• FG to propose N6.87tn budget in 2017, projects $42.5 oil benchmark
• Govt on roadshow to promote $1bn Eurobond
• IMF: Nigeria’s recession will end in 2017
with agency reports
In fulfillment of one of his campaign promises to cut cost, President Muhammadu Buhari has approved the disposal of two of the aircraft operated by the Presidential Air Fleet (PAF) of the Nigerian Air Force (NAF).
The presidency, through the Office of the National Security Adviser (ONSA), advertised the sale of two aircraft in THISDAY newspaper yesterday.
According to the advert, the two aircraft to be disposed off comprise a Falcon 7X executive jet and Hawker 4000. The airplanes, however, are just two of well over a dozen aircraft believed to be in the PAF.
ONSA, in the advert, said all bids should be quoted in US dollars and invited interested buyers are to inspect the Falcon at the presidential wing of the Nnamdi Azikiwe International, Airport, Abuja, while the Hawker aircraft is to be inspected at the Cessna Zurich Citation Service Centre in Zurich, Switzerland.
Interested buyers were given four weeks from yesterday to submit their bids for the two aircraft.
The Falcon 7X has a registration number, 5N-FGU and serial number 090. It has a passenger capacity for 16 persons and three crew members.
Its highlights include: Entry of service (2011); one owner; time of service: 2,776:47 hours; cycles since purchase: 2363; engine completed HSI in May 2016; engine time to overhaul is 4,529hrs: and ready for sale immediately.
The Hawker 4000 aircraft has a registration number 5N-FGX and serial number RC 066. It has a passenger capacity of nine persons, three crew, and highlights of service entry was in 2012; 1,178:15hrs since time of service; 1,146hours cycles; engine time overhaul is 4,821hours; and is ready for sale immediately.
In a statement yesterday by the president’s media aide, Mallam Garba Shehu, the presidency confirmed that the newspaper advertisement in THISDAY for the sale of two presidential aircraft was duly authorised by Buhari.
According to him, the decision was in line with the directive by Buhari that aircraft in the presidential air fleet be reduced to cut waste.
Shehu further said that when Buhari campaigned as the All Progressives Congress (APC) candidate before the 2015 presidential election, he promised to look into the presidential air fleet with a view to cutting down on waste.
He explained that Buhari’s directive to a government committee given this assignment was that he would like to see a compact and reliable aircraft fleet for the safe airlift of the president, vice-president and other government officials on special missions.
While disclosing that the exercise was by no means complete, Shehu added that some other aircraft in the presidential fleet would be handed over to the Nigerian Air Force to boost its operations.
THISDAY had exclusively reported last year of plans by the presidency to sell some of the aircraft in the presidential air fleet as part of the government’s cost cutting measures.
However, after pressure was brought to bear, the presidency denied the story and deferred plans to sell some of the aircraft.
Insider sources had informed THISDAY that the presidency has a number of serviceable and unserviceable aircraft that needed to be disposed off in order to reduce the amount spent by the federal government on aircraft maintenance annually.
Although information on the exact size of the fleet is treated as classified information, the fleet, according to aviation sources, is believed to comprise 11 to 16 aircraft, chief of which is the Boeing 738 BBJ, NAF 001 or Eagle One, used by the president for his travels.
With its luxury configuration comprising a master bedroom, washrooms and showers, a conference and dinning area, and a living area, the plane seats 25 to 50 passengers and would cost at least $100 million to replace today.
THISDAY gathered that about eight of the planes are reserved strictly for the president. Others are reserved for executive airlift.
The aircraft reserved for executive airlift are used by the Vice-President, Senate President, Speaker of the House of Representatives, Ministry of Foreign Affairs, and could be used to convey African heads of states visiting or departing Nigeria.
FG Proposes N6.87tn Budget
However, as the administration seeks to implement cost cutting measures and raise revenue to ward off the recession, the president yesterday submitted its Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) for 2017 to 2019 to the National Assembly, in which it proposed a N6.866 trillion budget for the 2017 fiscal year.
