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FG eyes N1tn JV funds to finance budget deficit

By on April 12, 2016

The Federal Government may use money set aside for funding joint venture projects with foreign and local oil firms to make up any shortfall in the 2016 budget if its revenue projections are not met, the Minister of Finance, Mrs. Kemi Adeosun, has said.

The nation has been trying to boost tax revenues and the non-oil income to fund a record N6.06tn 2016 budget aimed at reviving Africa’s biggest economy hit by the slump in oil prices.

“The Plan B is around the cash calls,” Adeosun told Reuters and the Financial Times in an interview in Lagos when asked how the budget would be funded if revenue projections fell short.

Cash calls are the government’s financial obligations to joint venture projects between the Nigerian National Petroleum Corporation and international and local oil companies.

The minister said, “If the revenue doesn’t come in, we have got N1tn in the budget for cash calls. We will not fund those cash calls from the budget.

“We will force those cash calls out into the modified carrier arrangement and we will release that money back into the Federation Account. That’s where the fiscal buffer sits.”

Modified carry agreements are loans provided by oil majors to NNPC for investing in oil exploration and production projects.

Nigeria’s oil and gas output has been relatively stagnant as new projects have been held up by delays in government funding for its share of joint ventures with foreign and local firms.

At a special event hosted by the Lagos Business School on Saturday, Adeosun set out the government’s plan to reset the country’s economy with structured borrowing, targeted investment and diversified growth.

The minister also said that the Federal Government was considering selling Chinese Panda bonds to help finance the 2016 budget, adding that these would come at a cheaper rate than Eurobonds.

Pointing to the impact of falling global oil prices on the economy, the minister said, “In the past, we had the means but not the will. Now, we have the will but we no longer have the money to invest. The safety blanket of oil has been ripped away, laying the poverty of Nigeria’s institutions bare.

“We have spent too many years tinkering at the edges of our institutions, our infrastructure and our economy, and that the mistakes and misjudgements of the last 40 years have set our clocks back by decades.”

Setting out the government’s blueprint for growth, Adeosun said, “We must collectively adopt a blueprint that equips the future generations to be creative and dynamic, that allows us to articulate a vision of a Nigeria, with a strong educational foundation; rich in depth of knowledge with a breadth of skills, an expansive infrastructure capable of servicing the needs of a nation of 150 million Nigerians.

“We must find the money and create a system that enables targeted expenditure, based on the nation’s priorities. This expenditure will be efficient and impactful, focused on creating wealth for the majority.”