The Nation Newspaper

Tag: shortfall

  • Power firms battle N892b shortfall

    Electricity consumers are owing N892billion due to their inability to pay a cost reflective tarrifs to the power distribution companies (DisCos).

    Association of Electricity Distribution Companies (ANED) Chief Executive officer Azu Onya said the Federal Government’s debt to the power firms is inclusive.

    He said the debts accumulated over the years, because consumers were not ready to pay the correct value of the energy, which the power firms supply them.

    Officials of ANED visited The Nation headquarters in Lagos yesterday.

    Onya said the debts was a buildup of N100billion subsidy which the Federal Government promised the power firms during the privatisation of the unbundled assets of the Power Holding Company of Nigeria(PHCN).

    He gave other reasons for debts to include the removal of collection losses, the failure of consumers to withdraw from payment of tariffs following the implementation of Multi Year Tariffs Order (MYTO), among others.

    Onya said: ‘’ The Federa Government is playing two roles. First, the government is playing the role of privatisation monitor and owner of 40 per cent of the assets in the power sector. In spite of this, the government has accumulated huge debts through the failure of the Ministries, Departments, and Agencies (MDAs) to pay their tarrifs.

    He described funding as a major problem inhibiting the growth of the sector.

    He said the power generation companies (GenCos), gas suppliers, energy distributors, meter manufacturers among other criticial stakeholders, were finding it difficult to raise funds for their operations.

    ANED Advocacy and Research Executive Director Sunday Oduntan said metering is one of the major problems in the industry. He admitted that all the power firms failed to meet the deadline for the distribution of meters to consumers.

    He said most consumers had not been metered due to shortage of the product.

    According to him, shortage of meters is one of the major problems, but not the major problem in the sector, adding that enumeration is key to knowing the number of consumers that are not metered in the sector.

    “Though the firms are starting the enumeration exercise late, the Ibadan, Benin, Jos, and other power electricity Distribution Companies are currently enumerating their customers; The Ikeja DisCo did the enumeration two years ago. As it is now, the Ibadan DisCo needs N30 billion for enumeration and other activities.

    The Ibadan Electricity Distribution Company (IBED) Head of Brands and Communication Mrs. Angela Olarenwaju said the company had started customers’ enumeration in Ibadan in the last six months, adding that “because IBED is the largest DisCo in the country with large customers to enumerate, we are doing the enumeration in phasesthe firm has a lot of consumers to enumerate, due to its large size in the country”.

  • Lagos to address teachers’ shortfall

    Lagos to address teachers’ shortfall

    THE Lagos State government has assured the 5,436 volunteer teachers deployed in the state under the Federal Government’s N-Power job creation programme, that they would be well rewarded if they do well at the end of their two-year service.

    Deputy Governor, Idiat Oluranti Adebule, said the state had a way of monitoring and evaluating teachers’ performance, noting that they will also be entitled to awards and other perks like their counterparts, who are permanently on the government payroll.

    Adebule , who  spoke during a workshop organised by the state for the new teachers at the Blue Roof, Ikeja Lagos, recalled how some of them staged a protest at the Lagos State House of Assembly in January, because of the delay in their deployment.

    She said: “I recall that some of you protested because you thought we were not ready to deploy you. We were ready as government, but we must ensure proper things are put in place.

    “We know you are not going to deal with papers, but human beings. We also know that majority of you are not trained teachers. Therefore, you should know what is expected of you; how you relate with your new assignment as well as the dos and don’ts of this profession,” she said.

    According to her, the state has employed 2,300 teachers over the last two years to enhance teacher-pupil ratio. With the injection of additional 5,436 volunteer teachers, Adebule is optimistic that teachers’ shortfall would further be addressed.

    “You all stand a chance of being rewarded if you are exemplary. In the same vein, the state will not hesitate to deal decisively with those of you who choose to be unruly, disobedient and lawless,” she warned.

    For those who will find themselves in the rural areas of the state, Adebule urged them to put themselves in the shoes of pupils of such communities, adding that their services will be better appreciated there.

    Government, she said, would deploy some of them to primary and junior secondary schools for their primary assignment. Nonetheless, Adebule warned that the deployment does not confer on them authority; rather it is for them to contribute their quota to the development of education in the state.

