Nigeria’s revenue up 91% on forex, energy reforms – PwC
PricewaterhouseCoopers (PwC) says the major twin reforms of President Bola Tinubu in the energy and foreign exchange sectors have pushed government revenue in terms of FAAC disbursement up “by 91 per cent from N976 billion in May 2023 to N1.87 trillion in April 2024.
In its Economic Outlook for June 2024, the agency projected that the country’s economy would grow at 2.9 per cent in 2024 following reforms instituted by the present administration.
It said that 200 per cent increase in oil exports from N5.15 trillion the first of 2023 to N15.5 trillion in the first quarter of 2024 and the increase in both FDIs and FPIs between April to June of 2023 and the corresponding period of 2024.
“The reforms have yielded positive outcomes. FAAC disbursements increased by 91.3 per cent from N976 billion disbursed in May 2023 to N1.87 trillion in April 2024. The increase was driven by distributable VAT, statutory allocation and exchange rate difference revenue,” it said.
While the report lauded the positives of President Tinubu’s reforms, it also highlighted the negative impact of the reforms on businesses and households due to shocks such as; inflation, naira devaluation, and rising interest rates.
The firm stated thus, “The naira depreciated against the dollar by 67.8 per cent from an average of N461.1 in May 2023 to N1,433.8 in May 2024. The depreciation took effect despite foreign exchange market reforms by CBN to achieve price discovery and attract liquidity to the market.”
For households, the report stated that shocks necessitated by the reforms have negatively impacted consumption, savings and investments in households, possibly leading to a decrease in the standard of living and an increase in poverty.
According to the report, “The Impact of pressure points on households may lead to a decrease in standard of living and higher Poverty levels.”
It also notes that naira devaluation, inflation and the rise in interest rates have led to an increase in import input prices which passes through to domestic price increases for businesses. The result of this according to the report is a reduction in margins, a decrease in revenue, an increase in the cost of funds and others.
It states, “The impact of pressure points on businesses may lead to a decrease in reinvestment and/or corporate exits from the industry.”
It would be recalled that within the first 30 days of assuming office, President Tinubu removed the aged-long and expensive fuel subsidy and unified the different segments of the foreign exchange market in a bid to equalise the exchange rate on the official and parallel markets.
However, it has led to a record level cost of living crisis for Nigerians. The transport cost has increased by over 200 per cent, inflation has reached a 28-year high of 33.95 per cent with food inflation at 40.66 per cent and the naira has depreciated to levels not seen before at N1500/$.
In a bid to rein in inflation and stabilise the foreign exchange market, the CBN has hiked MPR by a combined 750 basis points this year from 18.75 per cent to 26.25 per cent leading to a high cost of accessing capital by businesses.
