LAGOS—IF feelers from the Central Bank of Nigeria (CBN) are anything to go by, arrangements have been concluded to discus an estimated N103.3 billion deficit recorded by the Federal Government in the first six months of this year.
The apex bank is also working hard to push N1000 currency denomination into circulation on May 29, 2005, according to its governor, Prof. Charles Soludo. The monetary policy committee of the CBN is expected to discuss the report of its Research Department or ask that it be subjected to further analysis.
The President Olusegun Obasanjo’s administration in its 2004 budget estimated a fiscal deficit of N181.00 billion which would be about 2.10 per cent of the GDP. According to the report, the Federal Government spent N800.9 billion within the first seven months of the year, with the deficit financed largely through ways and means, excess crude oil revenue and other sources.
“During the first seven months of 2004, the fiscal operation of the Federal Government was estimated to have resulted in a deficit of N101.3 billion, as against N110 billion in the corresponding period of 2003. The deficit was financed from ways and means advances from the CBN, excess crude proceeds and other funds,” the report said.
Out of a federally collectible revenue estimate of N3.02 trillion, the Federal Government projected a revenue of N1.12 trillion but planned to spend N1.30 trillion, leaving a deficit of N 181 billion. The nation’s federally collected revenue from January to July stood at N2,096 trillion, which was an indication of 18.5 per cent increase over the level of 2004 budget estimate for the period. The amount also represented a 50.6 per cent positive variance over the revenue earned within the same period, last year.
Federal Government retained revenue within the first seven months was N699.6 billion, representing an increase of 6.9 per cent over the proportionate budget estimate of N560.69 billion. Federal Government’s retained revenue for the month of July alone was N125.1 billion which was N20.1 per cent over the budget estimate of N93.45 billion. Total expenditure for that month was N89.9 billion.
The report showed the inflation rate remained high at 19.1 per cent, thereby constituting a major challenge to the Obasanjo administration which has been targeting a single-digit inflation rate for the nation’s economy.
Lending rates, according to the report, have continued to be an obstacle against borrowing for the growth of the real sectors of the economy, as the spread between the weighted average deposit and maximum lending rates widened to 11.00 percentage points from 10.84 in the preceding month.
Similarly, the margin between the average savings deposit and maximum lending rates which stood at 15.97 percentage points in July rose to 17.19 percentage points in the August.
In spite of assurances from the managing director of the Nigerian National Petroleum Corporation (NNPC) that the refineries were improving in their operations, the report said that their performances were, indeed, declining.
“Nigeria’s crude oil production was estimated at 2.52 million barrels per day in August 2004, the same as the level of production in July 2004. Out of the total daily production, 2.42 million barrels were exported while 0.10 million barrels were consumed locally. The usual monthly allocation of 0.45 million barrels per day declined by 77.78 per cent because local refineries purchased only the crude oil they could refine,” the report said.
Meanwhile, Prof. Charles Soludo, speaking in an interview in Lagos, weekend, said the design of the N1000 note was now on and would soon be sent for minting. He said from the index of the apex bank, Nigeria required an average of three to four billion currency notes annually.
This, he said, was currently being imported, a situation he described as a shame for Nigeria which has a security printing and minting company but is still importing its currency.
“I have said, as a Nigerian, I find it unacceptable, totally unacceptable and a national shame, that as a country, we are the only one in the world that has a mint and still spend billions importing currency. When we came, the proposal was to have a management contract that would have brought one of the foreign firms to manage the mint. But we said this is unacceptable.
How are we going to bring in competitors to run the mint and make it competitive relative to theirs?
“We said we have to take it over, we are the major stakeholders of the mint. We account for over 80 per cent, 90 per cent of its businesses. We want to take it over and run it. Many things are involved. First, is to prove a point, to break the jinx that Nigerians cannot manage. We want to prove, break that jinx, that out of 130 million Nigerians that we cannot find competent people who can manage the mint profitably. This is unacceptable to us. That’s one.
“On the other hand, we see the enormous potentials that we have. By the importation we make, we are creating jobs abroad. The mint has the enormous capacity to grow and to add wealth creation. The banks print their cheques abroad, our electoral materials are printed abroad. So, you can imagine the billions of naira being spent importing these. Now, like I said, we are working on a business plan to get the mint to work I just visited three of the companies in Europe and I made it clear to them that I did not come to discuss importation with them and that in three years, we will not be importing currency from them again. I want our mint to be world-class. Not just the mint for Nigeria, it should be the mint for West Africa,” he said.
Prof. Soludo said the CBN has not taken decision on the proposed introduction of polymer plastic money, saying: “The polymer technology is new, and is not being used widely around the world. People who advocated the idea do think that is the best thing that has happened, those against it think it is the most horrible thing. We at the CBN are open, open to examine our actions, but will be guided by what is in the best interest of Nigerians.”
On the N25 billion capital base directive, he said: “It is both a crisis resolution and barrier enacting instrument. And the whole goal is to ensure quick consolidation and eliminate all the fragile banks. Because, when you go beyond the first 20 banks, the other 69 control less than 30 per cent of the industry, far less than 30 per cent of the industry. So, if you want to weed out many of these marginal banks, and then force a consolidation process, then you better raise the base to a level that will really induce the consolidated process and ensure that it occurs.
“So, in the process of thinking of what level these multiple objectives are going to be achieved, debate obviously occurred. Some wanted multiples of what we have. People prescribed N30 billion, N40 billion. They argued that we needed a strong banking system that could support the economy, a banking system that would prevent current and prospective crises. And then came up the issue of how much would be enough and what paid-up capital would be needed.
“And in order not to inflict maximum stress on the system but to ensure maximum returns on investment, on equity, we decided to keep the paid-up capital currently at N2 billion but then to ensure that the shareholders’ funds is enhanced. So, the amount invariably then, like I have said, was a consequence of a lot of debates and discussions, about what level of capitalisation would enable us achieve these four sets of objectives. It is give and take, even though we were almost going to settle at N32 billion, but I think at the end of the day, those who argued that let’s start with as low as N25 billion prevailed,” he said.