    Earlier, the immediate past Director-General, Public Service Staff Development Centre, Mrs Olubunmi Fabanwo, described teaching as one of the oldest professions in the world.

    Speaking on the topic: “My teacher; My role model”, Fabanwo recalled that prominent individuals such as Jesus Christ and Prophet Muhammed, were once great teachers, whose works are still read till date.

    She said teachers not only need to be knowledgeable, but must be able to impart same on learners.

    Fabanwo identified integrity, respect, care, ability, and experience among others, as virtues teachers must imbibe to be on top of their game.

    Going down memory lane, a Permanent Secretary in the state, Mrs Folashade Ogunnaike, said Lagos, which is celebrating her 50th anniversary, was established by the military government in 1967 and the word IBILE was coined to represent the five divisions (Ikorodu, Badagry, Ikeja Lagos Island, Epe) of the state.

    The reason for her address, she said, was to acquaint the new teachers, many of who are visiting Lagos, of the state’s geography.

    She implored them to show commitment, adding that those, who would be deployed in challenging terrains such as riverine communities, should not see it as suffering, but a determination to make such places better during their stay.

  • ‘Enugu expresses concern on shortfall of water to city centres’

    Enugu State Commissioner for Water Resources Charles Egungbe has said the shortfall in water supply to cities was a concern to the government.

    Egungbe, who made this known at the 2017 budget breakdown in Enugu, said the government would redouble efforts to improve the volume of water supplied to the affected areas.

    He said the budgetary allocation of N800 million to Water Corporation might not be sufficient, compared to the quantum of assignments they provided, but the government had shown the will to solve the problem.

    “If what we have in the 2017 budget is given to us, it will improve water supply,” Egungbe said.

    He said prior to the advent of the present administration, the corporation could only supply 15 cubic metres of water to Enugu urban.

    “The corporation is responsible for the supply of water in Enugu urban and the area requires about 200,000 metric tonnes

    “Through government’s intervention and prudent resource management, we can now produce 15,000 metric tonnes

    “It is not the size of the budget that matters, but how you use the one allocated to you. We hope to do better if there is improvement in the global economy,” Egungbe said.

    He said the government was negotiating with the French Development Agency to intervene in the supply of water to residents.

    The commissioners said the government was making efforts to defray over 71 months pension arrears owed retired workers of agencies under the ministry.

    He attributed the debt to lack of foresight and prudence on the part of management of the affected agencies.

    Egungbe said the government was worried that pensions and gratuities were owed and was dialoguing with the affected retirees.

  • N809.8b revenue shortfall cripples power sector

    The Electricity Distribution Companies (DisCos)under the auspices of Association of Nigerian Electricity Distributors (ANED) yesterday complained that the N809 billion current shortfall in the liquidity of the operators was inhibiting their operation.

    Addressing reporters in Abuja, its Executive Director, Mr. Sunday Oduntan, said “the figure of the shortfall now is N809.8 billion in the whole industry.”

    He described it “as the revenue that is accruable to the industry that is not there, stressing that the regulators in the sector are very inconsistent and perhaps inexperienced.

    He recalled that the Nigerian Electricity Regulatory Commission (NERC) fixed its tariff late December last year, but scheduled that the tariff should be effective on February 4 this year.

    This delay, according to him, caused a loss of N12.8 billion across the power sector value chain.

    He urged the government to give assurance on gas supply, and see to the possibility of selling to local consumers of gas in naira as ways of helping the sector.

    Oduntan said: “When you sell to me in dollar and I receive my money in naira, it cannot work. You should look at how best to factor these things such that at the end of the day, this thing will work. Not only selling in dollar, they are not selling at the rate recognised by the tariff. N197 is the allowed naira /dollar exchange in MYTO 2015. That means I am not allowed to sell my electricity based on the tariff computed on the basis of N197/$. So any increase in dollar is nobody’s business but my burden to carry.”

    He warned that if help fails to come to the sector,  the DisCos, transmission and generation sectors will all die.

    “Now the problem we have is that there is a lot of outstanding liabilities to be paid. We are owing NBET, we are owing market operators. We have been unable to pay. The huge shortfall does not encourage liquidity,” the ANED chief said.

