Panic As Federation Revenue Nosedives

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Panic As Federation Revenue Nosedives
Again, attempts by the Federation Accounts Allocation Committee (FAAC), the statutory body authorized to share revenues accruing into the federation account among beneficiaries (federal, states, FCT,  local government and revenue generating agencies) failed to agree on what the office of Accountant General of the Federation Jonah Otunla proposed for distribution in the month of August 2013. This has been a recurring trend in the last many months as signs of serious distress in the economy refuse to clear. This is despite insistence by Coordinating Minister of the Economy and Minister of Finance, Ngozi Okonjo-Iweala that all was well.
The FAAC meeting, where August revenues were to be shared was originally convened on September 13 but ended up in a stalemate following the failure of Federal Government to provide a N140 billion it was withholding. On Monday 23 September, Commissioners of Finance from the states and other members of FAAC trooped back to the auditorium of the Federal Ministry of Finance. They were shocked to learn that the figures being read to them still did not contain the N140 billion in contention. They walked out again.
Chairman, Forum of Finance Commissioners of Nigeria, Barrister Timothy O.N. Odaah, told reporters that as representatives of state Governors, the forum members have no contrary instruction to pass the August 2013 FAAC Account until the outstanding N336.0 billion accrued and arrears of augmentation and FAAC Budget Benchmark differentials are cleared. He threatened that forum members will not attend any subsequent FAAC meeting until and unless governors meet first and resolve either for or against this stand. According to a statement issued at the end of the briefing, Odaah said “we did condemn and express our outer disenchantment with the way and manner in which the Minister of State for Finance, as the Chairman of FAAC, has been running the administration of the Committee with resolute recklessness which demonstrates absolute insensitivity to the financial problems of both the subnational and the Local Governments of the Nigerian Federation.
“That we reject and condemn the abortive rescheduled FAAC meeting which the Minister flew as a kite and yet vamoosed from scene without any iota of attempt to implement, improve or ameliorate on our previous and subsisting demands as conditions for a successful subsequent FAAC meeting.”
The rejection of the allocation by the states was against an appeal by the Accountant-General of the Federation (AGF), Mr. Jonah Otunla, who presided over the second Federation Accounts Allocation Committee (FAAC) meeting following the absence of Ngama. He had assured the Commissioners of Finance from the states that the outstanding allocation would be provided by the NNPC.
Otunla who was pleading with the protesting members of FAAC said the September’s revenue was an improvement on that of August and that his office had received assurances from the NNPC that the issue would be dealt with dispatch and a positive outcome was expected. He also said that the government is exploring all avenues to end the shortfalls in revenue caused by oil theft and vandalisation as soon as possible.
Economic Confidential gathered exclusively that in the proposed allocation that was rejected by the commissioners and their accountants general, a total of N625.048 would have been distributed among the tiers of government and revenue generating agencies (Federal Inland Revenue Service and Nigeria Customs Service). States were allocated N317,997,648,622.34, while the Federal Government would have pocketed N248,835,780,379.56. The 774 local government councils were given N97,085,338,284.39. Value added tax contributed N23,198,738,744.93 to the pool. In addition, N40 billion, described as the difference between budget and actual revenue would have been added.
Among the states, Akwa Ibom would have got highest allocation of N25.003billion, followed by Rivers- 17.973billion; then Delta- N17.514 billion; Lagos- N15.479 billion ; Kano- N13.365 billion and Bayelsa-N12.870 billion. Ebonyi would also have got the least allocation of N4.722 billion followed by Nassarawa with N5.181 billion and Ekiti with N5.128 billion.
