The World Bank is reportedly toying with Nigeria over the proposed $1.5 billion dollars put forward since February 2020 but yet to be disbursed 6 months after.
Information from Fayer and Fraser an exclusive newsletter edited by Feyi Fawehinmi, a respected Financial analyst, indicates the loan from the World Bank has remained elusive as the multilateral institution has continued to move the “goalposts” through stringent conditions that are unprecedented.
According to Feyi, It is difficult to understand why the World Bank appears to be leading Nigeria on a merry dance over a relatively small loan amount that is less than half of what the IMF already approved and disbursed. One can consider a scenario where the funds were actually to help with Nigeria’s response to the pandemic and it had not yet been released by the end of August.
The World Bank approached Nigeria in February 2020 for a possible loan disbursement as the world envisioned the economic impact of COVID-19 on the global economy particularly emerging markets in sub-Saharan Africa like Nigeria. Yet after several presentations that lasted between March and April, the loan remains un-disbursed. The loan was meant to be disbursed in June 2020.
Several reports at the time indicated that the World Bank had laid out conditions upon which the Apex bank was to lend money to Nigeria among which are a unification of the exchange rate, removal of fuel subsidy, and introduction of a cost-reflective tariff. This is despite being a loan tied to the Covid-19 pandemic.
Rather than approve the loan, the World Bank then came up with a new demand – the CBN had to clear the backlog of foreign exchange demand which it calculated at US$6 billion. The CBN’s own calculations put the backlog at US$2 billion while in a separate calculation, the IMF put the figure at US$2.5 billion. To be clear, the backlog from foreign dividends, such as the one that recently embarrassed Nigeria’s largest bank, as well as those from correspondent banks is not included in CBN’s calculations. Still, it will be a stretch to imagine that even with those numbers included the number would reach the World Bank’s US$6 billion figure.” Faye and Fraser
What is the World Bank’s intention?
According to Faye and Fraser “One speculation is that the World Bank is unhappy that foreign portfolio investors are now stuck in the country unable to get the dollars they need to exit their positions and leave the country.”
As the source has often reported, Nigeria has a foreign exchange pent-up demand between $2-3 billion from both foreign and local portfolio investors. Nevertheless, Faye and Fraser wonders why this is a condition precedent to disbursement of the loan
“But this is also not the first time the World Bank will lead Nigeria on such a dance that ultimately ends in disappointment. In 2016 there were extensive talks about a loan which went on and on and ended with no funds being disbursed. Most disturbing is that the World Bank now seems to be using the media to selectively leak information to the public designed to paint a picture of the country’s resistance to reforms as the sole reason for the delay,” Fayer and Fraser stated.
A top-level government official who spoke to the source on condition of anonymity also wondered why the World Bank was placing so much emphasis on conditionalities that do not relate to the essence of the loan. “They have not asked for things like how many COVID-19 centers have we built? How well are we containing the spread of the virus and what palliatives has the government put in place to alleviate the poor? Have we properly deployed some of the funds and grants already raised by the government” the source asks?
Why this matters: The government, particularly the central bank has been chastised for months for taking too long to meet the conditions of the World Bank. However, with the prolonged delays to disbursement and spurious conditions, it appears there is more than meets the eye. Nigeria is significantly under pressure for a loan and has ruled out on any Eurobond this year. It could reconsider this move if the World Bank continues to delay.
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Nigeria generates N424.71 billion VAT in Q3 2020
The sectoral distribution of VAT data increased from N327.20 billion in the Second quarter of 2020 to N424.71 billion by the end of Q3 2020.
Nigeria’s value-added tax (VAT) collection increased from N327.2 billion recorded in Q2 2020 to N424.71 billion in Q3 2020, as other manufacturing sector led the pack with N47.07 billion remittance.
This was disclosed by the National Bureau of Statistics (NBS) in its Sectoral Distribution of Value Added Tax Q3 2020 report released on Monday.
VAT Collections in the quarter indicates a 29.8% increase as against N327.2 billion recorded in the previous quarter and 54.37% increase compared to N275.12 billion generated in the corresponding quarter of 2019.
- Other manufacturing, generated the highest amount of VAT with N47.07 billion and closely followed by Professional Services, which generated a sum of N44.01 billion.
- Commercial and Trading generated N21.18 billion while Mining, Textile and Garment industry generated the least with N63.5 million and N346.27 million respectively.
- Out of the total amount generated in Q3 2020, N214.66 billion was collected locally as Non-Import VAT while N115.34 billion was collected as Non-Import VAT for foreign.
- The balance of N94.70billion was generated as NCS-Import VAT.
- Out of the 28 sectors, 24 of them recorded improved VAT remittances during the period, compared to Q2 2020 while 4 of them recorded decline.
The N424.7 billion generated in Q3 2020, brings the total VAT collections year-to-date to N1.08 trillion, which is 22.87% higher than N876.1 billion generated as at the same period in 2019.