    According to him, the operators cannot continue to run a system that does not allow the re-engineering of their balance sheet.

    He urged the government to make way for the recognition of shortfall in the electricity market.

    Oduntan called on the NERC to do the needful by making provision for a tariff that reflects the current reality in the market.

    According to him, since handover of the entities to private sector, several regulatory setbacks have hindered the DisCos from meeting their targets in the performance agreements.

    He called for an upward review of the N20 billion capita expenditure (CAPEX) limit that the Federal Government allowed the companies, stressing that it has tied the hands of the investors and hindered them from expanding their businesses.

    The implication of cap CAPEX, said Oduntun was  to avoid tariff shock. “If it is very high, tariff will be very high, if it is very low, tariff will be very low. But if you are looking at the reality in the market, while we are taking decisions on these things. Under the MYTO, I am only allowed to spend a certain amount-N20 billion, and that money is not enough.

  • Budget financing in period of revenue shortfall

    Budget financing in period of revenue shortfall

    The gross monthly collections of non-oil revenue expected to drive capital expenditure in the 2016 budget is on the decline. This underperformance presents some risks to the Federal Government’s expansionary fiscal stance which pegs its N1.84 trillion capital expenditure on aggressive target of non-oil revenue collection. COLLINS NWEZE writes that while the option of borrowing to meet budget shortfalls in the short-term is plausible, diversification of the economy is needed in the long-run to achieve sustainable growth.

    Two things have kept the Federal Government worrying about funding the ambitious N6.06 trillion 2016 budget. The first is fall in crude oil prices, followed by decline in non-oil revenues which is expected to fund government’s N1.84 trillion deficits in the budget, targeting critical infrastructure.

    The failure of these two options, presents the third, which is borrowing from local and international markets to be supervised by the Debt Management Office (DMO). The plunge in the revenues means that the debt option to funding the budget remains the viable lifeline for the country.

    Besides, slide in crude oil prices, and Nigeria’s production is also of concern. Oil disruption especially vandalisation of pipelines has pushed production to the lowest in 20 years, as attacks against facilities in the Niger Delta increase in number and audacity.

    Last week, Chevron Corp. shut down about 90,000 barrels a day of output following an attack on a joint-venture offshore platform that serves as a gathering point for production from several fields. Even before that strike last Wednesday night, Nigerian oil production had fallen below 1.7 million barrels a day for the first time since 1994, according to data compiled by Bloomberg.

    On Friday, suspected members of the Niger Delta Avengers have attacked another oil facility in the Niger Delta, blowing up the Escravos pipeline linking Warri to Lagos.

    While earnings from oil declined, that from non-oil segment of the economy also keeps dropping. Data from Central Bank of Nigeria (CBN’s) Economic Report showed that from January to December last year, gross monthly collections of non-oil revenue, stood at N3.12 trillion ($15.8 billion) over the 12 months. But decline has set as from January this year, non-oil revenue felled significantly to N196 billion compared with monthly average of N477 billion projected in the 2016 budget.

    Besides, Nigeria earned a total of N143 billion from its non-oil exports in the fourth quarter of 2015, which shows a drop of 39.1 per cent or N90.6 billion from N234.43 billion recorded in the third quarter of the year, CBN figures showed.

    FBNQuest, the investment and research arm of FBN Holdings, disclosed that Customs and excise is the weakest of the four components of gross non-oil revenue. Customs contribution of N50 billion in January compares with a pro rata average of N72 billion in the budget is worrisome.

    The Customs Service has pointed to CBN policies as the reasons for the shortfall. It presumably had the famous circular on the 41 import items which the CBN restricted from accessing forex in mind which has reduced import revenues.

    “We should wait for several months’ data to judge the success of the FGN’s several initiatives, including: the Treasury Single Account, scrutiny of waivers and exemptions, collection of stamp duty (subject to a legal challenge), efficiency gains, possible revision of the standard Value Added Tax rate and regulatory fines,” the firm said.

    Regarding foreign debt, the strategy is to borrow on non-concessionary terms for projects with self-paying capacity and/or job creation potential, and on concessionary terms and grants for social sector projects.

    Experts believe that with the continued slide in government revenues from crude oil, its plan to provide tangible assets like housing, power (electricity), transport, education, communication, and technology, may be hampered by paucity of funds, making it to rely on borrowed funds.

