At its meeting presided over by the Vice President, Prof. Yemi Osinbajo, SAN, the National Economic Council, NEC, today endorsed a new funding regime for the oil and gas industry, eliminating the often arduous and onerous cash call regime which has dragged the industry in about a decade, stalling growth.
This is one of the highlights of today’s meeting of NEC, which is the constitutional body set up to advise the president on the economic affairs of the federation. Chaired by the Vice President, governors of all 36 states of the federation and the Central Bank governor are statutory members.
The alternative funding stream had been approved earlier this week at the Federal Executive Council meeting on Wednesday and then presented today to NEC, as the body mandated to come up with “measures necessary for the coordination of the economic planning efforts or economic programmes of the various Governments of the Federation.”
HIGHLIGHTS OF THE NATIONAL ECONOMIC COUNCIL’S 72ND NEC MEETING – THURSDAY, 17TH NOVEMBER, 2016
ENERGIZING THE MICRO, SMALL AND MEDIUM ENTERPRISES (MSMES) SECTOR AS MAJOR ECONOMIC GROWTH DRIVE
- Council received a presentation from the Ministry of Industry, Trade and Investment and relevant agencies on Energizing the MSMEs sector as a major Economic Growth Drive.
- The Ministry informed the Council that the total estimated number of MSMEs is 37,067,416 MSMEs in Nigeria, and their contributions to employment is 84.02%, 48.47% to GDP, and 7.27% to export.
- Of the total number, micro enterprises account for the majority, (99.8%) of the MSMEs in Nigeria, with 36,994,578 enterprises, 68,168 small enterprises, and 4,670 medium enterprises.
- According to the presentation, Lagos State has the highest number of Micro Enterprises – (3,224,324); followed by Oyo and Kano States (1,864,054 and 1,794,358 respectively, while Nasarawa State has the least (226).
PRESENTATION BY THE CBN GOVERNOR ON FINANCING OPPORTUNITIES CRITICAL FOR MSMES DEVELOPMENT
- Following up on the presentation, the Governor of CBN made a related presentation to the Council on financing opportunities critical for MSMEs development.
- The Governor reported that the reason for the CBN’s involvement in MSMEs is to increase lending, provide access to affordable credit facility, and diversify the country’s economic base, create jobs and improve microeconomic stability.
- Other reasons include to boost the capacity of MSMEs, conserving foreign exchange reserve, encourage export and the expansion of agriculture, manufacturing and to service other sub-sectors.
- He stated that the CBN has a fund for such purposes in excess of N200B meant to provide affordable loans to MSMEs, adding that for instance in about three states the Bank has helped 120, 290 small holder farmers under the Anchor Borrowers Programme launched by President Muhammadu Buhari, creating more than 500,000 jobs.
MEMORANDUM ON THE ADOPTION OF SUSTAINABLE OPTION FOR FUNDING JOINT VENTURE CASH CALLS BY THE HONOURABLE MINISTER OF STATE, PETROLEUM RESOURCES
Minister of State for Petroleum Resources, Dr. Ibe Kachikwu stated that the current upstream Joint Venture arrangement in the Nigeria’s oil and gas industry is unincorporated Joint Venture (UJV) meaning that NNPC and the International Oil Companies (IOCs) partner in each Joint Venture as unique and separate legal entities.
- The Minister also noted that while the NNPC pays the entire Oil and Gas revenues realised from the JV operations into the Federation account, the production costs are appropriated, calendarized and paid monthly as Cash Calls to the JV operations from the NNPC and IOCs.
- According to the Minister, January – November 2016 underfunding of the NNPC Cash Calls is estimated at US$2.3 billion. This is in addition to the inherited arrears estimated at USD$6.8 billion for year ending 2015.
- However he disclosed that through negotiations the $6.8B past due Cash Calls burden on the Federation has now been reduced to $5.1B, which would be paid based on an improved oil production output.
- Under the new funding stream, the JVs would become incorporated and source for their own financing, freeing-up the FG from the budgetary obligations of coming up with the cash calls already put at $2.3B so far this year alone.
- Under the alternative funding regime, the technical cost of oil production in the country would also come down from about $27 per barrel to $18.
- The new arrangement, he assured would drive up investment in the oil and gas sector while also boosting production output and revenue significantly.
- For instance net payment from oil production to the Federation account is expected to peak under the new arrangement to about $18B by year 2020 while raising output to 3million barrels per day.
REPORT ON THE EXCESS CRUDE PROCEEDS PRESENTED BY THE HONOURABLE MINISTER OF FINANCE
- The Honourable Minister of Finance, Mrs. Kemi Adeosun reported to Council that as at November 2016, the balance of Excess Crude Proceeds stands at $2, 455,790,144- i.e. about $2.4B
UPDATE ON BUDGET SUPPORT LOAN FACILITY
- A sum of N1.1 billion was disbursed in the month of October to 35 States and a total of N6.3 billion has now been disbursed to each of the 35 States.
LONG TERM FINANCIAL ABUSES BY SOME REVENUE GENERATING AGENCIES
- Arising from previous Council deliberations on the matter, the Vice President informed that the Federal Government is paying diligent attention to the issue of abuses and excesses of certain Revenue Generating Agencies, RGA.
- He then asked the Finance Minister to further brief the Council. The Minister detailed to Council certain activities of some Revenue Generating Agencies (RGAs) that amounted to financial abuses of the revenue they generate, meant to have been remitted to the Federation Account, but diverted through several undue and illegal means and ploys.
- This include paying salaries above specifications of the Revenue Mobilization Allocation and Fiscal Commission, RMAFC, converting official cars to personal ownership under 48 hours of purchase, inappropriate and arbitrary monetization of medical allowances, undue and excessive overseas travels, lavish training allowances and conference spendings, excessive and personal loan approvals, including unapproved mortgages among others.
- The Ministry of Finance and RMFAC are working together to rein in these abuses as this revenue agencies raise as much as 1.5 trillion Naira yearly, and spend almost 90% of it on recurrent expenditure in clear violation of due process and the constitution.
- The Minister added that this financial abuses have been going on for a decade, whereby the agencies hide revenues that ought to go into the Federation Account. But assured Council that such activities will now be exposed and terminated as directed by the President.
AOB: ECOLOGICAL FUND
- Governors brought up the alleged N2 billion said to have been paid to some States by the last Administration under unclear circumstances and criteria. There were complaints that state governments did not have equal access to the Fund amid allegations of political preferences.
- Vice President Osinbajo assured the Council that the matter would be properly investigated, broadly reviewed, and forthright counsel would be made to the President regarding the matter.