The nation’s current daily oil production has now fully complied and surpassed the mark with its promised cuts under an agreement among major oil producers, NNPC chief, Mele Kyari, explained.
During an Atlantic Council Zoom call, Kyari noted that Nigeria, which holds the position of Africa’s largest oil exporter, had previously failed at complying completely with its promised cuts in past months. The essence is, thus, to ensure that it fully makes up for the gaps by July.
“Our actual daily production indicates we’re in an overconforming situation,” he said.
With more of the countries under the OPEC+ deal compliant, an extension of the agreement into the month of August will not be necessary. During the call, he also noted that NNPC is putting measures in place to ensure that the country can stop fuel importation within a period of three years.
Given the conversations Nigeria has been having with U.S. companies including Bechtel and KBR on potential projects such as oil refineries, pipelines, and gas projects, he noted the partnership efforts being made by the government to fix the nation’s suboptimal refineries.
READ MORE: Why are oil prices down despite a successful OPEC meeting?
Previous efforts to revamp the refineries had failed for years until they were completely shut down by NNPC in the month of April. Kyari, however, said he was confident that the refineries would get up and running again in no time.
Speaking on the refinery projects, he said, “We have a new framework, and this will enable others to help us.”
Related
Nigeria explains when it will fully comply with OPEC+ output cutJune 10, 2020In "Energy"
NNPC to maintain crude oil production cut amidst bearish market trendAugust 15, 2019In "Business News"
Mele Kyari officially takes over as NNPC GMDJuly 8, 2019In "Business News"
ECONOMY & POLITICS
NNPC states why it failed to fix refineries, to build 200,000 capacity refinery
Mele Kyari disclosed that the failure to fix the refineries over the years was a strategy problem.
Published
6 hours agoon
June 14, 2020
The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari, has explained why the country has not been able to successfully fix the refineries after about 20 years of trying to do that.
The NNPC boss said that the failure to fix the refineries over these years was a strategy problem, as they never knew what they wanted to do with it. He said that the corporation didn’t get the right advisory services and the right strategy to go through with it.
Mele Kyari disclosed this on Friday, during a virtual conference organized by Atlantic council. He said that it was difficult to explain why an oil-producing country like Nigeria would become a net importer of petroleum products.
READ ALSO: Government can unlock N4 trillion by removing these subsidies – PWC
According to Kyari, “This reason is very simple, we couldn’t fix our refineries and that’s very difficult to explain. Why can’t we fix our refineries? We started this very many years ago. For 20 years, all attempts to fix the refineries failed for very simple reason, there is a strategy problem.
“First, we never knew what we wanted to do with it; we didn’t get the right advisory, the right strategy to go through this. And we started a process 4 years ago to getting oil traders to come and help us fix this, that never worked. We also have the strategy to make sure that we get in the original refinery builders to help us do it. That is not their job. It’s just like you are buying a car and saying that Toyota must come and repair it for you, that doesn’t work anywhere.’’
READ MORE:NNPC unveils COVID-19 contacts tracing app, marketers to buy petroleum products online
Going further, Kyari said that the country has changed its strategy to make sure that they have a new framework. The framework is to help the corporation and also the investors to put their money into it and ultimately change that equation. He said the way to go is to first fix the refineries as they have set a target for that and have a clear strategy for achieving it.
The NNPC boss also said that NNPC is working on building a condensate refinery in order to achieve self-sufficiency in refined petroleum products. He said that the condensate refinery which should have a total refining capacity of 200,000 barrels per day would complement production at Dangote Refinery when it takes off and the four NNPC refineries when they have been fixed and revived.
ECONOMY & POLITICS
LASG reacts to protests over delayed salaries of street sweepers
There are 7,500 street sweepers employed by 120 service providers across the state, according to LAWMA.
Published
7 hours agoon
June 14, 2020
The Lagos state government has reacted to recent protests and agitations by its road sweepers, over delay in salary payments.