    Loan monitoring

    The House of Representatives’ Committee on Aids, Loans and Debt Management is seeking for more powers that would enable the DMO monitor projects to be financed with borrowed funds.

    The House Committee said that the mandate of the DMO should be strengthened to include monitoring the implementation of all projects of government that is financed with borrowed funds.

    The Chairman of the House Committee on Aid, Loans and Debt Management, Hon Adeyinka Ajayi, advocated for this position alongside other members of the committee at a three-day retreat for members of the committee in Owerri, Imo State, over the weekend.

    Hon Ajayi, in his keynote address at the retreat organised by the DMO, noted that it has become imperative for the agency to be empowered to monitor the implementation of all projects financed with borrowed funds.

    He argued that since it was the duty of the DMO to raise funds to finance budget deficit, “the body should as well be saddled with the responsibility of monitoring implementation”, noting that this would ensure compliance, transparency and accountability.

    The committee praised the DMO management for coming up with the retreat, whose theme was: Debt Sustainability and the Challenge of Financing Economic Recovery, saying that the retreat was timely, coming at a time the nation was facing some economic challenges.

    Hon Ajayi said the workshop is coming on the heels of concerns expressed by some Nigerians over the rising debt profile of the nation. While acknowledging the prevailing economic challenges, the House Committee Chairman said the committee will work with the Debt Management Office to ensure effective implementation of the 2016 budget.

    The Director-General of the DMO, Dr. Abraham Nwankwo, restated government’s commitment to financing capital projects aimed at addressing Nigeria’s huge infrastructural deficit and repositioning the economy.

    The DMO boss who spoke against the backdrop of the agency’s role in the implementation of the 2016 budget, said the nation’s long term debt financing of sustainable economic recovery and growth is feasible given its abundant ideal economic capacity.

    Nwankwo told members of the committee that the administration of President Muhammadu Buhari has taken a bold step to stimulate the economy by making sure that the nation’s huge infrastructure gap was quickly closed through efficient and effective application of all borrowed funds into capital projects.

    Other members of the House Committee on Aid, Loans and Debt Management emphasised the need for the diversification of the economy especially in the areas of agriculture, solid minerals and manufacturing.

    Dr. Nwankwo said the debt body has been helping to country manage its debt effectively. For instance, it began the implementation of the strategic objective of assisting the states of the   federation to develop debt management institutions and capabilities since the last quarter of 2007, as part of its five-year strategic plan.

    The goal, he explained, was to forestall a relapse into debt un-sustainability, as was experienced by the country before its successful exit from the Paris and London Club debts over-hang. The strategy was to redress the very weak debt management institutions, structures and practices at the state levels towards a more effective coordination of public debt management.

    The DMO has also established Domestic Debt Data of States of the 36 states, with framework in place for regular updates. The debt office has also helped in the passage by some states within the federation, the Fiscal Responsibility/Public Debt Management Laws to govern debt management and engender fiscal discipline.

    Priority projects in the budget

    The Minister of Budget and National Planning, Senator Udoma Udo Udoma, who presented the 2016 Budget highlights in Abuja, said the Social intervention projects are in five areas, including job creation, school feeding, conditional cash transfer, enterprise programme.

    The power, rails and road are also very important priority areas.There are a number of specific activities but the need to raise up to 7,000 megawatts installed capacity of electricity remains a priority.

    There is also need to conclude the privatisation of National Independent Power Project plants and improve management and performance of Treasury Single Account.

    On agriculture, N940 million would be channeled into the development of Strategic Grazing Reserves while another N90 million is for Price Stabilisation/Buy-back/Price Gurantee Scheme, just as NN939.7 billion is for extension services.

    National Assembly and borrowing

    The National Assembly is expected to approve the borrowing programme for every succeeding year and approval of overall limits, for the amounts of consolidated debts of the Federal, state and local governments, to be set by the President on the advice of the minister.

    The DMO captures the benefits of using debts to fund projects more succinctly. “If you want to build a railway from Lagos to Aba, there are two options. Firstly, you can save up the money for 10 years, before starting the project. The second option is to borrow and build the railway, and within 10 years, generate enough revenues to offset the debt,” DMO’s head, Policy Strategy and Risk Management, Joe Ugolala said.

