…says COVID-19 putting Nigeria’s foreign exchange under pressure
Minister of Finance, Zainab Ahmed, says Nigeria may slide into another recession if the country fails to achieve a very strong third quarter 2020 economic performance.
Ahmed disclosed this at the opening of a five-day interactive session on the 2021-2023 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) held on Thursday in Abuja.
The interactive session was organised by the House of Representatives Committee on Finance, under the chairmanship of Hon James Faleke, the lawmaker representing Ikeja Federal Constituency.
Ahmed, who was represented by the Minister of State for Finance, Clement Agba, said the COVID-19 pandemic had put further pressure on Nigeria’s foreign exchange.
The minister said, “Nigeria is exposed to spikes in risk aversion in the global capital market, 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.”
Ahmed added that the disruptions in global trade and logistics would also have negative effects on the collection of Customs duty in 2020.
She expressed regret that COVID-19 containment measures, although necessary, have inhibited domestic economic activities, with consequential negative impact on taxation and other government revenues.
The minister added, “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 per cent.”
Ahmed said actual revenue performance averaged 61.4 percent over the past five years, noting that some reforms were yielding positive results, with significant improvements between 2018 and 2019.
She added, “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.”