According to a statement from the Acting Managing Director/Chief Executive Officer, Lagos State Waste Management Authority (LAWMA), Mr. Ibrahim Odumboni, the government had released payments for April 2020 to the contractors, and plans are underway to release payments for May 2020.
“LAWMA has made the April payments to our sweeping contractors for onward disbursement to their staff members. In addition, efforts are being made to ensure prompt release of subsequent payments, not only for May, but all future payments,” he assured.
Odumbomi noted in his statement that the government engages independent contractors, who in turn engage the sweepers, and makes all payments directly to them.
He added that though no contract exists directly between the government and the road sweepers, their welfare is a priority to the government, and efforts are in top gear to ensure that they receive subsequent payments soon.
READ MORE: FAAC disburses N780.93 billion in April, allocation increases by 34%
He appealed for support and understanding from the sweepers, assuring that the LAWMA appreciated their committed service, especially during this pandemic.
According to him, the issue “will be discussed with the contractor and amicably resolved to the satisfaction of all stakeholders.”
There are 7,500 street sweepers employed by 120 service providers across the state, according to LAWMA.
A recent report had revealed some of the harsh conditions under which some of the street sweepers had to work, with some of them having their salaries delayed as far as the 15th day of a new month. The report also showed that despite the high risk they face of being involved in road accidents, there is no life insurance covering the sweepers.
ECONOMY & POLITICS
Nigeria records debt service to revenue ratio of 99% in first quarter of 2020.
This suggests almost all the revenue generated was used to meet debt service obligations.
Published
1 day agoon
June 13, 2020
The rising cost of Nigeria’s debt profile breached a new milestone with the country’s debt service as a percentage of revenue rising to 99% in the first quarter of 2020. This is contained in the Medium-Term Expenditure Framework and Fiscal Strategy (MTEF/FSP) report recently released by the Federal Ministry of Finance, Budget, and National Planning
A cursory review of the data obtained from the MTEF/FSP report shows that in Q1 2020, Nigeria incurred a total sum of N943.12 billion in debt service while the federal government retained revenue was put at N950.56 billion. This implies Nigeria’s debt service to revenue is estimated to be 99% during the period.
This is the highest on record and it suggests almost all the revenue generated from both oil and non-oil sources was used to meet debt service obligations.
Debt service, recurrent expenditure, and Revenue Breakdown
Nigeria like the rest of the world has been battling with the COVID-19 pandemic and was expected to suffer a significant revenue shortfall. However, the data suggests the government may have experienced a significant drop in revenues before the lockdown induced economic downturn indicating that things may indeed be worse than projected.
According to the data, the country earned N950.5 billion in revenue compared to a prorated budget of N1.9 trillion representing a whopping shortfall of 52%. Oil revenue was N464 million representing a shortfall of 30% when compared to budget while non-oil revenue was N269 billion representing a shortfall of 40%.
READ ALSO: Nigeria’s fiscal quandry: A revenue problem or a debt problem?
Source: MTEF Framework2020-2022.
Despite the revenue shortfalls recorded, government recurrent expenditure (debt and non-debt) remained in line with budgetary expectations. According to the data, debt service for the first quarter of the year rose to N943.1 billion divided into domestic debt (N594.23 billion), Foreign Debt (N129.51), and Interest on Ways and Means (219.38 billion) respectively.
Recurrent non-debt expenditure was N1.1 trillion, largely in line with budget expectations a common feature over the last two decades. However, capital expenditure was N139.7 billion, a whopping 71.3% off target as much needed capital expenditure suffered yet another decline.
Is Nigeria “Bankrupt”?
The continued depletion in Nigeria’s revenue continues to raise questions around the solvency of the Nigerian economy. Generally, debt sustainability can be explained using either debt to GDP or debt service to revenue ratio.
