• Thursday, March 28, 2024
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FG’s budget deficit hits decade high and four things to start your day

Five things to start your day
FG running out of cash as budget deficit hits decade high
The Federal Government’s budget deficit in 2019 was a hefty N4.6 trillion, a decade high and almost equal to the N4.8 trillion in revenue generated.
This is yet another sign of the government’s ailing finances and should reinforce the need to attract private capital to meet the country’s huge infrastructure financing needs.
Recurrent expenditure gulped nearly 80 percent of the N9.4 trillion in total expenditure for the period, an unwanted trend for a country with an infrastructure deficit that will require $31 billion in annual investments for ten years according to estimates by global consultancy, Mckinsey.
The government plans to spend another N10 trillion this year and will be hoping a newly enacted Finance Act would help bolster revenues and reduce a swelling budget deficit. But that’s no guarantee. Not when tax receipts may remain subdued on the back of weak economic activity.
Total sees biggest profit slump in 5 years
Downstream Oil and Gas player Total Nigeria saw its biggest profit decline in at least five years, as revenue woes worsened.
The unaudited result of Total, which distributes and markets refined petroleum products and fuels, showed profit slumped by 69.6 percent year-on-year to N2.4bn in 2019 after revenue declined 5.6 percent, the biggest contraction in sales since a 13.5 decline in 2015.
The decline comes despite a one-off asset disposal gain of N2.8bn in the year.
“Ex the disposal gain, TOTAL would have reported a c. N341.4mn loss,” analysts at Lagos-based CardinalStone said in a note to clients, Wednesday.
Is a yield repricing on the cards?
The results of the Nigerian Treasury Bills auction of Wednesday is fanning expectations for yield repricing in 2020 and in particular post the hawkish stance of the CBN’s MPC at the meeting of 23/24 January.
The yield on the 1-yr was repriced by 159bps to 6.95% at the auction. This is the first time NTBill auction yields are up since 2 October 2019 when yields started to decline steadily.
The market is expected to react to this today, but think the magnitude of the repricing in the coming days will largely be driven by demand and supply.
“We, however, highlight that real yields are still negative (-6.03% for the 1-year). On corporate issuance of debt securities, we expect pricing to reflect the latest market dynamics,” said Tajudeen Ibrahim, head of research at Lagos-based investment bank Chapel Hill Denham.
Lagos seals N100bn bond deal for infrastructure financing  
Lagos State government on Wednesday leaped forward in its quest to bridge the state infrastructure gap, as it signed the N100.33 billion infrastructure bond to be sourced from capital market to fund infrastructure and pressing capital projects.
At a signing ceremony held at the Banquet Hall at the State House in Alausa, Governor Sanwo-Olu, investors and issuing parties put the final ink on the over-subscribed Series Three Bond Issuance of N100 billion, which was issued and raised by the State under its N500 billion Third Bond Programme approved four years ago.
The governor, who was visibly excited by the financial intervention, declared the moment as “historic and new journey” for the state in its drive to provide requisite infrastructure to catalyse its economy, saying it was the largest bond programme ever embarked on by any sub-national entity in the country.
Sanwo-Olu said: “We have embarked on a new journey that is not meant to serve our personal interest, but to activate more prosperity for our dear Lagos and give our people the hope for better tomorrow we all dreamed. When we came into Government, we made commitment to all Lagosians that we are coming to pursue and implement an agenda that will build our capacity to achieve ‘Greater Lagos’ we all will be proud of.
“With this N100 billion bond, we will ensure that all Lagosians feel the direct impact of this intervention in their homes and on the roads. We are bringing new infrastructure and repairing the existing ones, including bridges and hospitals. We are going to renovate schools and build new ones for our children; slums will be regenerated and pressing environmental issues will be solves. We are going to make people feel the essence of governance.”
Here are the 12 key steps highlighted by NESG to attract investments and boost growth
At the NESG Macroeconomic Outlook 2020 themed “Nigeria in a New Decade: Priorities for Accelerated Growth, Job Creation and Poverty Reduction”, 12 specific and crucial interventions were highlighted for the government to embark on to improve the business environment, competitiveness, attract investment and accelerate growth.
For quick wins, NEGS says the government must implement budget reforms, appoint credible individuals to drive reforms, halt ad-hoc policymaking and engage stakeholders, curtail activities of non-state actors and free up redundant assets.
Medium-term reforms would require power/energy sector reforms, pursue legislative reform to unlock investment, adopt PPPs in infrastructure delivery and ensure human capital development.
On the other hand, long-term reforms require that the government addresses subsidy programmes – petrol, electricity and exchange rate, implement fiscal policies to retain and attract investments and implement industrialisation policies.
The recommendation by NESG follows President Muhammadu Buhari’s reaffirmation, in his New Year message, that his administration would lay the foundation necessary for lifting 100 million people out of poverty in the next 10 years and the World Bank’s warning that Nigeria could be home to one in four of the world’s poorest by 2030.