The federal government is negotiating with the International Monetary Fund (IMF) on repayment terms for the $3.4 billion extended to Nigeria under the Fund’s global $650 billion Special Drawing Right (SDR).
As part of further measures to enable member countries cope with the devastating effects of the Covid-19 pandemic, the IMF in had August approved $650 billion in SDR, out of which Nigeria received $3.4 billion based on its quota contribution and economic standing.
But the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, disclosed recently that although the money has already been released to Nigeria through the Central Bank of Nigeria (CBN), discussions on the terms of repayment were still ongoing with the IMF.
Responding to a question at the public presentation and breakdown of the 2022 budget proposals, the minister stressed that negotiations on the terms of repayment were ongoing with the multilateral institution.
Ahmed explained that the SDR fund has a very concessional window, disclosing that the $3.4 billion would be part of the 2022 External Borrowing Plan.
The finance minister also revealed that the federal government was to evaluate the process and policy effectiveness of fiscal incentives, including a review of sectors eligible for Pioneer Tax Holiday Incentives under the Industrial Development Income Tax Relief Act (IDITRA).
The principle of pioneer status as a tax incentive relieves sectors designated as pioneers from paying company income tax in their formative years to enable them to make a considerable profit for re-investment into the business.
The pioneer status is administered by the Nigerian Investment Promotion Commission (NIPC).
The federal government had in 2017 approved additional 27 industries and products to enjoy the pioneer status, including mining and processing of coal; processing and preservation of meat/poultry and production of meat/poultry products; manufacturers of starches and starch products; processing of cocoa; manufacture of animal feeds; tanning and dressing of leather, manufacturers of leather footwear, luggage and handbags; manufacturers of household and personal hygiene paper products and manufacturers of paints, vanishes and printing ink.
Others were manufacturers of plastic products (builders of plastic wares) and moulds; manufacturers of batteries and accumulators; manufacture of steam generators; manufacturers of railway locomotives, wagons and rolling stock; manufacturers of metal-forming machinery and machine tools, manufacturers of machinery for metallurgy, manufacturers of machinery for food and beverage processing.
They also included manufacturers of machinery for textile, apparel and leather production; and manufacturers of machinery for paper paperboard production.
Manufacturers of plastics and rubber machinery; players in waste treatment, disposal and material recovery; e-commerce services; software development and publishing; motion pictures, video and television programme production, distribution, exhibition and photography; music production, publishing and distribution were included
Also on the list were real estate investment vehicles under the Investments and Securities Act; mortgage-backed securities under the Investments and Securities Act; and business process outsourcing.
On the review of the 2022-2024 Medium Term Expenditure Framework (MTEF) which led to the recent upward adjustment of the 2022 appropriation bill from N13.98 trillion to N16.4 trillion, the minister said the revision became imperative to reflect the new fiscal terms in the Petroleum Industry Act (PIA) 2021, as well as other critical expenditure in the 2022 proposed budget.
But she was quick to point out that the fiscal effects of the PIA’s implementation expected to take effect from January would kick in mid-2022.
She said: “The revised 2022-24 Fiscal Framework is premised on hybrid of January-June (based on current fiscal regime) and July-December (based on PIA fiscal regime), while 2023 and 2024 are now fully based on the PIA.”
The minister, who also spoke about government’s revenue drive initiatives added: “Our target over the medium term is to grow our revenue-to-GDP ratio from about 8–9 per cent currently to 15 per cent by 2025.
“At that level of revenues, the debt-service-to-revenue ratio will cease to be a critical concern. It is now critical to fix our revenue challenge, because cutting expenditure is not currently a viable option, as our public expenditure /GDP ratio is also the lowest among some Africa’s leading economies.
“We must however continue to rationalise our expenditures as we cannot afford waste. In reality, our largest expenditure items are currently personnel cost debt service and capital expenditure, which between them account for 85 per cent of the 2022 budget.”
According to her, the most viable solution to the nation’s fiscal challenges was to grow revenues and plug all leakages