The balance in Nigeria’s Excess Crude Account (ECA) has reduced significantly from the $35.7 million it was as of June 2022 to $376,655.09 as at July 25, 2022.

A communiqué issued at the end of the Federation Account Allocation Committee (FAAC) meeting for July 2022, held in Abuja yesterday disclosed this.

Also, the International Monetary Fund (IMF) has advised Nigeria and other African countries currently experiencing high debt levels to as a matter of urgency take proactive measures to restructure them in order to avoid debt crises.

But no explanation was given for the huge drop in the ECA. The slump in the ECA came as allocation to the federal, state and local governments increased by N121.624 billion as FAAC shared a total sum of N802.407 billion for June.

The sum of N680.783 billion was shared in the preceding month of May and N656, 602 in April.

However, the rise in June allocation was attributed to tremendous increases in Companies Income Tax (CIT) and Petroleum Profit Tax (PPT), although oil and gas royalties declined marginally.

The communiqué explained that the N802.407 billion total distributable revenue comprised distributable statutory revenue of N608.580 billion and distributable Value Added Tax (VAT) revenue of N193.827 billion.

According to the communique, total deductions for cost of collection was N44.606 billion and deductions for transfers, savings, refunds and 13 per cent derivation to Anambra State was a total sum of N373.200.

The share of the federal government from the total distributable revenue of N802.407 billion was N321.859 billion, the states received N245.418 billion, and the local governments got N182.330 billion.

The sum of N52.799 billion was shared to the relevant states as 13 per cent derivation revenue.

The communique revealed that gross statutory revenue of N1,012.065 billion was received for the month of June 2022.

This was higher than the sum of N589.952 billion received in the previous month by N422.113 billion.

From the N608.580 billion distributable statutory revenue, the federal government received N292.785 billion, the states received N148.505 billion and the local governments received N114.491 billion.

The sum of N52.799 billion was shared to the relevant states as 13 per cent derivation revenue.

In the month of June 2022, the gross revenue available from VAT was N208.148 billion, which was lower than the N213.179 billion available in the month of May 2022 by N5.031 billion.

From the N193.827 billion distributable VAT revenue, the federal government received N29.074 billion, states received N96.914 billion and the local government councils received N67.839 billion.

According to the communiqué, in the month of June 2022, CIT and PPT recorded tremendous increases, while import duty, oil and gas royalties increased marginally.

Excise duties decreased significantly while VAT decreased marginally.

Meanwhile, the leadership of the National Assembly yesterday held a consultative meeting with the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed over the draft 2023-2025 Medium Term Expenditure Framework and Fiscal Strategy Paper(MTEF/FSP).

The President of the Senate, Ahmad Lawan and the Deputy Speaker of the House of Representatives, Hon. Ahmed Idris Wase led key leaders from the two chambers to the meeting which held behind closed doors at the Senate wing of the National Assembly.

Also in attendance were the Minister of State for Budget and National Planning, Clement Agba and heads of government revenue generating agencies such as NNPC Limited, Nigeria Upstream Regulatory Commission, Federal Inland Revenue Service, Nigeria Custom Service and also the Director General of the Debt Management Office.

In his opening remarks, the Senate president said the meeting was at the instance of the Finance minister.

Lawan said the discussion on the 2023-2025 MTEF/FSP, in a way, was to kick start the budget process for 2023.

We take this very seriously because we have established a trend and we want to keep the trend of processing the budget and pass it before the end of December. Then Mr. President, on the side of the Executive, assents to it before the end of December as well.

This is, of course, very important to us. For us, this is our last MTEF/FSP, because our tenure will come to an end on 11th June, 2023.

We will be as committed as we have ever been and probably we will be more committed to ensure that we work with you to process the MTEF/FSP and the budget as well so that we continue with the trend that we intend to leave as a legacy for the 10th session of the National Assembly by the Grace of God.

