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CBN, fiscal authorities move to shore up dwindling revenue

By on October 31, 2015

Fiscal and monetary authorities yesterday met to intensify efforts aimed at shoring up dwindling oil revenue and bridging the budget gap to minimise the adverse effects of low oil prices on the economy.
Speaking in Abuja at the opening of a two-day retreat themed, “Dwindling Government Revenue: Implications and Priorities for Fiscal and Monetary Policy Coordination in Nigeria”, Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, said dwindling oil prices and other commodities had diminished the current outcomes of the macro-economy.
The retreat is coming on the heels of a drastic drop in revenue, which was evident at Wednesday’s meeting of the Federation Account Allocation Committee (FAAC), during which the three tiers of government shared a paltry N390 billion, the lowest federally collectible revenue in recent memory.
Emefiele said the unsavoury development remained a daunting challenge to fiscal and monetary policy management in the country.
Represented by the CBN Deputy Governor, Economic Policy, Dr. Sarah Alade, he said the ensuing scenario had the propensity to impair the country’s medium and long-term prospects if not minimised.
He said: “The knock on effect of recent global macro-economic slowdown had accentuated the urgent need for Nigeria to strengthen its economic fundamentals and attain self sufficiency so as to ensure macroeconomic stability.
“In particular, the fall in oil prices has negatively affected revenue projections and in the short-term has amplified exchange rate pressure due to a tapering of export proceeds. I wish to draw our attention to the principal objective of macroeconomic policy, which is to achieve sustainable and inclusive economic growth in the context of macro stability.
“To achieve this, monetary and fiscal policies need to assiduously play their respective roles while collaborating to ensure that public expectations are harmoniously and effectively anchored.”
Emefiele said the joint effort by the fiscal authorities had become inevitable to effect ways of addressing emerging issues in the global and domestic economy to deliver on the government’s macroeconomic objectives.
He said the retreat would further provide the appropriate avenue for the key managers of the economy to deliberate, brainstorm, evaluate and recommend appropriate policy actions that would increase government revenue and facilitate optimal budget execution.
In attendance at the Fiscal Liquidity Assessment Committee (FLAC) workshop were representatives from the CBN, Office of the Accountant-General of the Federation (OAGF) and the Federal Ministry of Finance.
Also, the Director, Monetary Policy Department, CBN, Mr. Moses Tule, said that FLAC was a strategic committee of the CBN which provides an avenue for the monetary and fiscal authorities to interact.
This is for the purpose of articulating policy decisions that are complementary rather than conflicting.
He said that FLAC was a fallout of the collaboration between the International Montary Fund (IMF) and the CBN in 2007 as a way of improving monetary and fiscal policy coordination.
“The manufacturing and other productive sectors of the economy are also not exempted given the import-dependent nature of the economy.
“Importation of raw materials, particularly in the face of naira depreciation, has been expensive. Hence reducing the output of the real sector which is now evident in the downward trend in the nation’s gross domestic product for the last three quarters between 2014 and 2015.
“These developments portend a negative signal for the economy and the celebrated growth in the nation’s GDP may be affected. Hence the need for both monetary and fiscal authorities to consider and design an escape programme for the nation,” he explained.
He added that the falling price of crude oil had also had an impact on the manufacturing sector and other sectors of the economy.
Meanwhile, Vice-President Yemi Osinbajo has reiterated the federal government’s opposition to the devaluation of the naira, stating that it is not an appropriate option under the current economic realities in the country, and offered no solutions as far as the Buhari administration was concerned.
He also said the federal government plans to set up a $25 billion infrastructure fund which would be sourced from local and international sources including the Nigerian Sovereign Investment Authority (NSIA), better known as the Sovereign Wealth Fund (SWF), and pension funds among others.
A statement issued in Abuja yesterday by his media aide, Mr. Laolu Akande, said Osinbajo made the remarks yesterday when he received ambassadors from Italy and Canada, among other callers to his office.
President Muhammadu Buhari had also expressed his view that a further devaluation of the Nigerian currency was not healthy for the economy.
Osinbajo said: “I don’t agree to devaluation and it is not that I am doctrinaire about it. In the first place, it is not a solution: we are not exporting significantly. And the way things are, devaluation will not help the local economy.”
According to him, what the country needs to do was to start spending more on the economy and then things would ease up a bit.
He observed that there is exact science to the issues pertaining to the economy, stressing that what was important was to be reasonably flexible in dealing with them.
The vice-president said that other sovereign wealth funds had already indicated interest in the Nigerian infrastructure fund which would be used to address the nation’s decaying roads, railway and power infrastructure.
“This is our approach to speeding up the country’s infrastructure development,” he added.
Osinbajo said the current foreign exchange restrictions were temporary to ensure that “we don’t deplete our foreign exchange reserves substantially”, at a time when the price of oil in the international market is dropping.
He added that the restriction was also to bring some stability to the country’s foreign reserves without which Foreign Direct Investment (FDI) might be affected.
In his reckoning, FDI was more forward looking than portfolio investments, which he said is impacted by the decision to manage the foreign exchange resources of the country at this time.
“I am not sure devaluation is the issue, but how to attract foreign direct investment which is more useful,” the vice-president noted, adding that he expected a bit more stability and direction in the next few months.
He disclosed that the federal government would work with the central bank to ensure that legitimate businesses are not badly impacted by the current foreign exchange restrictions, especially those with previous contracts and loan commitments.
The vice-president received the Italian Ambassador to Nigeria, Mr. Fulvio Rustico, and the Canadian High Commissioner, Mr. Perry John Calderwood.
A delegation of top executives from Citigroup led by Mr. Jim Cowles also paid a courtesy call on the vice-president yesterday.

 

[ThisDay]