With Nigeria’s total public debt below 30% of GDP, the country’s debt burden appears to be relatively light compared with many other countries. Meanwhile, debt-to-GDP is not regarded as the best indicator of debt sustainability, especially in a country where tax-to-GDP is low. For Nigeria, a better indicator of debt sustainability is the debt service-to-revenue ratio, which in Nigeria has in recent years risen to worrying levels, and now 99% as at Q1 2020
In 2019, former CBN Governor, Sanusi Lamido, declared that Nigeria is “bankrupt and the country is heading to bankruptcy”. This statement credited to the former Emir of Kano State just after the African Development Bank (AfBD) revealed that Nigeria spends more than 50% of its revenue on debt servicing, and this is worrisome.
READ: Evidence that Sanusi is right about Nigeria ‘going bankrupt’
Gloomy Outlook
With the economy likely on the path to a recession, government revenues particularly non-oil revenues could remain depressed this quarter and the next. This means the government will still need to rely on debt borrowing to fund its operations. Just recently, the national assembly approved another $5.5 billion in debt borrowing for the Federal Government piling more pressure on Nigeria’s debt service to revenue ratio.
Though the latest rise in crude oil prices presents a silver lining, Nigeria still faces a cut in its crude oil output and will earn less oil revenue than was projected. The government has also cut its crude oil benchmark as contained in the MTEF.
“Crude oil production volume has been revised downwards from the 2.18 million barrels per day (mbpd) in the 2020 Budget to 1.9 mbpd (out of which 400kbpd is condensate). This reflects recent oil output cut by the OPEC and its allies to stabilize the world oil market. which put Nigeria’s quota at 1.48mbpd, excluding condensates. Oil production averaged 2.1mbpd in the first two months of the year before the collapse in demand and price as most economies went into lockdown.
READ ALSO: LCCI condemns Senate over Buhari’s $22.7 billion loan approval
Crude oil producers are experiencing great difficulty in selling crude cargoes, resulting in heavy price discounting to attract buyers. Nevertheless, the lower production volume has enabled the NNPC to shut in some very high cost oil wells, and hence lowered the average production cost, from about US$33 to under US$28 per barrel.” MTEF
These challenges also suggest the government may have to rely on funding from the CBN to meet its revenue shortfalls. The government has in the past relied on the CBN Ways and Means to fund recurrent expenditure as it repays with future oil inflows.
The Bottomline: Revenue outlook still muted
According to the Joint World Bank-IMF Debt Sustainability Framework for Low-Income Countries released in 2020, a country’s debt service to revenue threshold should not exceed 23%.
Meanwhile, Nigeria currently stays around 99%. This implies out of every 100 Naira that Nigerian earned in Q1 2020, 99 Naira was spent on servicing debts.
This is an unsustainable model for Nigeria and cannot continue for too long. At some point, the government will have to increase its revenues or face further spending cuts.
The nation’s current daily oil production has now fully complied and surpassed the mark with its promised cuts under an agreement among major oil producers, NNPC chief, Mele Kyari, explained.
During an Atlantic Council Zoom call, Kyari noted that Nigeria, which holds the position of Africa’s largest oil exporter, had previously failed at complying completely with its promised cuts in past months. The essence is, thus, to ensure that it fully makes up for the gaps by July.
“Our actual daily production indicates we’re in an overconforming situation,” he said.
With more of the countries under the OPEC+ deal compliant, an extension of the agreement into the month of August will not be necessary. During the call, he also noted that NNPC is putting measures in place to ensure that the country can stop fuel importation within a period of three years.
Given the conversations Nigeria has been having with U.S. companies including Bechtel and KBR on potential projects such as oil refineries, pipelines, and gas projects, he noted the partnership efforts being made by the government to fix the nation’s suboptimal refineries.
READ MORE: Why are oil prices down despite a successful OPEC meeting?
Previous efforts to revamp the refineries had failed for years until they were completely shut down by NNPC in the month of April. Kyari, however, said he was confident that the refineries would get up and running again in no time.
Speaking on the refinery projects, he said, “We have a new framework, and this will enable others to help us.”
