FG Plans N2trn Promissory Notes To Clear Debts

Abuja – The Federal Government on Monday disclosed plans to issue N2 trillion worth of promissory notes through the Central Bank of Nigeria (CBN) as part of efforts to offset the outstanding debts owed contractors across the country.

This was disclosed by top members of the President Muhammadu Buhari’s economic team during an interactive session with the expanded joint Committee of the House of Representatives on Appropriation, Finance and Aids, Loans and Debt Management on the 2017-2019 borrowing plan and Medium Term Expenditure Framework (MTEF) and Fiscal Policy Paper (FSP).

Addressing the legislators, Udoma Udo Udoma, Minister of Budget and National Planning, who led the team, said the 2016-2018 Medium Term Expenditure Framework (MTEF) had to be altered because key projections in the document have become unrealistic over time.

It would be recalled that the House of Representatives, through its spokesman, Abdulrazak Namdas, last Thursday, explained that work on the 2017 budget was being slowed down by the non-passage of the MTEF.

Accompanied by Kemi Adeosun, Minister of Finance; Ahmed Idris, Accountant General of the Federation, as well as management teams of the Budget Office of the Federation, the Central Bank of Nigeria (CBN), the Nigerian National Petroleum Corporation (NNPC), Federal Inland Revenue Service (FIRS) and others, Udoma explained that “all our macroeconomic projections have to be adjusted due to developments after the budget was finalised in August (2016)”.

According to him, the economy was not as robust as expected as “crude oil production was disrupted, and production came down to about half of the expectation”, pointing out, however, that the new document was prepared after “extensive consultations”, and that it perfectly conformed with the provisions and requirements of the Fiscal Responsibility Act.

Specifically affected in the new adjustments, according to him, include the projected inflation rate of 12.93 percent, which had to be put at 15 percent, as efforts at bringing it down from the current 18 percent in which it stands “is not possible” while putting other factors into consideration, and the exchange rate of N290 to a dollar, and now N305 to a dollar. “Based on the new adjustments, several other things had to be modified”, he stated.

He, however, explained that it was not all gloomy, as there have been positive adjustments too, especially in the area of revenue generation targets, which has helped in the reduction of the 2017 budget deficit initially projected at N4.438 trillion to a new projection of N2.356 trillion.

According to him, of the aggregate N7.298 projected expenditure, capital allocation has been jerked up to 31 percent, from the initial 28 percent, explaining that relevant government agencies have been tasked to recover outstanding royalties, while early step-in rights could bring in $1.5 billion, oil production licensing about $926 million, and marginal oil fields, $100 million.

On effect of the Treasury Single Account (TSA), the minister of finance argued that though the effect in the short term was bad, “but in the long run, it is going to benefit the economy”, noting that it was also an opportunity for the commercial banks to do the real business of banking.

Adeosun also disclosed that the Federal Government as at 2nd week of January has increased capital releases for the 2016 budget to N831 billion from the N715 billion in November 2016.

On the depreciating value of the naira and rising exchange rates, the finance minister said there’s a misleading ideology with regards to the exchange rates.

“The craze for dollar purchase is not driven by any economic fundamentals. It’s purely speculative and emotional and the CBN is engaging the bureau de change to try and sort that out as to why people rush to buy the dollar at any price on the black market”, Adeosun told lawmakers.

The expanded committee representatives at the meeting were Adeyinka Ajayi, Chris Azubogu, Jones Onyereri, who expressed displeasure over the state of the economy, urging the Federal Government to put necessary measures in place to locally refine petroleum products, bridge the gap between inter-bank rates and parallel market rate.

While expressing displeasure over the huge job losses in the manufacturing sector, the lawmakers called for deliberate action towards paying contractors owed between N5 million and N50 million and demanded for details of the country’s debt portfolio.

The MTEF/FSP is expected to be laid before the House, where members will debate it and passed for implementation this week, before resuming debate on the general principle of the 2017 budget proposal.

Budget and National Planning minister in response expressed optimism that the ‘Recovery and Growth Plans’ to be launched in the next few weeks will help in reflating the ailing economy in 2017 fiscal year.

On the revenue projection from oil revenue, Udoma assured that the $1.5 billion from royalties, $100 million from marginal fields licensing rounds are quite ambitious and realistic.

He disclosed that the revenue projection from Customs put at N826 billion in 2016 was reduced to N717 billion in 2017 budget proposal.

According to a document seen by Independent, out of total sum of $4,298,643,108.92 royalties outstanding for the year, total NNPC royalties stand at $2,723,726,664.70.

Udoma further explained that the ‘Recovery and Growth Plans’ which contain details of specific sector-by-sector plans have already been captured in the 2017 budget proposal laid before the joint session of the National Assembly by President Buhari.

On his part, Bright Nwankwo, Director General of Budget Office, disclosed that the 2017-2019 borrowing plan was based on 60 percent for domestic borrowing and 40 percent foreign borrowing against the previous borrowing template of 82 percent for domestic and 18 percent for foreign borrowing