equity financing, we do not have to make huge interest payments, and we can use some of the proceeds of our equity issuance to pay some of the down debt, make the fiscal situation more sustainable and rekindle much-needed confidence in our economic and fiscal resilience.”

LCCI stated that is not too late to use equity to fund the 2023 deficit proposal. The current administration should be encouraged to take advantage of the equity choice to bequeath a legacy that the incoming administration can build upon as we find our way back to the path of fiscal sustainability as a nation.

LCCI commends the early transmission, consideration, and signing of the federal budgets in recent times. Just like in 2022, the Federal Government transmitted the 2022 budget to the National Assembly on the 7th of October 2021.  The 2022 budget, titled “Budget of Economic Growth and Sustainability” valued at N17.126 trillion, was transmitted to the President by the National Assembly, on Friday, December 24, 2021. We expect to see an earlier transmission by the National Assembly and signing into law earlier than last year.

“It is commendable to note the strategic objective of the expenditure policy which focuses on macroeconomic stability, human development, food security, improved business environment, energy sufficiency, improving transport infrastructure, and promoting industrialization by focusing on Small and Medium Scale Enterprises.”

Beyond the figures and policy statements contained in the 2023 Federal Government budget, the Chamber wishes to highlight some recommendations for implementation:

  1. We can improve the performance of the 2023 budget by studying how the 2022 budget has performed so far, looking at what has worked well, what failed, and what must be corrected in the implementation of the 2023 budget.
  2. Governments at all levels must put actionable policies in place to address the high costs of fuel and food. The high rate of inflation will continue to distort most of the budget assumptions and targets if not curtailed.
  3. Particular attention must be put on investing more in transport infrastructure in resolving the many logistical challenges that have impacted the movement of goods across the nation.
  4. Looking beyond oil revenues, we can enhance our forex earnings through the increased inflow of foreign direct investments. We need to invest more in infrastructure and critical port reforms to reduce the bottlenecks in our export logistics and processes that will boost non-oil production and exports.
  5. The allocation of N470billion to revitalize tertiary institutions and enhance the salaries of university staff is commendable and at least a show of concern about the plight of the university community in recent times. However, we must accept that the current funding model for our universities is not sustainable in the face of the many revenue challenges being tackled by the government. A more sustainable way is to grant financial autonomy to the universities with a new emphasis on equity investments for infrastructure.
  6. In addressing the most significant components of human development, we urge governments at all levels to remain consistent in funding education, health, infrastructure, and security. One-off funding cannot address the decay in these areas within a year. It must be a practice and tradition of seeking robust equity funding for these areas consistently.
  7. It is now obvious to us that we may not even be able to source debts from foreign investors as in the past. Many factors have diminished our debt ratings, and this should push the government to consider immediate issuance of wholesale equity investment at home and abroad to fund idle assets to finance the deficits instead of borrowing more.

We must immediately block revenue leakages by curbing oil theft, pipeline vandalization, and trimming excessive fuel, power, gas, and forex subsidies, as well as massive tax and duty waivers to lift revenue to N20 to N30 trillion thresholds from the present N6 to N10 trillion thresholds.

Economy

Our Response: Perception Survey On The First 60 Days Of President Bola Tinubu Administration 

Published

on

Our Response: Perception Survey On The First 60 Days Of President Bola Tinubu Administration 

We appreciate the intense emotions and debate sparked by the aforementioned study conducted by CMC Connect LLP (Perception Consulting), especially given the challenges Nigerians are currently facing.

Our decision to conduct the survey was motivated by a desire to deepen our democracy through public feedback that can assist the government feel the pulse of the people.

The report includes numerous perspectives for constructively engaging the present government, and we encourage everyone to read it beyond the sensational headlines. Also, there is a significant variance dependent on crucial research criteria such as demography, sample size, and time.

With over 30 years of proven experience as a leading Perception Consulting firm in Nigeria, our track record is driven by integrity and commitment to excellence.

We are happy to share our methodology to demonstrate that we followed global professional standards in conducting surveys of this type and assure the public that it is free of influence from any source, including funding of the exercise, which was entirely undertaken by our firm as part of our corporate social responsibility.

We have just evaluated the data we received from the field, and we will like to encourage more Nigerians to participate in similar surveys on a regular basis to help promote good governance, and advance our democracy, economy, and ultimately, the nation.

Our Response: Perception Survey On The First 60 Days Of President Bola Tinubu Administration

Continue Reading

Economy

International Cooperation In Financial Security Among Key Topics Of The Economic Forum

Published

on

Russia–Africa Economic And Humanitarian Forum Set To Host St. Petersburg Seasons Festival Of Culture At Second Russia–Africa Summit

Rashidat Okunlade Writes

On 27 July, the panel discussion ‘International Cooperation in Financial Security’ was part of the business programme of the Russia–Africa Economic and Humanitarian Forum as part of the ‘New Global Economy’ track.