Related
Nigeria explains when it will fully comply with OPEC+ output cutJune 10, 2020In "Energy"
NNPC to maintain crude oil production cut amidst bearish market trendAugust 15, 2019In "Business News"
Mele Kyari officially takes over as NNPC GMDJuly 8, 2019In "Business News"
ECONOMY & POLITICS
NNPC states why it failed to fix refineries, to build 200,000 capacity refinery
Mele Kyari disclosed that the failure to fix the refineries over the years was a strategy problem.
Published
6 hours agoon
June 14, 2020The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari, has explained why the country has not been able to successfully fix the refineries after about 20 years of trying to do that.
The NNPC boss said that the failure to fix the refineries over these years was a strategy problem, as they never knew what they wanted to do with it. He said that the corporation didn’t get the right advisory services and the right strategy to go through with it.
Mele Kyari disclosed this on Friday, during a virtual conference organized by Atlantic council. He said that it was difficult to explain why an oil-producing country like Nigeria would become a net importer of petroleum products.
READ ALSO: Government can unlock N4 trillion by removing these subsidies – PWC
According to Kyari, “This reason is very simple, we couldn’t fix our refineries and that’s very difficult to explain. Why can’t we fix our refineries? We started this very many years ago. For 20 years, all attempts to fix the refineries failed for very simple reason, there is a strategy problem.
“First, we never knew what we wanted to do with it; we didn’t get the right advisory, the right strategy to go through this. And we started a process 4 years ago to getting oil traders to come and help us fix this, that never worked. We also have the strategy to make sure that we get in the original refinery builders to help us do it. That is not their job. It’s just like you are buying a car and saying that Toyota must come and repair it for you, that doesn’t work anywhere.’’
READ MORE:NNPC unveils COVID-19 contacts tracing app, marketers to buy petroleum products online
Going further, Kyari said that the country has changed its strategy to make sure that they have a new framework. The framework is to help the corporation and also the investors to put their money into it and ultimately change that equation. He said the way to go is to first fix the refineries as they have set a target for that and have a clear strategy for achieving it.
The NNPC boss also said that NNPC is working on building a condensate refinery in order to achieve self-sufficiency in refined petroleum products. He said that the condensate refinery which should have a total refining capacity of 200,000 barrels per day would complement production at Dangote Refinery when it takes off and the four NNPC refineries when they have been fixed and revived.
ECONOMY & POLITICS
LASG reacts to protests over delayed salaries of street sweepers
There are 7,500 street sweepers employed by 120 service providers across the state, according to LAWMA.
Published
7 hours agoon
June 14, 2020The Lagos state government has reacted to recent protests and agitations by its road sweepers, over delay in salary payments.
According to a statement from the Acting Managing Director/Chief Executive Officer, Lagos State Waste Management Authority (LAWMA), Mr. Ibrahim Odumboni, the government had released payments for April 2020 to the contractors, and plans are underway to release payments for May 2020.
“LAWMA has made the April payments to our sweeping contractors for onward disbursement to their staff members. In addition, efforts are being made to ensure prompt release of subsequent payments, not only for May, but all future payments,” he assured.
Odumbomi noted in his statement that the government engages independent contractors, who in turn engage the sweepers, and makes all payments directly to them.
He added that though no contract exists directly between the government and the road sweepers, their welfare is a priority to the government, and efforts are in top gear to ensure that they receive subsequent payments soon.
READ MORE: FAAC disburses N780.93 billion in April, allocation increases by 34%
He appealed for support and understanding from the sweepers, assuring that the LAWMA appreciated their committed service, especially during this pandemic.
According to him, the issue “will be discussed with the contractor and amicably resolved to the satisfaction of all stakeholders.”
There are 7,500 street sweepers employed by 120 service providers across the state, according to LAWMA.
A recent report had revealed some of the harsh conditions under which some of the street sweepers had to work, with some of them having their salaries delayed as far as the 15th day of a new month. The report also showed that despite the high risk they face of being involved in road accidents, there is no life insurance covering the sweepers.