    He sees the second option as more plausible as it captures the inherent benefits of borrowing to build infrastructure that is in the interest of the economy. He explained that for one to borrow, there must be that inherent capacity to repay, whether the debt came from internal or external sources.

    He explained that the Federal Government has the capacity to borrow from outside to fund budget, and support specific projects including infrastructure.

    He said that despite challenges with external and internal economic volatility, the DMO is committed to supporting opportunities for employment generation. “We are more than ever committed to doing what we know how to do best, democritisation of public debt. We need to use debt to tackle poverty. We are committed to employment generation. Now that things are tight, we need to show that we are resilient people,” he said. “We need to reassure ourselves that we have what it takes to achieve a sustainable growth”.

    He called for the democratisation of public debt management system, adding that Nigeria’s debt to Gross Domestic Product (GDP) ratio is still low.  “The rebasing of the economy shows it has grown rapidly, and that the larger the economy, the larger the debt. There must be optimum relationship between the equity and debt,” he said.

    Ugolala, said there is so much demand for infrastructure because of its immense benefits to the economy. Speaking on external and domestic borrowing guidelines for the Federal and State Governments and their agencies, he explained that the National Assembly has a role to play in government’s borrowing plan.

  • Pension funds burn cities as $1tr shortfall set to grow

    The cost to American cities for their cash-strapped pension funds is starting to look a lot worse, and it’s not because the stock-market rally may be losing steam, Bloomberg has reported.

    Houston was warned by Moody’s Investors Service this month that it may be downgraded because of mounting retirement bills, the latest municipality put on notice as the company ignores bookkeeping gimmicks that let cities mask the size of their debt for years. The approach foreshadows accounting rules for even top-rated issuers that are poised to cause pension shortfalls to swell as new financial reports are released.

    “If you’re AAA or AA rated and you’ve got significant and visible unfunded pension obligations, you’ve only got one direction to go in terms of rating, and that’s potentially down,” said Jeff Lipton, head of municipal research in New York at Oppenheimer & Co. “It’s the presentation on the balance sheet that is now going to drive urgency.”

    Cities that shortchanged pensions for years are under growing pressure to boost their contributions, even after windfalls from a stock market that’s tripled since early 2009. Janney Montgomery Scott has said growing retirement costs are “the largest cloud overhanging” the $3.6 trillion municipal-bond market, where investors are demanding higher yields from borrowers under the greatest strain.

    Chicago pays

    That was on display this week for Chicago, whose credit rating was cut to junk by Moody’s in May because of a $20 billion pension shortfall. The city was forced to pay yields of almost 8 percent on taxable bonds maturing in 2042, about twice what some homeowners can get on a 30-year mortgage.

    Estimates of the pension-fund deficits facing states and cities vary, depending on the assumptions used to calculate the cost of bills due over the next several decades. According to Federal Reserve figures, they have $1.4 trillion less than needed to cover promised benefits.

    Officials have been able to lower the size of the liability by counting on investment earnings of more than 7 percent a year, even after they expect to run out of cash. New rules from the Governmental Accounting Standards Board require a lower rate to be used after retirement plans go broke. Many reported shortfalls will grow as a result.

  • Furore over budget, revenue shortfall

    Furore over budget, revenue shortfall

    The House of Representatives is probing the the federal revenue shortfall. Correspondents VICTOR OLUWASEGUN and DELE ANOFI write on the altercation between the House Committee on Finance and Finance Minister Dr. Ngozi Okonjo-Iweala on the vexed issue and its implications for the executive/legislative relationship.

    The face-off between the Federal Government and the House of Representatives over dwindling economic fortunes may continue this year.

    The House has begun an investigation into the revenue shortfall, which generated anxiety among the 36 governors last year. During the investigation by the House Committee on Finance, the legislators and the Finance Minister and Controlling Minister of Economy, Dr. Ngozi Okonjo-Iweala, traded words. There were hot exchanges. However, the disagreement was not personal.