It also proposed an oil benchmark of $42.50, average exchange rate of N290.00 to $1, and oil production volume of 2.2 million barrel per day (mbpd) for 2017.
In the document, the federal government also projected N6.847 trillion and N7.117 trillion budgets for 2018 and 2019, respectively, and $45 per barrel and $50 per barrel oil benchmarks for 2018 and 2019.
The government is also proposing 2.3mbpd and 2.4mbpd oil production volumes for 2018 and 2019, respectively, just as it projected an average exchange rate of N290.00 to $1 exchange rate for both years.
The proposed N6.866 trillion budget for 2017 is higher than the N6.060 trillion budget for the 2016 fiscal year, but the government set a revenue target of N4.169 trillion in 2017.
The government plans to generate revenue from the following sources: share of oil revenue – N1.3 trillion; share of dividends from Nigeria Liquefied and Natural Gas (NLNG) – N14.111 billion; mineral and mining – N1.064 trillion; non-oil revenue – N1.508 trillion; company income tax – N902.8 billion; value added tax – N282.2 billion; customs – N277.5 billion; and government share from Federation Account – N45.9 billion.
Other projected sources for funding the budget are N1.207 trillion independent revenue; N6.549 billion as government share of actual balance in special accounts; N9.086 billion as the federal government’s balances in special levies accounts; and N50 billion unspent balance from the previous fiscal year.
Of the N6.866 trillion proposed for 2017, the government hopes to spend N1.765 trillion as capital expenditure, N2.563 trillion on recurrent (non-debt expenditure), and N1.639 trillion for debt service.
Also, N350,000 billion has been budgeted for the recurrent Social Intervention Programme in 2017.
The government explained that whereas Nigeria’s total debt profile stood at N16.3 trillion as of June 2016, N3.19 trillion of the figure was external debt while N13.11 trillion was domestic, adding that the federal government owes 74.6 per cent of the debt stock while 25.4 per cent is owed by the 36 states of the federation.
In the MTEF, it said the inflation rate stood at 16.5 per cent in June 2016, noting that the increase was caused by the movement in price levels.
It also said the unemployment rate increased from 10.4 per cent in the last quarter of 2015 to 12.1 per cent in the first quarter of 2016, adding that the level of under-employment rose from 18.7 per cent in the last quarter of 2015 to 19.1 per cent in the first quarter of 2016.
The government also projected the gross domestic product (GDP) to grow at 3.02 per cent in 2017 while inflation is expected to decline to 12.9 per cent during the fiscal year.
“Also, consumption is projected to increase to N8.05 trillion. This growth will be supported by the envisaged improvement in the implementation of the capital budget and efficiency of funds utilisation to support domestic demand during the period,” the document said.
On macro-economic stability, the government said it plans to formulate policies aimed at guaranteeing formidable macro-economic stability capable of withstanding “external and domestic shocks”.
These policies, it said, would stimulate domestic production with the overall intention of securing investors’ confidence by creating a conducive business environment, productivity and inclusive growth.
It added that the budget would yet be built on the zero-based budgeting (ZBB) system introduced in 2016 but with a caveat that the budgeting process in 2017 would “be automated to minimise human interface and address other glitches experienced in the implementation of the first ZBB”.
The government also revealed that of the N6.060 trillion budget approved by the National Assembly for 2016, only N2.419.38 trillion had so far been spent as of June as recurrent and capital expenditure “with the shortfall in revenue inflow being made up by additional financing from borrowing and other sources”.
It also disclosed that N1.479.56 trillion had been released from the budget for recurrent expenditure for the payment of salaries, pensions and overheads which the federal government said was a little bit higher than the N1.323.19 trillion prorated for January to June.
It further added that as of July 18, 2016, only N331.58 billion had been released for the execution of critical infrastructure projects. The federal government also disclosed that of the projected N3.855.74 trillion revenue target in 2016, only N951.52 billion had been retained by the government as of June, a figure it said was less than 50.6 per cent of the prorated projection.