ECONOMY & POLITICS
Nigeria records debt service to revenue ratio of 99% in first quarter of 2020.
This suggests almost all the revenue generated was used to meet debt service obligations.
Published
1 day agoon
June 13, 2020The rising cost of Nigeria’s debt profile breached a new milestone with the country’s debt service as a percentage of revenue rising to 99% in the first quarter of 2020. This is contained in the Medium-Term Expenditure Framework and Fiscal Strategy (MTEF/FSP) report recently released by the Federal Ministry of Finance, Budget, and National Planning
A cursory review of the data obtained from the MTEF/FSP report shows that in Q1 2020, Nigeria incurred a total sum of N943.12 billion in debt service while the federal government retained revenue was put at N950.56 billion. This implies Nigeria’s debt service to revenue is estimated to be 99% during the period.
This is the highest on record and it suggests almost all the revenue generated from both oil and non-oil sources was used to meet debt service obligations.
Debt service, recurrent expenditure, and Revenue Breakdown
Nigeria like the rest of the world has been battling with the COVID-19 pandemic and was expected to suffer a significant revenue shortfall. However, the data suggests the government may have experienced a significant drop in revenues before the lockdown induced economic downturn indicating that things may indeed be worse than projected.
According to the data, the country earned N950.5 billion in revenue compared to a prorated budget of N1.9 trillion representing a whopping shortfall of 52%. Oil revenue was N464 million representing a shortfall of 30% when compared to budget while non-oil revenue was N269 billion representing a shortfall of 40%.
READ ALSO: Nigeria’s fiscal quandry: A revenue problem or a debt problem?
Source: MTEF Framework2020-2022.
Despite the revenue shortfalls recorded, government recurrent expenditure (debt and non-debt) remained in line with budgetary expectations. According to the data, debt service for the first quarter of the year rose to N943.1 billion divided into domestic debt (N594.23 billion), Foreign Debt (N129.51), and Interest on Ways and Means (219.38 billion) respectively.
Recurrent non-debt expenditure was N1.1 trillion, largely in line with budget expectations a common feature over the last two decades. However, capital expenditure was N139.7 billion, a whopping 71.3% off target as much needed capital expenditure suffered yet another decline.
Is Nigeria “Bankrupt”?
The continued depletion in Nigeria’s revenue continues to raise questions around the solvency of the Nigerian economy. Generally, debt sustainability can be explained using either debt to GDP or debt service to revenue ratio.
With Nigeria’s total public debt below 30% of GDP, the country’s debt burden appears to be relatively light compared with many other countries. Meanwhile, debt-to-GDP is not regarded as the best indicator of debt sustainability, especially in a country where tax-to-GDP is low. For Nigeria, a better indicator of debt sustainability is the debt service-to-revenue ratio, which in Nigeria has in recent years risen to worrying levels, and now 99% as at Q1 2020
In 2019, former CBN Governor, Sanusi Lamido, declared that Nigeria is “bankrupt and the country is heading to bankruptcy”. This statement credited to the former Emir of Kano State just after the African Development Bank (AfBD) revealed that Nigeria spends more than 50% of its revenue on debt servicing, and this is worrisome.
READ: Evidence that Sanusi is right about Nigeria ‘going bankrupt’
Gloomy Outlook
With the economy likely on the path to a recession, government revenues particularly non-oil revenues could remain depressed this quarter and the next. This means the government will still need to rely on debt borrowing to fund its operations. Just recently, the national assembly approved another $5.5 billion in debt borrowing for the Federal Government piling more pressure on Nigeria’s debt service to revenue ratio.
Though the latest rise in crude oil prices presents a silver lining, Nigeria still faces a cut in its crude oil output and will earn less oil revenue than was projected. The government has also cut its crude oil benchmark as contained in the MTEF.