    In the opinion of the House, the economy has suffered from hemorrhage. The legislators complained that Ministries, Departments and Agencies (MDAs) were responsible for the drop in the Internally Generated Revenues (IGR). For instance, the committee alleged that the Nigerian National Petroleum Corporation (NNPC) was owning the Federal Government N142.7b and it showed no intention of paying the money. The corporation supposed to remit the amount from its N6 trillion IGR between 2009 and July 2012 to the Consolidated Revenue Fund (CRF) as demanded by the Fiscal Responsibility Act, 2007.

    On the other hand, the Central Bank of Nigeria (CBN) was also alleged to be owing the Federal Government N95b unmerited independent revenue from its IGR, but it remitted N80b. in March. The Committee also turned the heat on the banks for short changing the Federal Government of its revenues as tax collection agents. There were mind boggling revelations. on behalf of the government.

    However, the meeting of the committee with the Finance Minister ended on a sour note. The Committee Chairman, Hon. Abdulmumin Jibrin, and Dr. Okonja-Iweala clashed. Before the meeting, the Speaker, Hon. Aminu Tambuwal, had accused the Ministry of Finance and the Budget Office of inflicting pain on the country. He said the ministries were responsible for the benchmark controversy, which led to another frosty relationship between the legislature and the executive.

    Jibrin alleged that while the minister had painted a picture of a growing economy, what is on ground is at variance with her position. He handed to the minister 50 questions, which he said will shed light on the true picture. The committee gave the minister two weeks to give her response.

    Okonjo-Iweala informed the committee that, owing to her indisposion, the Accountant General of the Federation (AGF) and the Director General of the Budget Office, Bright Okogwu, would provide necessary answers to the queries.

    The first question is: what are the major economic achievements of the administration in the 2013 fiscal year? The committee chairman queried: “If the economy is one of the fast growing economies, what is exactly growing the economy? What role does government play in the said economic growth, especially given that as high as 80 percent of the total annual budget spending still goes into recurrent expenditure?

    “Since your arrival as minister of finance in 2011, you have publicly announced the need to reduce the recurrent expenditure so that more money would be made available to capital spending which is critical to growing and diversifying the country’s economy. How far has government succeeded in making these necessary cuts; and where exactly have these cuts been made in this effort to reduce recurrent expenditure? In other words, based on real amount spent on capital expenditure, how much reduction was made in 2011 against 2010, in 2012 against 2011 and in 2013 against 2012?

    “You are known to be celebrating a single-digit GDP growth. But speaking recently at a breakfast dialogue with some members of the organised private sector in Lagos, organized by the Nigerian Economic Summit Group (NESG), you were quoted as saying: “We are growing, but not creating enough jobs. That is a very big challenge. We need to grow faster. I think it needs to grow at least 9 to 10 percent to drive job growth the way we want.” Don’t you agree that a good finance minister managing an economy like ours should be celebrating a GDP growth as high as 20 percent annually? Why is it that our economy cannot grow beyond a single digit? How many jobs are being created as a result of these said growths? In which sectors of the economy are these jobs created? If in private sector, what contributions is government making to further assist these private sector firms?

    “In the presence of Nigeria’s huge infrastructure deficit, why is it that the country’s debt-to-GDP at about 19 percent in 2012 remains one of the lowest in the world when compared to nations already with world-class infrastructure and industrial economies such as America’s 105 percent, Brazil’s 65.49 percent, India’s 67.60 percent, and South Africa’s 40.9 percent? Since facts don’t lie, have you any disagreements with the September 4, 2013 Global Competitiveness Report of the World Economic Forum for 2013-2014, which ranked Nigeria 120th out of 148 countries ranked in the Global Competitiveness Index, including being ranked far behind some African countries such as Mauritius 45th, South Africa 53rd, and Kenya 96th?

    ‘’For the first time in Nigeria’s 53rd year history, we have successfully privatized the electric power industry,’’ so said the President at a recent meeting in London with some foreign investors. As minister of finance should you agree that the recent privatization of the country’s power infrastructure is worth celebrating as a major economic achievement in 2013, when in reality there is little or nothing to show as an improvement in the country power supply? Also why our rush to wholesale privatization of the power sector when countries like South Africa, generating as high as 42,000MW still have their power sector mostly in public hands?”.

