The Federal Government of Nigeria has retained N360 to a dollar as the country’s official exchange rate. This was according to the 2021 – 2023 Medium Term Expenditure Framework and Fiscal Strategy Paper. The details were released by the Ministry of Finance, Ahmed Zainab, during a “Public Consultative Forum,” on Friday.
Despite growing speculations about the devaluation of Naira and global economic uncertainty, the federal government has left the country’s exchange rate at N360 per dollar. This calls for concerns as international organisations and analysts have urged Nigeria to harmonise foreign exchange markets.
Dataphyte Chart of the day: Economic Crisis in Nigeria Started Before COVID-19 Pandemic. Now it is worse!
Data Source: Dataphyte Research and Budget Office#COVID-19 #coronavirus #unemployment #corruption pic.twitter.com/o1bvHwMUcv— Dataphyte (@Dataphyte) July 11, 2020
Currently, Nigeria has about five different exchange rate regimes. The official market pegged at N360/$1 and the Investors and Exporters’ Window at N381 to the dollar. There is also the Parallel Market, which is currently above N450. The Central Bank of Nigeria (CBN), through various market interventions, also sells FX for medical tourism, education, and SMEs.
Speaking on the value of the naira, Clement Ike, the Minister of State for Budget and National Planning said the local currency is within the purview of the CBN. He said the monetary authority is in the best position to adjust the rate. “What we have is still the N360 to the dollar.”
Oil Production and Oil Price Projection
According to the MTEF Projections, the oil production benchmark has been pegged at 1.86 million per barrel per day in 2021, 2.09 million productions per barrel per day in 2022, and 2.38 million for 2023.
Likewise, the projected oil price for 2021 is $40 per barrel for 2021, 2022, and 2023.
For the 2021 outlook, the fiscal deficit is projected at N5.16 trillion, aggregate projected revenue at N6.9 trillion while expenditure is projected at N11.86 trillion. Overall, the economy is projected to decline by 4.2% in 2020 on the projection that the oil economy will slump by 12.96% in 2020. The resultant effect of oil GDP is expected to drag the non-oil sector slower by 3.6% year-on-year.
The nominal GDP is expected to increase from N130.84 billion in 2020, N132.13 billion in 2021, and up to N138.42 billion by 2023. Similarly, consumption expenditure is projected to remain flat N118.74 billion this year and N118.4 billion in 2021 and grew to N124.36 billion by 2023. This reflects a gradual steadiness in the country.
The government alluded to the significant medium-term fiscal challenges, especially with respect to its revenues. This is caused largely due to COVID-19 related disruptions which have exacerbated structural weakness with the economy.
Meanwhile, the Federal government expects inflation to remain above single-digit over the medium term, significantly impact on the cost of doing business, including a high cost on food distribution.
Mr. Atiku Samuel, a policy analyst, urged Nigeria to widen its tax net and ensure that inputs from stakeholders are considered in the affairs of the state.
He advised the government to look at ways of raising substantial taxes such as Personal income tax and Value Added Tax. “One way to do this is to increase consumer spending. When you do this, government revenue will increase.
“The big employer of labour remain in the informal sector. The government needs to look at obstacles of why are people not formalising business entities. Try and formulate a policy that will solve this and increase the tax base.”
In terms of leakage, he called for an automated system of remitting Value Added Tax. With this, he advised the government to find a way to ensure the money generated from sales are remitted to the coffer.
Mr Atiku also said the government needs to harness a lot of ideas. This includes boosting of tax morale, simplify tax payment, and verification of tax payment.
Mr. Tope Fasuwa, an economist and ex-Presidential candidate of ANRP(Abundant Nigerian Renewal Party), urged policymakers to explore every opportunity to block wastages and increase capital expenditure. “Every opportunity should be explored. Even with the ongoing investigation of Mr. Ibrahim Magu, the Chairman of the Economic and Financial Crimes Commission (EFCC), the government should ensure loopholes and financial crimes are blocked.”
2020 Budget Implementation
- FG share of oil revenue was N701 billion while non-oil revenue totalled N439.2billion
- Companie income tax and VAT collected amounted to N213.24 billion and N68.09 billion, representing 62% and 58% of prorate revised target for the period.
- Customs collections were N18 billion (73% of the revised budget target). the revenues amounted to N339.51 billion, while N80.22 billion.
- Between January and May 2015, the federal government said it has spent N3.12 trillion. Out of which N1.2 trillion went into debt service and N1.32 trillion for personal cost, including Pensions.
- At the end of May 2020, only N253.33 billion had been released for capital expenditure. The Minister of Finance said this was largely due to the budget revision exercise.