“Crude oil production volume has been revised downwards from the 2.18 million barrels per day (mbpd) in the 2020 Budget to 1.9 mbpd (out of which 400kbpd is condensate). This reflects recent oil output cut by the OPEC and its allies to stabilize the world oil market. which put Nigeria’s quota at 1.48mbpd, excluding condensates. Oil production averaged 2.1mbpd in the first two months of the year before the collapse in demand and price as most economies went into lockdown.
READ ALSO: LCCI condemns Senate over Buhari’s $22.7 billion loan approval
Crude oil producers are experiencing great difficulty in selling crude cargoes, resulting in heavy price discounting to attract buyers. Nevertheless, the lower production volume has enabled the NNPC to shut in some very high cost oil wells, and hence lowered the average production cost, from about US$33 to under US$28 per barrel.” MTEF
These challenges also suggest the government may have to rely on funding from the CBN to meet its revenue shortfalls. The government has in the past relied on the CBN Ways and Means to fund recurrent expenditure as it repays with future oil inflows.
The Bottomline: Revenue outlook still muted
According to the Joint World Bank-IMF Debt Sustainability Framework for Low-Income Countries released in 2020, a country’s debt service to revenue threshold should not exceed 23%.
Meanwhile, Nigeria currently stays around 99%. This implies out of every 100 Naira that Nigerian earned in Q1 2020, 99 Naira was spent on servicing debts.
This is an unsustainable model for Nigeria and cannot continue for too long. At some point, the government will have to increase its revenues or face further spending cuts.
The nation’s current daily oil production has now fully complied and surpassed the mark with its promised cuts under an agreement among major oil producers, NNPC chief, Mele Kyari, explained.
During an Atlantic Council Zoom call, Kyari noted that Nigeria, which holds the position of Africa’s largest oil exporter, had previously failed at complying completely with its promised cuts in past months. The essence is, thus, to ensure that it fully makes up for the gaps by July.
“Our actual daily production indicates we’re in an overconforming situation,” he said.
With more of the countries under the OPEC+ deal compliant, an extension of the agreement into the month of August will not be necessary. During the call, he also noted that NNPC is putting measures in place to ensure that the country can stop fuel importation within a period of three years.
Given the conversations Nigeria has been having with U.S. companies including Bechtel and KBR on potential projects such as oil refineries, pipelines, and gas projects, he noted the partnership efforts being made by the government to fix the nation’s suboptimal refineries.
READ MORE: Why are oil prices down despite a successful OPEC meeting?
Previous efforts to revamp the refineries had failed for years until they were completely shut down by NNPC in the month of April. Kyari, however, said he was confident that the refineries would get up and running again in no time.
Speaking on the refinery projects, he said, “We have a new framework, and this will enable others to help us.”
Related
Nigeria explains when it will fully comply with OPEC+ output cutJune 10, 2020In "Energy"
NNPC to maintain crude oil production cut amidst bearish market trendAugust 15, 2019In "Business News"
Mele Kyari officially takes over as NNPC GMDJuly 8, 2019In "Business News"
ECONOMY & POLITICS
NNPC states why it failed to fix refineries, to build 200,000 capacity refinery
Mele Kyari disclosed that the failure to fix the refineries over the years was a strategy problem.
Published
6 hours agoon
June 14, 2020The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari, has explained why the country has not been able to successfully fix the refineries after about 20 years of trying to do that.
The NNPC boss said that the failure to fix the refineries over these years was a strategy problem, as they never knew what they wanted to do with it. He said that the corporation didn’t get the right advisory services and the right strategy to go through with it.
Mele Kyari disclosed this on Friday, during a virtual conference organized by Atlantic council. He said that it was difficult to explain why an oil-producing country like Nigeria would become a net importer of petroleum products.
READ ALSO: Government can unlock N4 trillion by removing these subsidies – PWC
According to Kyari, “This reason is very simple, we couldn’t fix our refineries and that’s very difficult to explain. Why can’t we fix our refineries? We started this very many years ago. For 20 years, all attempts to fix the refineries failed for very simple reason, there is a strategy problem.
