•Says crude oil theft, subsidy deductions responsible for poor 2022 budget performance
•Laments effects of rising diesel cost on food prices
•Highlights measures to make ports attractive
The Minister of Finance, Budget and National Planning, Zainab Ahmed, yesterday said that mechanisms have been put in place to tackle the growing inflation in Nigeria.
Ahmed who made the disclosure while appearing before the House of Representatives Committee on Finance for the 2023 budget defence, pointed out that rising price of diesel was affecting food prices.
in response to the rising inflation, the Central Bank of Nigeria (CBN) had last month raised the Monetary Policy Rate (MPR), otherwise known as interest rate, by 150 basis points, to 15.5 per cent from 14 per cent. The CBN had also raised banks’ Cash Reserve Requirement (CRR) by 750 basis points to a minimum of 32.5 per cent, from 27.5 per cent, in order to mop up liquidity from banks’ vaults and discourage currency speculation. Inflation in Nigeria rose to 20.77 per cent in September, up from 20.52 per cent in August.
Responding to the question by the chairman of the committee, Hon. James Faleke on efforts to arrest the growing inflation in the country, Ahmed said the ongoing Russian and Ukraine war and the decision of some central banks in advanced countries affected fiscal activities in Nigeria.
Ahmed, however said President Muhammadu Buhari had directed the National Food Security Council to brainstorm and make recommendations on the way forward.
She said: “On inflation, it’s a very serious situation where Nigeria’s inflation is now 20.77 per cent. The inflation in Nigeria has a number of components: One of them is imported inflation, occurrences in other countries also affects Nigeria. For example, the war in Ukraine and Russia has an impact on Nigeria in the sense that some of the inputs for food production are affected.
“Also the decisions taken by the central banks in USA, Europe on monetary tightening also has an impact on their own level of inflation that also affects our country. But in Nigeria, we also have food inflation, and because of the high cost of diesel we find this showing up in food prices.
“So when farmers produce their goods and they have to transport them to market the increasing cost of transportation is impacting the food. What the central bank is doing is continuing to monitor inflation by money tightening and mopping up liquidity.
“On the side of the government, the president has authorised the National Food Security Council and we have held a meeting on how some support will be provided. The committee will be meeting again in the next couple of days to provide recommendations to Mr. President.”
Speaking on the measures to make the nation’s port attractive to importers, the minister said the ministry and the Nigerian Ports Authority were jointly working towards decongesting the ports through the installation of scanners in the ports as well as the extension of Lagos to Abuja rail line.
According to Ahmed, all government’s independent revenue had been deployed to the Treasury Single Account (TSA).
Ahmed explained: “On why our ports are not attractive, it’s a very big problem. The ports congestion and the unfortunate reality is a lot of importers prefer to go to our neighbors.
“On the measures we are taking, the Ministry of Finance has provided and bought some very large scanners. Our assessment is that it will help to fasten the clearing process and decongest the ports.
“The ports authority on their own is trying to re-organise ports to attain better efficiency including control of entry and exit to the ports. On independent revenue and deployment of single treasury account, it has been deployed to all government agencies, there’s no agency of government that’s having their accounts outside of the treasury.
“The accountant general will provide more information on that,” she said.
Earlier, giving a review of the 2022 budget performance, the minister said N3.52 trillion was for debt service in the N17.32 budget.
According to her, in the 2022 budget, the government had a proposal of N6.1 trillion new borrowings, N3.5 trillion from domestic sources.
She added that as of August, the federal government had borrowed N4.06 trillion from local sources, including from the Central Bank of Nigeria.
Ahmed however revealed that crude oil theft and subsidy deductions on petrol by the Nigerian National Petroleum Company Limited (NNPCL) were factors responsible for the poor performance of the overall budget.
She assured that the government was mindful of the development and was working on the safety nets to cushion the effects on the economy.
“The aggregate expenditure for 2022 is estimated at N17.32 trillion, with a pro-rata spending target of N11.55 trillion at the end of August. The actual spending as of August 31 was N9.56 trillion.
“Of this amount, N3.52 trillion was for debt service, and N2.89 trillion for personnel costs, including pensions and N1.78 billion was released for capital expenditure.
“The fiscal deficit for 2022 is estimated at N7.35 trillion. The N5.33 trillion deficit as at August is N430.82 billion above the pro-rata level. The level of borrowing is N1.26 trillion ahead of July target.
“Full implementation of the 2022 budget is challenged particularly by oil revenues trailing at 27.1 per cent performance as at August 2022.
“Crude oil production challenges and PMS subsidy deductions by NNPC constitute significant threat to the achievement of our revenue growth targets, as seen in the 2022 performance up to August.
“Revenue generation remains the major fiscal constraint of the federation. The systemic resource mobilisation problem has been compounded by recent economic recessions,” Ahmed said.