    The Committee expressed worry over the debt profile, which was responsible for the $4 added to the government’s projected benchmark for 2013 budget, put at $75. The House raised it to $79 so that the balance could be used to service the debt and boost domestic economic activities. “From Debt Management Office (DMO) 2012 Annual Report, the total public debt outstanding between 2008 and 2012 for external stock rose from $3.72bn to $6.53bn, while domestic stock rose from $17.68bn to $41.97bn. The total debt service in the same period showed a reduction from 11.46 per cent to 5.96 per cent while the percentage of domestic debt servicing grew from 88.54 per cent in 2008 to 94.04 per cent in 2012, drastically increasing the cost of the total debt service, since the cost of domestic borrowing is atrociously higher than the cost of external borrowing. “How could your debt sustainability analysis rationalize this without seeing some narrow interests being the overriding reason? Could this be the explanation why commercial banks in the country are declaring unheard-of three digit profits and the high Foreign Portfolio Investment and low Foreign Direct Investment?”, Jibrin asked.

    Also, the committee beamed a searchlight on the Excess Crude Account and the Sovereign Wealth Fund and their effects on the internal economic growth. The committee raised some posers” “How much exactly has been the amount of money lost in government revenue as a result of import duty waivers in 2011, 2012 and 2013?Provide the names and beneficiaries and justification for same. In your opinion as the minister of finance who oversees the economy, what are the implications to the country’s economy? What efforts have you have made to stop this waiver policy, which is distorting the economy?

    “Our non-oil income has dropped in 2013. A case where increased tariffs on various items effectively reduced importation to zero in some sectors. However, those items now find their way into Nigeria through our borders. Does it make any sense to increase these tariffs when we have such porous borders? As an example, officially, Togo imported more rice this year than Nigeria.

    “Do you really believe that Nigeria needs a ‘Sovereign Wealth Fund’ at this critical juncture of budgetary deficits, and having to be borrowing extensively in an effort to address government revenue gaps?

    “ Shouldn’t the presence of Nigerian Sovereign Investment Authority (NSIA) simply mean spreading government’s scarce resources thinly? Why will you insist that no matter what we still need to operate a sovereign wealth fund? Sincerely speaking, how sustainable are the objectives of Nigeria’s Sovereign Wealth Fund, particularly in the long-term?

    “Who determines the investment objective and who establishes the risk parameter for the NSIA’s portfolio? In providing answer to this question, it is also important to understand and explain why NSIA recently hired a Swiss national as its chief portfolio investor? Answering this question is important since it should help us to know who determines the maximum draw-down that the government would be comfortable with in extremely negative market environments.

    “Do you agree that the Excess Crude Account as being operated by government is illegal and unconstitutional, especially given how it has been managed? Can you explain with clarity how the ECA is being operated? Also provide a statement of account of the ECA from 2011 to 2013? Also how much have we made in excess of the benchmark price from January 2013 till date.

    “ If there is nothing like Excess Crude Account, would you have been demanding lower oil price benchmark for the budget, especially when the executive arm of government around world is known for demanding more money from lawmakers in order to be able to meet government spending obligations, particularly capital spending. Why is the reverse the case in Nigeria only, notably since 2011?

    “ With respect to the Excess crude account and our Sovereign wealth fund again, there have been allegations and counter allegations on its legality. Assuming, for the sake of the committee’s enlightenment, the FGN alone saved its own excess in its ECA/SWF (which is about 52% of the Federation account) and the states and LGs get their funds in full compliance with the constitution, what would be the effect on the economy?”

    “Why should we expect private sector firms to be investing in the economy? You are quoted as saying, ‘’ Very soon, the US would become a net exporter of oil. So, it would be disingenuous for anyone to say that just because the price of oil has hovered at around $100 per barrel, it cannot crash”. Lest we forget, as recently as 2008, oil prices crashed from a peak of $147 per barrel to $35 per barrel in a space of months triggered by the global financial crisis.

    “Given the IEA global oil price trajectory, can’t we agree that “there are many constraints on supply keeping pace with demand’’, which means that within this decade, oil prices should always hover around $125 per barrel? Answering this question will help us understand why you insist on benchmarking the oil price for the 2014 appropriation at below $79 per barrel.

    “ In answering this question, would you also agree that, as the global economy shifts from the West to Asia, will the appetite for global oil consumption shift from the West to Asia?