“First, we never knew what we wanted to do with it; we didn’t get the right advisory, the right strategy to go through this. And we started a process 4 years ago to getting oil traders to come and help us fix this, that never worked. We also have the strategy to make sure that we get in the original refinery builders to help us do it. That is not their job. It’s just like you are buying a car and saying that Toyota must come and repair it for you, that doesn’t work anywhere.’’
READ MORE:NNPC unveils COVID-19 contacts tracing app, marketers to buy petroleum products online
Going further, Kyari said that the country has changed its strategy to make sure that they have a new framework. The framework is to help the corporation and also the investors to put their money into it and ultimately change that equation. He said the way to go is to first fix the refineries as they have set a target for that and have a clear strategy for achieving it.
The NNPC boss also said that NNPC is working on building a condensate refinery in order to achieve self-sufficiency in refined petroleum products. He said that the condensate refinery which should have a total refining capacity of 200,000 barrels per day would complement production at Dangote Refinery when it takes off and the four NNPC refineries when they have been fixed and revived.
ECONOMY & POLITICS
LASG reacts to protests over delayed salaries of street sweepers
There are 7,500 street sweepers employed by 120 service providers across the state, according to LAWMA.
Published
7 hours agoon
June 14, 2020The Lagos state government has reacted to recent protests and agitations by its road sweepers, over delay in salary payments.
According to a statement from the Acting Managing Director/Chief Executive Officer, Lagos State Waste Management Authority (LAWMA), Mr. Ibrahim Odumboni, the government had released payments for April 2020 to the contractors, and plans are underway to release payments for May 2020.
“LAWMA has made the April payments to our sweeping contractors for onward disbursement to their staff members. In addition, efforts are being made to ensure prompt release of subsequent payments, not only for May, but all future payments,” he assured.
Odumbomi noted in his statement that the government engages independent contractors, who in turn engage the sweepers, and makes all payments directly to them.
He added that though no contract exists directly between the government and the road sweepers, their welfare is a priority to the government, and efforts are in top gear to ensure that they receive subsequent payments soon.
READ MORE: FAAC disburses N780.93 billion in April, allocation increases by 34%
He appealed for support and understanding from the sweepers, assuring that the LAWMA appreciated their committed service, especially during this pandemic.
According to him, the issue “will be discussed with the contractor and amicably resolved to the satisfaction of all stakeholders.”
There are 7,500 street sweepers employed by 120 service providers across the state, according to LAWMA.
A recent report had revealed some of the harsh conditions under which some of the street sweepers had to work, with some of them having their salaries delayed as far as the 15th day of a new month. The report also showed that despite the high risk they face of being involved in road accidents, there is no life insurance covering the sweepers.
ECONOMY & POLITICS
Nigeria records debt service to revenue ratio of 99% in first quarter of 2020.
This suggests almost all the revenue generated was used to meet debt service obligations.
Published
1 day agoon
June 13, 2020The rising cost of Nigeria’s debt profile breached a new milestone with the country’s debt service as a percentage of revenue rising to 99% in the first quarter of 2020. This is contained in the Medium-Term Expenditure Framework and Fiscal Strategy (MTEF/FSP) report recently released by the Federal Ministry of Finance, Budget, and National Planning
A cursory review of the data obtained from the MTEF/FSP report shows that in Q1 2020, Nigeria incurred a total sum of N943.12 billion in debt service while the federal government retained revenue was put at N950.56 billion. This implies Nigeria’s debt service to revenue is estimated to be 99% during the period.
This is the highest on record and it suggests almost all the revenue generated from both oil and non-oil sources was used to meet debt service obligations.
Debt service, recurrent expenditure, and Revenue Breakdown
Nigeria like the rest of the world has been battling with the COVID-19 pandemic and was expected to suffer a significant revenue shortfall. However, the data suggests the government may have experienced a significant drop in revenues before the lockdown induced economic downturn indicating that things may indeed be worse than projected.
