The Minister of Finance, Mrs. Zainab Ahmed, says unless Nigeria achieves a very strong third quarter 2020 economic performance, the country can slide into recession.
Ahmed issued the warning on Thursday in Abuja at the opening of a five-Day interactive session on the 2021-2023 Medium Term Expenditure Framework (MTEF), and Fiscal Strategy Paper (FSP).
The interactive session was organised by the House of Representatives Committee on Finance, chaired by Rep. James Faleke (APC-Lagos).
Represented by the Minister of State for Finance, Mr. Clement Agba, Ahmed said that the COVID-19 pandemic had put further pressure on Nigeria’s foreign exchange.
“Nigeria is exposed to spikes in risk aversion in the global capital markets, which will put further pressure on the foreign exchange market as foreign portfolio investors exit the Nigerian market.
“Nigeria’s Q2 GDP growth is in all likelihood negative and unless we achieve a very strong Q3 2020 economic performance the Nigerian economy is likely to lapse into a second recession in four years with significant adverse consequences.
“In response to the developments affecting the supply of foreign exchange to the economy, the Central Bank of Nigeria (CBN), adjusted the official exchange rate to N360, and more recently to N379,” she said.
The minister said that the disruptions in global trade and logistics would negatively affect Customs duty collections in 2020.
According to her, COVID-19 containment measures, although necessary, have inhibited domestic economic activities, with consequential negative impact on taxation and other government revenues.
“Consequently, the projections for customs duty, stamp duty, value added tax, and company income tax revenues were recently reviewed downwards in the revised 2020 budget.
“Customs revenue has generally performed close to target over the last few years, exceeding target in 2019.
“There has been some improvement in company income tax and VAT remittances; we expect significant improvements in VAT collections with the new VAT rate of 7.5 percent,” she said
The minister said actual revenue performance averaged 61.4 percent over the past five years, adding that some reforms were yielding positive results, with significant improvements between 2018 and 2019.
“I believe we can do more to improve revenues, especially remittances from government-owned enterprises possibly up to N1 trillion annually.
“Support of the National Assembly, by ensuring coordinated oversight, will contribute to achieving targets,” she said.
Meanwhile, the federal government has begun the process of reforming the Calabar and Kano Special Economic Zones (SEZS) in line with the approved processes for economic reforms.
Ambassador Mariam Katagum, Minister of State for Industry, Trade and Investment, made this known on yesterday in Abuja at the Contract Execution Ceremony and kick-off meeting on the Calabar and Kano SEZs.
It would be recalled that the National Council on Privatisation (NCP) at its meeting held on June 12, 2018, approved the reform of two Federal Government owned SEZs in Calabar and Kano.
The minister noted that in line with NCP approved process for economic reforms, the next step was the engagement of transaction advisers who would guide the reform process.
Katagum noted that the transaction adviser was selected through a competitive tendering process.
“The procurement process commenced with the short-listing of nine firms from the national database to compete for the provision of transaction advisory services for the reform of the two SEZs.
“Request for Proposals (RfPs) was subsequently issued out to the short listed nine firms on Aug. 16, 2018,” she said.
The minister said that at the deadline for the submission of their response to the RfP on Sept. 14, 2018, five out of the nine shortlisted firms submitted proposals.
Highlighting responses received from the firms, she listed the five shortlisted firms that responded as Cordos Capital Limited, Ernst and Young, KPMG, PWC and Zenith Capital while four firms did not respond.
She also listed the firms that did not respond as Chapel Hill Denham, Coronation Merchant Bank, Stanbic IBTC and Vetiva Capital.
Katagum said an eight-man evaluation team, comprising representatives of the ministry, Ministry of Justice, Nigeria Export Processing Zones Authority (NEPZA) and Bureau of Public Enterprises (BPE), was constituted to evaluate the technical proposals received.
She explained that Quality Based Selection (QBS) method was adopted for the procurement process and a minimum benchmark score of 75 percent as specified in the Request for Proposals (RfPs) was used to select the winning bidder.
She said at the conclusion of the evaluation, Ernst and Young emerged as the best qualified firm with a total score of 83.85 percent.
According to the minister, the selection of Ernst and Young firm was subsequently approved by the National Council on Privatisation.
“Today’s signing ceremony brings to an end the Consultant Procurement Phase of the Transaction.
“It is the sincere expectation of the TIC that the Ernst and Young Consortium will add immense value to the ongoing revitalisation processes on the SEZs,” she said.
The minister urged the firm to cause a major breakthrough in the country’s effort at engendering massive industrial revolution and inflow of Foreign Direct Investments (FDI).
Responding, Mr. Damilola Aloba, Partner, Strategy and Transactions, Ernst and Young Consortium, expressed delight for being appointed as transaction adviser on the concession of the two SEZs.
Aloba said Nigeria presently has about 34 SEZs, with the benefit of creating jobs, catalysing economic growth and contributing tremendously to the economic development of the country.
According to him, the SEZs support import substitution, facilitate export and economy diversification.
He said the first thing was to carry out due diligence on the two zones intended to find out financial, legal, environmental, real estate and human resource due diligence.
In addition, he said it would also carry out evaluation of the two SEZs and business and assets valuation of the zones, including outline business case toward assessing authentic impact and benefits of the zones.
The expert further said it would develop a strategy to sensitise the whole world about the benefits and pictures of each job in the SEZs, adding that there would be extensive bidding processes to determine right technical, managerial and financial capabilities.
“After these, the actual concession process will commence for the investors or potential concessionaire through due diligence,” he said.