In July, FAAC distributed N715.8 billion to beneficiaries of federation account. But despite a downward flow of revenue, Coordinating Minister for the Economy and Minister of Finance, Okonjo-Iweala insisted the economy was doing well. But the Minister of State for Finance, Lawan Ngama said following the deadlocked meeting of July 13 that it was no longer in a position to implement the 2013 Appropriation Act. He said benchmark revenues estimated in the 2013 budget were over-bloated and no longer realistic to implement as actual revenues have consistently failed to meet the initial estimates. As a result he said, government would no longer augment allocations to the three tiers of government and that they will henceforth share only the actual collections to the federation account and not what was initially budgeted. Ngama said while the nation’s production of crude oil has appreciated to around 2.4 million barrels, it will take 90 days before the impact of the increase in production is felt in the country. Like his senior colleague, Ngama blamed Nigerian National Petroleum Corporation for the revenue shortfall as it failed to fully remit appropriate revenues into the federation account. So far, he said, it had taken the committee two months to fund the July shortfall and it is still looking for money to make up the difference.
Generally, the economy has continued to show signs of distress although figures from National Bureau of Statistics (NBS) suggest the opposite of what Nigerians are feeling. For instance, NBS says inflation rate continues to fall and is now well into the single digit but the currency continues to slide. By definition, inflation simply means a devaluation of the currency. At the last meeting of the Monetary Policy Committee (MPC), Governor of the Central Bank of Nigeria (CBN) Sanusi Lamido Sanusi said exchange rate declined to N163/$ as at September 2013 against N154/$ in June of the same year. Also, CBN says on its website that external reserve declined from $46.9 billion on August 23, 2013 to $44.6 billion on September 24, 2013. “The Monetary Policy Committee (MPC) expressed concern about the worsening performance of the oil sector, which is principally due to the reported incidence of growing crude oil theft and significant revenue leakages in the oil sector. The Committee, therefore, urged the government to step up efforts aimed at curtailing the malfeasance in the oil sector, and adopting best practice in establishing strong controls, independent oversight and transparency in the official oil sector”, Sanusi said.
Many government including Federal, states and local councils are no longer able to pay staff salaries and many staff unions are already threatening strike actions.
State governors under the aegis of Nigeria Governors’ Forum led by Mr. Rotimi Amaechi of Rivers State have called upon Okonjo-Iweala to immediately resign her appointment if she is unable to properly handle her portfolio. They accused her of failure to implement the appropriation law and drew attention to the non-compliance with the revenue projection of the 2013 budget. Blaming Okonjo-Iweala for poor management of the economy, the governors stated that the non-compliance was a direct breach of the Appropriation Act of 2013. While expressing concern over the management of the economy by Okonjo-Iweala, they called for strict adherence to the Appropriations Act, 2013. NGF stated that the National Economic Council (NEC), is constitutionally responsible for the management of the economy and should be used for that purpose as opposed to the Economic Management Team constituted by the President. The governors also called on the National Assembly to legislate the separation of the office of the Accountant General of the Federation from that of the Federal Government for better accountability and management of the economy.
Defending herself however, Okonjo-Iweala eulogized her own ability to manage the economy excellently and enumerated the various achievements of the current economic reform agenda, particularly in terms of job creation, infrastructure development in rail (which takes passengers from Kano to Lagos in three days), road, air and waterways, foreign reserves level, successful privatisation of PHCN successor companies, increasing private investment inflows, inflation rate and capacity of the country to meet payment obligations when due and other areas. According to her, in addition to ensuring that the economy is prudently managed through a combination of fiscal and monetary measures, indications showed that more and more investors were investing in the country, even as the state governments are also exploring the bond market to raise funds for their long term infrastructure needs.
On the performance of the 2013 capital budget, Okonjo-Iweala said in addition to paying salaries and government’s bills when due, a total of N850 billion had been released this year on capital budget, of which substantial portion had been cashbacked.