According to the data, the country earned N950.5 billion in revenue compared to a prorated budget of N1.9 trillion representing a whopping shortfall of 52%. Oil revenue was N464 million representing a shortfall of 30% when compared to budget while non-oil revenue was N269 billion representing a shortfall of 40%.
READ ALSO: Nigeria’s fiscal quandry: A revenue problem or a debt problem?
Source: MTEF Framework2020-2022.
Despite the revenue shortfalls recorded, government recurrent expenditure (debt and non-debt) remained in line with budgetary expectations. According to the data, debt service for the first quarter of the year rose to N943.1 billion divided into domestic debt (N594.23 billion), Foreign Debt (N129.51), and Interest on Ways and Means (219.38 billion) respectively.
Recurrent non-debt expenditure was N1.1 trillion, largely in line with budget expectations a common feature over the last two decades. However, capital expenditure was N139.7 billion, a whopping 71.3% off target as much needed capital expenditure suffered yet another decline.
Is Nigeria “Bankrupt”?
The continued depletion in Nigeria’s revenue continues to raise questions around the solvency of the Nigerian economy. Generally, debt sustainability can be explained using either debt to GDP or debt service to revenue ratio.
With Nigeria’s total public debt below 30% of GDP, the country’s debt burden appears to be relatively light compared with many other countries. Meanwhile, debt-to-GDP is not regarded as the best indicator of debt sustainability, especially in a country where tax-to-GDP is low. For Nigeria, a better indicator of debt sustainability is the debt service-to-revenue ratio, which in Nigeria has in recent years risen to worrying levels, and now 99% as at Q1 2020
In 2019, former CBN Governor, Sanusi Lamido, declared that Nigeria is “bankrupt and the country is heading to bankruptcy”. This statement credited to the former Emir of Kano State just after the African Development Bank (AfBD) revealed that Nigeria spends more than 50% of its revenue on debt servicing, and this is worrisome.
READ: Evidence that Sanusi is right about Nigeria ‘going bankrupt’
Gloomy Outlook
With the economy likely on the path to a recession, government revenues particularly non-oil revenues could remain depressed this quarter and the next. This means the government will still need to rely on debt borrowing to fund its operations. Just recently, the national assembly approved another $5.5 billion in debt borrowing for the Federal Government piling more pressure on Nigeria’s debt service to revenue ratio.
Though the latest rise in crude oil prices presents a silver lining, Nigeria still faces a cut in its crude oil output and will earn less oil revenue than was projected. The government has also cut its crude oil benchmark as contained in the MTEF.
“Crude oil production volume has been revised downwards from the 2.18 million barrels per day (mbpd) in the 2020 Budget to 1.9 mbpd (out of which 400kbpd is condensate). This reflects recent oil output cut by the OPEC and its allies to stabilize the world oil market. which put Nigeria’s quota at 1.48mbpd, excluding condensates. Oil production averaged 2.1mbpd in the first two months of the year before the collapse in demand and price as most economies went into lockdown.
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Crude oil producers are experiencing great difficulty in selling crude cargoes, resulting in heavy price discounting to attract buyers. Nevertheless, the lower production volume has enabled the NNPC to shut in some very high cost oil wells, and hence lowered the average production cost, from about US$33 to under US$28 per barrel.” MTEF
These challenges also suggest the government may have to rely on funding from the CBN to meet its revenue shortfalls. The government has in the past relied on the CBN Ways and Means to fund recurrent expenditure as it repays with future oil inflows.
The Bottomline: Revenue outlook still muted
According to the Joint World Bank-IMF Debt Sustainability Framework for Low-Income Countries released in 2020, a country’s debt service to revenue threshold should not exceed 23%.
Meanwhile, Nigeria currently stays around 99%. This implies out of every 100 Naira that Nigerian earned in Q1 2020, 99 Naira was spent on servicing debts.
This is an unsustainable model for Nigeria and cannot continue for too long. At some point, the government will have to increase its revenues or face further spending cuts.
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