    “As crude oil continues to sell at $100-$110, how low will production have to fall for us to record a net loss or at what production level can we break even at a 2013 benchmark of $79?

    The House also wanted to know whether Okonjo-Iweala is familiar with business arrangements of the NNPC. It queried: “Why were these business arrangements excluded from the MTEF, which used to be the practice? “Why do you always prefer a lower benchmark, which leaves government with wider deficits and your attitude of no qualms with domestic borrowings at excessively high interest rates to balance deficit, as against our position of increasing benchmark to reduce deficit, which consequently reduces domestic borrowing, that frees up funds for the real sector of the economy, thereby bringing down the interest rate, increased private sector investments and creating jobs?

    “What is the total amount expended by certain statutory agencies of government without appropriation for 2011, 2012, and 2013?

    “ As the Coordinating Minister of the Economy, do you feel comfortable with allegations that almost equal amount of our yearly aggregate expenditure is being spent without appropriation, yet we are crying that the country is running short of revenue?

    The 50 questions have generated interest in the government circle and the public. For now, the House awaits the minister’s response. Her explanations may either restore mutual confidence between the two arms or accentuate the frosty relationship.

  • Reps call for minister’s sack over N396b Ecological Fund shortfall

    Reps call for minister’s sack over N396b Ecological Fund shortfall

    •House report exposes irregularities in Fund management

    Tempers flared yesterday at a proposed hearing by the Uche Ekwunife-led House Committee on Environment as the members agreed that the Minister of Environment, Hajiya Hadiza Mailafia, should be sacked by President Goodluck Jonathan.

    Ms Mailafia’s absence yesterday stalled investigations into the shortfall of almost N400 billion in the Ecological Fund deductions.

    The committee, which was to have conducted a hearing on the operation of the Ecological Fund, postponed the hearing following the minister’s absence.

    Members of the committee said Ms Mailafia has no passion for the work and that there is an apparent disconnect between her and the work she was meant to be doing.

    A member of the committee, Mohammed Abdulahi Shamsidin (Kaduna), who made the suggestion, was supported by the committee members.

    He said: “The President has appointed these people to work with him.

    “The Minister of Environment has no passion for the environment and there is a disconnect between her and the work she was chosen for.

    “I would suggest that she should try her luck else where. We should call on the President to find someone else who is not only interested in the job, but has the competence as well as the love for Nigeria.”

    The committee also flayed the Secretary to the Government of the Federation (SGF) , Anyim Pius Anyim, for his absence at the investigative session which was meant to conclude work the committee started last year.

    Yesterday’s investigative session was stimulated by an interim report , which exposed almost N400billion shortfall in the deductions from the Ecological Fund.

    According to the report obtained by The Nation, there were illegal transfers and loans from the Ecological Fund without appropriation from the National Assembly.

    The report reads: “The Statement of Affairs presented by the Accountant General indicates that 1.46 per cent was used in calculating inflows into the fund from January to December 2003.

    “This, according to the statement, was later reviewed downward to one per cent from January 2004 to June 2012, in complete violation of the provision of the Federation Account Act, which provides for two percent.

    “For instance, the total inflow into the Ecological Fund account between January 2003 and February 2012 was N322, 165, 322,070.86 after the deduction of N20,123,084,858.03 for debt servicing.

    “This one per cent used by the Accountant-General of the Federation for the computation of the inflows into the Fund from January 2004 to June this year was contrary to the two percent specified in the Act.

    “This, therefore, resulted in the understatement of the figure , N302,358,388,317.81.”

    The report also said: “N93, 768,951,164.22 was transferred from the Ecological Fund Account to Consolidated Revenue Fund (CFR) and the Federation Account.”

    According to the report, the transfers were said “to have funded the acceleration of capital budget advances to states and local governments to meet shortfalls and funding of 2009 as well as Third Quarter Development Funds Warrant etc.”

    The House report said of the amount, only N50 billion was paid back leaving a shortfall of N43.7 billion.

    “The submissions under review also indicated that a loan of N60.75billion was taken from the Ecological Fund Account by both the federal and state governments for purposes not related to ecological problems.”

    Of this loan, only N30.5 billion was repaid, the report states.

    “ Some direct payments were made to ministries and agencies. There were also deductions of N20, 123,084,858.03 for debt servicing.”