Reasons for Increment
Since manufacturing sector is the biggest contributor to VAT during the quarter, the increase can mainly be attributed to the increase in manufacturing activities.
However, it is worth noting that offshore operations recorded the highest growth of 193% in VAT remittances during the period.
The increase in VAT will grow government revenue base especially in a time when oil revenue is dwindling, this could in turn be invested in infrastructure, other developmental projects, etc.; thereby, stimulating the nation’s economic growth.
The rise in value added tax is a welcome development to the Nigerian government in their bid to diversify the economy and widen their revenue base from a fiscal point of view.
Nigeria’s inflation rate hits 13.71%
Nigeria’s inflation rate has risen to 13.71% as prices jump in almost every sector.
Nigeria recorded a high rate of inflation in September, the highest since March 2018.
The country’s inflation rate rose to 13.71 percent in September 2020, 0.49 percent points higher than the rate recorded in August 2020 (13.22%).
The National Bureau of Statistics (NBS) in its CPI/Inflation report for September also revealed that the Headline index increased by 1.48 percent in September 2020. This is 0.14 percent rate higher than the rate recorded in August 2020 (1.34) percent.
Food inflation stood at 16.66 percent in Sept 2020 from 16.00 percent in Aug 2020. Core Inflation at 10.58 percent in Sept 2020 from 10.52 percent in Aug 2020. This was reportedly caused by increase in prices of bread and cereals, potatoes, yam and other tubers, meat, fish, fruits and oils and fats.
The report read;
“On a month-on-month basis, the Headline index increased by 1.48 percent in September 2020. This is 0.14 percent rate higher than the rate recorded in August 2020 (1.34) percent.
“The urban inflation rate increased by 14.31 percent (year-on-year) in September 2020 from 13.83 percent recorded in August 2020, while the rural inflation rate increased by 13.14 percent in September 2020
from 12.65 percent in August 2020.”
In spite of billions on farming, food swelling up by 108% since 2015
About N2 trillion spent in the last 5 years to achieve food self-sufficiency.
Nigeria’s food swelling has dramatically increased since August 2015, precisely 5 years after the Buhari Administration assumed responsibility for the Nigerian economy.
This was controlled by contrasting the composite file for food expansion rate in August 2020 versus same period in 2015. The thing that matters is an incredible 108% expansion in swelling rate, in only 5 years. Inside this period, Nigeria’s swapping scale has been cheapened by 49%.
While the Nigerian economy has been desolated by an exceptionally low oil cost condition, since it tumbled from over $100 per barrel in 2014, a large portion of the purposes behind the expansion in average cost for basic items are incompletely credited to a portion of the approaches of the administration.
Since 2015, the legislature has zeroed in on a ‘develop what-you-can-eat’ strategy, emptying billions of naira into the rural part. Since its beginning in 2015, the Anchor Borrowers Program (ABP), has gotten about N190billion payment from the CBN.
Another N622billion was loaned through banks under the Commercial Agriculture Credit Scheme. Include the different awards, charge motivating forces, and concessions, that is nearly N2 trillion spent over the most recent 5 years on helping Nigeria to accomplish food independence.
While unassuming victories have been recorded, the expense of staple food things stay high – jogging in each spending month. Since the outskirt conclusion was reported in August 2019, the food swelling rate has increased each month, from 13.17% in August of 2019 to 16% a month ago. It is extended to hit 20% by the main quarter of 2021, when the impacts of the expansion in petroleum and power costs are represented.
Nigerians have never had it this terrible. Notwithstanding the honest goals of the administration, things have not especially ended up being admirably. A typical test in attempting to tackle an issue isn’t having the option to oversee what is outside of your control. In farming, a great deal appear to be outside of the control of this administration.
Yield per hectare for most cultivating is well underneath worldwide norms, driving up the expense of anything that remains to be offered to Nigerians. Ranchers likewise face instability, flooding, and some of the time starvation influencing their capacity to plant and reap. Even subsequent to gathering, gracefully chain difficulties actually continue, leaving ranchers to battle with go betweens, transportation, and capacity. The outcome is far less ranch produce arriving at the last shopper.
For things under its influence, it actually can’t decide the results, and the circumstances and end results. Simply a week ago, it reported the forbidding of maize, just to flip-flop subsequent to discovering that poultry ranchers needed maize feeds to develop their chickens. It immediately allowed licenses to four organizations to import maize.
Accordingly, while the administration endeavors to oversee what it can control, for example, forbidding of imports, denying admittance to forex, and obviously outskirt conclusion, it can’t tackle every one of these issues with CBN financing and restricting. They are auxiliary, and require a superior methodology that is private area driven, yet down to earth. The administration likewise needs to come clean with itself; Nigeria can’t act naturally adequate by restricting.
Inasmuch as we keep on abstaining from depending on information and target thinking, to adjust the requirement for neighborhood agro-preparing and imports to satisfy need, food swelling will stay high and running. Who knows, when this present organization’s residency is up, we could be taking a gander at a highly sensitive situation driven by an out and out food emergency.