So that the 10th National Assembly will have something to build on and serve as the bridge between the ninth and the tenth National Assembly.

The partnership between the two arms of government on the budget particularly, has been very rewarding.

This year, we expect the budget estimates to be presented between the last week of September and the first week of October,

Lawan said.

Speaking in a similar vein, Wase who stood in for the Speaker, Rt. Hon. Femi Gbajabiamila expressed the readiness of the House to work together and synergise with relevant stakeholders with a view to ensuring that, “we give the best for our country and we shall do that with the utmost sense of duty and with all patriotism.”

Restructure Your Debts Urgently, IMF Tells Nigeria, Others

Meanwhile, IMF has advised Nigeria and other African countries to as a matter of urgency take proactive measures to restructure their debts.

The Washington-based institution also retained Nigeria’s projected economic growth for 2022 at 3.4 per cent and that of 2023 at 3.2 per cent, which was an increase of 0.1 per cent compared with the 3.1 per cent it had projected for the country in its World Economic Outlook (WEO) in April.

This was disclosed during the virtual launch of the IMF’s WEO for July 2022 titled, “Gloomy and More Uncertain,’ yesterday.

Nigeria’s Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, last week sounded the alarm bells as she revealed that the country’s debt service cost in the first quarter (Q1) 2022 was N1.94 trillion, N310 billion higher than the actual revenue received during the period.

Elevated debt level has also been the trend in other countries in Africa.

Responding to a question on the rise and looming debt crisis in Africa, the Chief Economist and Director, Research Department, IMF, Mr. Pierre-Olivier Gourinchas said:

On a number of countries when you have a combination of shocks and we’ve experienced shocks upon shocks. We have the pandemic, we have the impact of the war, and elevated energy and food prices that are hitting a number of countries that don’t have really a lot of fiscal space and many of the low-income countries.

They can get into a situation where their debts are assessed as unsustainable meaning that there are financing gaps and the financing gaps need to be closed and that require having the creditors and the country negotiate a reduction in the claims on the country. That’s what the debt restructuring process means.

Speaking further, the IMF official said:

And that process is absolutely vital because if you don’t have a reduction in the claims of debt restructuring, then the country is still saddled with unsustainable liabilities that it has to service and is unable to.

So that process is one that also unlocks once we have restored debt sustainability. It unlocks access to IMF resources and that’s the point at which the IMF can come in and provide some financial assistance.

According to him, there was need for governments in Africa to adopt proactive measures in addressing their debt challenges.

He added:

So that’s a critical step and a number of countries are actually currently under discussions to reduce their external debt and we can anticipate that others will be doing so.

It is important that this process happens as quickly as possible and that countries may be proactive in terms of seeking a debt resolution, maybe ahead rather than waiting until it’s too late. That is because when it’s too late, then you really have no policy options and no room. But it’s an important part of the process.

The IMF has a role to play and we are trying to help both in terms of facilitating debt resolution and also providing the financial assistance that we can, once this is established.

On his part, the Division Chief, Research Department, Mr. Daniel Leigh said:

The main challenge that we are focusing on is indeed the risk of debt distress.

The latest WEO further stated that tighter financial conditions could trigger debt distress in emerging market and developing economies.

It states:

As advanced economy central banks raise interest rates to fight inflation, financial conditions worldwide will continue to tighten. The resulting increase in borrowing costs will, without correspondingly tighter domestic monetary policies, put pressure on international reserves and cause depreciation versus the dollar, inducing balance sheet valuation losses among economies with dollar-denominated net liabilities.

Such challenges will come at a time when government financial positions in many countries are already stretched, implying less room for fiscal policy support, with 60 percent of low-income countries in or at high risk of government debt distress.

Justin Nwosu

Justin Nwosu is the founder and publisher of Flavision. His core interest is in writing unbiased news about Nigeria in particular and Africa in general. He’s a strong adherent of investigative journalism, with a bent on exposing corruption, abuse of power and societal ills.