Poverty As Ultimate Reward For Pension Fund Contributors?

Economic Confidential
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Poverty As Ultimate Reward For Pension Fund Contributors?
Our collective sense of compassion seems to have become so dulled to media reports and photographs of emaciated senior citizens collapsing after waiting endlessly in queues under the hot tropical sun, for verification of their identity or eventual payment of pension entitlements from government agencies responsible for disbursement!  In reality, the victims of such oppression have no ethnic or religious colouration, but they are all levelled by the evident common index of social deprivation, while the rest of us shut our eyes at the gross abuse of the dignity of aged men and women, who served their country for most of their lives.
The unsightly juxtaposition of such horrid spectacle against the background of impunity in the misapplication of pension funds is obviously also lost on our political leadership; worse still, despite the reforms enacted in the 2004 Pension Act, there has been no single conviction of anyone for the well-documented reckless looting of pension funds!
Nonetheless, Pension Fund Administrators were created under the 2004 Act to ensure judicious management and administration of pension contributions, while the National Pensions Commission (PENCOM) was established with statutory powers to optimally regulate the subsector.
Regrettably, however, despite the positive expectations from the implementation of the Pension Reform Act 2004, many retirees are still dissatisfied with what they get as monthly pension, and some have even shown preference for the clearly defined benefits under the old scheme.  In order to resolve the observed lapses and ensure that pension benefits are substantive, the Pension Reform Act 2013 Bill, currently before the National Assembly seeks to increase monthly contributions to the Retirement Savings Account of workers to 20 per cent of total emolument, out of which employers will contribute 12 per cent, while workers contribute eight per cent of their total emolument.
Organised Labour, however, prefers workers contributions to remain at 7.5 per cent, and employers contribute 12.5 per cent into the pension pool, while the Nigerian Employers Consultative Association considers this proposal as burdensome to employers, because such additional contribution, they argue, may force them to retrench workers or seek other ways to circumvent the increase.
Incidentally, pension assets currently under the management of Pension Fund Administrators approach over N4tn, a handsome nest-egg, which some stakeholders rightly suggest should be deployed for development of infrastructure such as power, education, housing, transport, etc, nationwide, especially since commercial banks have not been forthcoming with cheap long-term loans for such purposes.
Instructively, successful economies institutionally mobilise their substantial pool of pension funds to addressing critical infrastructural deprivations, while regulators watchfully restrain the deployment of large portions of such funds into the volatile and unstable capital market for private equity.  For example, pension contributors in the United States and Europe would have suffered dastardly blows, if most pension funds had been placed in any of the failed merchant banks between 2008 and 2009 financial crisis!
The aversion to high-risk investments in private equity means that more stable, risk-free sovereign debts are better favoured for pension funds, even if returns from such investments are minimal but steady.  In view of the preceding, the question is whether or not proposed reforms in the 2013 Pension Bill under consideration will successfully erase lapses observed in the 2004 Act, so that workers can rest assured that their welfare and vital needs will be adequately provided for from their monthly/quarterly pension payments, so that they can still maintain some semblance of dignity in their lifestyle during retirement?
In reality, if PENCOM effectively regulates the sector in line with best practice, with prompt and severe sanctions for infractions, pension contributions would be invested in safe instruments with relatively steady yields.  Consequently, the usual challenges of delayed payments and the unnecessary assault to dignity of pensioners may likely also be a thing of the past.
Regrettably, however, improved facilitation of the payments system may still not be adequate protection against the threat of poverty, as discussions on pension reforms have so far ignored the critical issue of erosion in the value of money over time!  Even the ubiquitous market woman, labourer or housewife knows from experience that, a thousand naira would buy so much food items and consumables in January, but if unrestrained inflation prevails throughout the year, same amount would buy less of the same basket of goods in December!! Thus, in an economy where the purchasing power of incomes, for example, falls by, say, 10 per cent annually, static pension incomes will systematically command less value of goods; for example, if average year-on-year inflation rates remain as high as 10 per cent, a million naira savings in 2013 may just be worth a hundred thousand in 2023!
Consequently, inflation rates in successful economies are rigorously managed below three per cent of a five to 10-year benchmark, in order to protect the value of incomes, and also encourage a culture of savings.  Indeed, the greater the value of savings in an economy, the greater would be the funds available for investment; conversely, when high double-digit rate of inflation prevails in any economy, people are less inclined to save; less funds will therefore become available for investment, and such scenario would restrain economic growth and employment opportunities nationwide.
Thus, the retrogressive impact of Nigeria’s year-on-year average inflation rate of about 10 per cent is probably starkly reflected in the weakness of our infrastructural base.  Thus, double-digit inflation rates would not only discourage workers from making pension contributions, it would similarly have an adverse impact on the integrity of our economy.  Ultimately, economic growth, employment opportunities and enhancement of the social welfare of our citizens, will become seriously challenged by uncaged inflationary spiral!!
If the reformed pension scheme is well managed, future retirees may indeed never suffer the pains of endless queues before collection of their pension incomes.  Sadly, however,  unless our Economic Management Team (EMT) succeeds in bringing down inflation to international best practice levels of not more than 3%, there can be little doubt that pensioners will inevitably suffer severe shock on realization that their pension payments have, ultimately, unexpectedly become inadequate to cater for their basic needs, as a result of the failure of EMT’s  monetary strategies to restrain inflation!
So, Sadly, in spite of the current reforms, we may just be back in square one, with senior citizens living in penury after a lifetime of service to their fatherland!
Advisedly, however, the surplus cash, which drives inflation and poisons the object of the pension scheme, will evaporate when CBN resists the temptation to keep substituting naira allocations for monthly distributable dollar revenue!!
 

2014 budget: Jonathan sends MTEF to Senate

Economic Confidential
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2014 budget: Jonathan sends MTEF to Senate
Pursuant to the provisions of the Fiscal Responsibility Act, 2007, President Goodluck Jonathan has presented the 2014-2016 Medium-Term Expenditure Framework (MTEF) and Fiscal Strategy Paper to the Senate. Stakeholders expressed hope that the receipt of the document would aid the early passage of the budget just like what happened last year.
In separate letters to President of the Senate David Mark and Speaker of the House of Representatives, Aminu Tambuwwal, Jonathan said the preparation of the 2014 budget have culminated in the 2014 -2016 MTEF and FSP and was “Prepared against the backdrop of global economic uncertainty, the 2014-2016 MTEF and FSP reflect the reality of our circumstance and will ensure that planned spending is set at prudent and sustainable levels, consistent with government’s overall medium-term developmental objectives.”
The documents help a nation in its revenue generation efforts; having essential features like the production quota, oil benchmark and revenue projection.