The federal government said it predicated the shortfall on under-performance of non-oil sources, adding that independent revenue and the federal government’s share of company income tax (CIT) collections were less than the N646.32 billion and N271.76 billion projected, respectively.
The government promised to improve revenue mobilisation from the non-oil sector in 2016, promote transparency and accountability, pursue sustainable debt management, intensify economic diversification, enhance infrastructure for increased productivity and development, improve governance, and pursue a social development programme.
Govt Promotes $1bn Eurobond
In a related development, the Debt Management Office (DMO) has launched a one-week roadshow to Britain and the United States to promote a planned $1 billion Eurobond issue to investors, a government official said yesterday.
“The DMO is currently on a roadshow in the UK and the United States,” the official told Reuters, asking not to be named. “It’s a pre-marketing engagement with prospective investors.”
Finance Minister, Kemi Adeosun is scheduled to take part in the roadshow, the official said. Adeosun’s office said the minister travelled yesterday to attend the IMF/World Bank annual meetings in Washington D.C.
Nigeria is yet to appoint advisers and bookrunners for the bond offer after bids for the roles closed on September 19. The official said the appointments are still in process.
The DMO has said it expects to raise $1 billion from the Eurobond market by mid-December, which forms part of Nigeria’s plans to borrow a total of N1.8 trillion ($5.8 billion) from abroad and at home to fund an expected budget deficit of N2.2 trillion this year.
AfDB Pushes for FX Reforms
This is just as the African Development Bank said yesterday that it will help Nigeria to overcome its recession, but added that the country should increase taxes and lift hard currency curbs to ease the dollar shortages choking the economy, its president said.
According to the News Agency of Nigeria (NAN), the bank’s boss and former Nigerian Agriculture Minister, Dr. Akinwumi Adesina, said in an interview late on Monday in London that “Nigeria is too big to fail”.
He said: “The African Development Bank will rally strongly around Nigeria to overcome its recession.
“They (Nigeria) have a liquidity problem. We (AfDB) want to make sure Nigeria gets resilient.”
But the government should also lift hard currency curbs imposed by the central bank, Adesina said, adding that this would end the pressure on the naira.
He said: “In our view, it would be better to have gradual (customs) tariffs as opposed to (forex) restrictions.”
“Attracting investment was the only way for the central bank to lower its interest rates. The interest rate is way too high.
“You cannot drag the economy out of recession with those interest rates.”
He said Nigeria had agreed on several reforms such as increasing its value-added and corporation taxes to offset a loss of oil revenues.
He added that the tax-to-GDP ratio was four to five per cent, less than that of other countries in the region which stood at around 15 per cent.
Nigeria has been hampered after a plunge in oil revenue, which makes up 70 per cent of national income and currency reserves needed to fund imports.
In September, the Central of Bank Nigeria (CBN) left its benchmark rate at 14 per cent, resisting calls to lower borrowing costs to attract investments.
IMF: Nigeria’s Recession Will End in 2017
Meanwhile, the IMF is projecting that Nigeria’s economy will end its recession in 2017, growing by 0.6 per cent that year.
According to the IMF’s World Economic Outlook (WEO) released yesterday in Washington, the fund is projecting that the current economic recession will outlast 2016, with a gross domestic product (GDP) contraction of 1.7 per cent, reported online news medium, The Cable.
Nigeria’s economy was previously projected to contract by 1.8 per cent in 2016 by the fund, but the WEO has seen that reviewed to 1.7 per cent.
The country has recorded a 0.36 and 2.06 per cent contraction in the first and second quarters of 2016, respectively, plunging it into its worst recession in 29 years.
“Sub-Saharan Africa’s largest economies continue to struggle with lower commodity revenues, weighing on growth in the region,” IMF said in the report.
“Nigeria’s economy is forecast to shrink 1.7 per cent in 2016, and South Africa’s will barely expand.
“By contrast, several of the region’s non-resource exporters, including Côte d’Ivoire, Ethiopia, Kenya, and Senegal, are expected to continue to grow at a robust pace of more than five per cent this year,” the report stated.