Nigeria Revenue Drops To 5-year Low As Tax, Oil Income Fall

Nigeria’s revenue fell last month to the lowest level in more than five

years as taxes and oil earnings dropped, making it more difficult for the
government of Africa’s largest economy to pay public workers.

The country’s federal, state and local governments were altogether
allocated 300 billion naira ($1.5 billion) in March, the Ministry of
Finance said in a statement e-mailed late Thursday from the capital,
Abuja. To assist the lower-tier governments, the ministry also waived 10.9
billion naira of loan repayments.


About 27 of 36 states are “currently experiencing challenges meeting their
salary payments,” the ministry said. “We are not able to guarantee that
all states will be able to meet their salary obligations.”

Nigeria, Africa’s biggest oil producer, has been hammered by crude prices
falling 60 percent since mid-2014 to about $45 a barrel. The economy grew
2.8 percent last year, the slowest since 1999. That pace will probably
falter further to 2.3 percent in 2016, the International Monetary Fund
said last month.
A decision by the government in the nation of 180 million people to peg
its currency even as oil revenue falls has been blamed by analysts for
worsening the crisis. Foreign investors are shunning the country’s bonds
and stocks until there’s a devaluation, while local businesses are
struggling to import essential raw materials.

“This is another by-product of a broken foreign exchange policy,” Alan
Cameron, an economist at Exotix Partners LLP in London, said by phone on
Friday. “Unpaid civil service salaries have the potential to turn into a
big social and political problem because for every salary paid there are
likely to be several more people who rely on it.”

The central bank has kept the naira’s official rate at 197-199 against the
dollar since March 2015, causing a rationing of foreign exchange to
businesses which has led to shortages of goods from gasoline to milk and
has sent the local currency plunging to 320 on the black market.

Not Convinced

President Muhammadu Buhari, 73, has made it clear that he, not the central
bank, has the final say on currency policy — and that just as he was
during his first stint in power as a military ruler in the 1980s. The
former general is loath to be seen by voters as capitulating to foreign
investors and the IMF, both vocal critics of his stance.

Buhari reiterated on Friday that he has yet to be convinced that a weaker
naira will have any tangible benefit to most Nigerians in the import
dependent country. He said in a statement that a previous devaluation
after he was deposed in a 1985 coup didn’t lead to the creation of jobs or
new industry.

“When I was military head of state, the IMF and the World Bank wanted us
to devalue the naira,” Buhari said. “But I stood my ground for the good of
Nigeria.”

Bloomberg