The session will be moderated by Nikolay Zhuravlev, Deputy Chairman of the Federation Council of the Federal Assembly of the Russian Federation. The following participants are expected to join the discussion: German Neglyad, State Secretary – Deputy Director, Federal Financial Monitoring Service; Ilya Yasinskiy, Director of Financial Monitoring and Currency Control Department, Bank of Russia; Alexey Lyzhenkov, Deputy Director of the Department for New Challenges and Threats, Ministry of Foreign Affairs of the Russian Federation; Ahmed Said Hussein Khalil, Chairman, Egyptian Money Laundering and Terrorist Financing Combating Unit; and Dubale Mukuken Yirga, Head of Legal Division, Eastern and Southern Africa Anti-Money Laundering Group, etc.

In today’s world, the fight against financial crime is complicated by the fact that the theft of funds takes place in the absence of physical contact, and the interaction between the perpetrator and the potential victim takes place in virtual space or through the use of communications. Financial technology, which is experiencing explosive growth, allows literally dozens of cross-border transfers to be made around the world in a matter of seconds. These convenient information and financial technologies are actively used by fraudsters, drug traffickers, terrorists, corrupt officials, human and arms traffickers, and other criminals. Investigating their crimes and unraveling their ‘financial traces’ is impossible without cooperation between the competent government authorities of different countries whose jurisdictions are affected by these crimes. The panelists will answer the following questions: what is needed to strengthen bilateral and multilateral cooperation in the area of financial security, anti-money laundering, and countering the financing of terrorism, and what needs to be done to effectively carry out preventive work, including with young people, to explain how these offences (fraud is among them) are committed?

“In the context of the COVID-19 pandemic, significant segments of the economy and, consequently, financial activity of citizens have gone online. The sector of shadow web markets has expanded, the number of duplicate websites disguised as original ones is growing, the number of cases of funds embezzlement from bank cards and e-mail spamming for this purpose is increasing, and the use of cryptocurrencies by terrorist groups as one of the safest ways of self-financing is gaining momentum. Countering the financing of terrorism is one of the key areas on the agenda of international antiterrorist cooperation,” said Alexey Lyzhenkov, Deputy Director of the Department for New Challenges and Threats, Ministry of Foreign Affairs of the Russian Federation.

 

The panel discussion is scheduled for 14:00 in conference hall G1 (pavilion G).

 

The Roscongress Foundation is the organizer of the Second Russia–Africa Summit and Economic and Humanitarian Forum.

 

Official website: summitafrica.ru 

 

Continue Reading

Economy

The Promise Of Prosperity In The Face Of Change: A Bold Leap For Nigeria

Published

on

The Promise Of Prosperity In The Face Of Change: A Bold Leap For Nigeria

By Otega Ogra

Change is never easy. It is often met with resistance, fear, and uncertainty. But it is through change that progress is made. The recent quick-fix economic reforms initiated by President Bola Tinubu’s administration, including the removal of fuel subsidies and the consolidation of multiple foreign exchange regimes, are a testament to this truth.

These reforms, though challenging in the short term, hold the promise of a more prosperous and stable Nigeria. They represent a bold step towards economic self-sufficiency, a move away from unsustainable subsidies, and a commitment to a more transparent and efficient foreign exchange market. But President Tinubu understands that these changes, while necessary, will have an immediate impact on the Nigerian economy.

The Promise Of Prosperity In The Face Of Change: A Bold Leap For Nigeria

Otega Ogra.

That’s why his administration has put in place a series of measures to cushion these effects and ensure that no Nigerian is left behind. From the establishment of the Infrastructure Support Fund (ISF) to the planned distribution of grains and fertilizers to 50 million Nigerians starting this week in collaboration with the states, from the activation of land banks to the creation of a National Commodity Board to the various taxes suspended or deferred to help Nigerians, and the half a billion dollars mobilized at the Food conference in Rome yesterday, these measures are designed to provide immediate relief and pave the way for long-term prosperity.

These are not mere palliatives; they are strategic investments in our future. They are a testament to President Tinubu’s commitment to creating a Nigeria that is not only self-sufficient but also prosperous and resilient.

So, as we navigate these challenging times, let us remember that we are not alone. We have a leader who is not only aware of our struggles but is also committed to ensuring our prosperity. President Tinubu is confident in the resilience of the Nigerian People and the strength of the Nation’s economy. Let us embrace these changes, not with fear, but with hope and confidence in the promise of a brighter future. There is light at the end of the tunnel, and with these reforms, Nigeria is taking a bold step toward that light.

 

Continue Reading

Trending