The total federal allocation shared among the
three tiers of governments by the Federation Accounts Allocation
Committee (FAAC) in the first half (Q2) of 2013 was N3.3 trillion.
The amount represented an increased by 13.74 per cent, compared to the N2.92 trillion shared in the same period of 2012. The Managing Director, Financial Derivatives Company Limited, Mr. Bismarck Rewane, disclosed this in his monthly "economic news and views," presented at the Lagos Business School's executive breakfast meeting on July 3, 2013, a copy of which was made available to THISDAY at the weekend.
He argued that FAAC in July and the remaining months of the second half of the year was expected to fluctuate within N500 billion and N900 billion as in previous months.
However, he pointed out that a decline in the federal allocation remains possible. This he stressed could pose a downside risk to the naira as well as funding gap "A depreciation of the naira would result in a depletion of external reserves and consequently affect the federal allocation. Further decline in oil price would increase the disparity between the approved budget and revenues. Government may resort to bank loans, external borrowing to manage the funding gap," he forecast.
But Emerging Market Strategist at Standard Bank Plc, Mr. Samir Gadio, in an interview with THISDAY expressed concern over the continuous sharing of proceeds from crude oil.
"That is so much of a concern. If the oil price is at about $100 and you are not accumulating any fiscal savings, then basically you are spending almost everything that you receive and you really wonders what will happen if one day the oil price drops to even $90 per barrel and stays there for six months.
"If you have less oil revenue, which means that you have less naira for the budget. So, for the politician, what basically would be a problem is that as oil revenue declines, they would have less to spend and there would some pressure on exchange rate. Although we are not there yet, but it is a risk when fiscal policy is on the edge," Gadio warned.
He regretted that the Sovereign Wealth Fund (SWF) that was supposed to address the situation had received strong opposition at the state level. However, Rewane projected real GDP growth at 6.86 per cent, inflation of 9.1 per cent, exchange rate depreciation of 1.24% to N162/$, slowdown in reserve accretion, increased volatility in the Nigerian stock market, this half of the year.
The amount represented an increased by 13.74 per cent, compared to the N2.92 trillion shared in the same period of 2012. The Managing Director, Financial Derivatives Company Limited, Mr. Bismarck Rewane, disclosed this in his monthly "economic news and views," presented at the Lagos Business School's executive breakfast meeting on July 3, 2013, a copy of which was made available to THISDAY at the weekend.
He argued that FAAC in July and the remaining months of the second half of the year was expected to fluctuate within N500 billion and N900 billion as in previous months.
However, he pointed out that a decline in the federal allocation remains possible. This he stressed could pose a downside risk to the naira as well as funding gap "A depreciation of the naira would result in a depletion of external reserves and consequently affect the federal allocation. Further decline in oil price would increase the disparity between the approved budget and revenues. Government may resort to bank loans, external borrowing to manage the funding gap," he forecast.
But Emerging Market Strategist at Standard Bank Plc, Mr. Samir Gadio, in an interview with THISDAY expressed concern over the continuous sharing of proceeds from crude oil.
"That is so much of a concern. If the oil price is at about $100 and you are not accumulating any fiscal savings, then basically you are spending almost everything that you receive and you really wonders what will happen if one day the oil price drops to even $90 per barrel and stays there for six months.
"If you have less oil revenue, which means that you have less naira for the budget. So, for the politician, what basically would be a problem is that as oil revenue declines, they would have less to spend and there would some pressure on exchange rate. Although we are not there yet, but it is a risk when fiscal policy is on the edge," Gadio warned.
He regretted that the Sovereign Wealth Fund (SWF) that was supposed to address the situation had received strong opposition at the state level. However, Rewane projected real GDP growth at 6.86 per cent, inflation of 9.1 per cent, exchange rate depreciation of 1.24% to N162/$, slowdown in reserve accretion, increased volatility in the Nigerian stock market, this half of the year.
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