Childhood diseases Still A Challenge in sub-Saharan Africa

Economic Confidential
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Childhood diseases Still A Challenge in sub-Saharan Africa
Children in sub-Saharan Africa are now less likely to die from diarrhea and pneumonia, but these illnesses are still the most common causes of childhood death and sickness in most African countries, according to a new report published today.
Loss of health due to diarrheal diseases dropped 34% between 1990 and 2010, lower respiratory infections (LRIs) such as pneumonia dropped 22%, and protein-energy malnutrition was down 17%. Several countries documented striking progress, with Malawi reducing diarrheal diseases by 65%, Burundi decreasing LRIs by 44%, and Benin reducing measles by 84% during this time.
Malaria and HIV/AIDS were the leading causes of premature death and disability in 2010 for the region. But in some countries, there has been significant progress in recent years. Between 2000 and 2010, Rwanda recorded a 56% decrease in the rate of healthy years of life lost from malaria, while Botswana cut the rate of premature death and disability from HIV/AIDS by 66%.
These are some of the findings from the new report The Global Burden of Disease: Generating Evidence, Guiding Policy  Sub-Saharan Africa Regional Edition, published in September by the World Bank and the Institute for Health Metrics and Evaluation (IHME). “The rapid shifts in disease burden place poor people in low- and middle-income countries at high risk of not having access to appropriate services and incurring payments for health care that push them deeper into poverty,” said Timothy Evans, Director of Health, Nutrition, and Population at the World Bank Group. “The data in these new reports are critical inputs to the efforts of policymakers in countries towards universal health coverage that aim to improve the health of their people, communities, and economies.”
The report also finds that nutritional deficiencies were the leading cause for disability in childhood, mental and behavioural disorders accounted for the most illness during adolescence and young adulthood, while musculoskeletal disorders were the largest drivers of disability in adulthood. In the region’s upper- and middle-income countries, non-communicable diseases emerged as a significant health threat. From 1990 to 2010, substantial increases in premature mortality and disability were recorded from stroke (up by 31%), depression (up by 61%), diabetes (up by 88%), and ischemic heart disease (or coronary artery disease, up by 37%). Amidst the region’s rapid economic growth, early death and illness from road injuries increased by 76% between 1990 and 2010. Health loss from interpersonal violence also climbed during this time, particularly in the Democratic Republic of the Congo and Lesotho.
“The health landscape in sub-Saharan Africa is changing in unexpected ways,” said Dr. Christopher Murray, IHME Director and one of the lead authors of the GBD study. “Addressing chronic disease and certain communicable diseases will continue to be important, but people in sub-Saharan Africa are dealing with a greater range of illnesses today that aren’t fatal but are definitely disabling.”
The report also identifies trends in leading risk factors that cause the most disability in the region. Under-nutrition during childhood and household air pollution were among the leading factors behind premature death and disability.

Mordi Emerges CEO, National Competitiveness Council

Economic Confidential
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Mordi Emerges CEO, National Competitiveness Council
President Goodluck Jonathan has appointed Mr. Chika Mordi, as the first Chief Executive of the National Competitiveness Council of Nigeria (NCCN). Other members of the premier NCCN board include Michael Porter, Aliko Dangote, Lynda Chalker and Juan Pardinas.
Minister of Industry, Trade and Investment, Mr. Olusegun Aganga said in a statement, “We are pleased to have Mordi at the helm of the council’s affairs. His track record demonstrates that he possesses the intellect, ambition and experience to help Nigeria attain global economic prominence.”
Mordi, an ex-banker will lead a strategically placed body, part of the Jonathan administration’s wider policy to dramatically improve the ability of local and international businesses to conduct and operate in Nigeria.
Founder, Tony Elumelu Foundation, Mr. Tony Elumelu, whose foundation provided a take-off grant for the council, said, “Competitiveness is a prerequisite for a country’s development. The NCCN is working to create an enabling environment for the private sector to flourish. This is the only sustainable solution for Nigeria’s and Africa’s development.
“Mordi brings a skill set and track record that makes me feel highly confident that our objectives will be realised.”
Reacting to the appointment, Mordi said, “I am honoured to have the opportunity to contribute in a significant way to Nigeria’s development and its global business profile. The private sector is instrumental in creating sustainable growth, reducing poverty and boosting collective prosperity for Nigerians. The NCCN is intrinsic to ensuring the right conditions are in place to secure Nigeria’s strong future; I am looking forward to the challenge.”
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