Nigeria Revenue Drops to 5-Year Low as Tax, Oil Income Fall

LAGOS, Nigeria, Capital Markets in Africa — 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 he is against devaluationjust 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 devalue the naira,” Buhari said. “But I stood my ground for the good of Nigeria.”

Source: Bloomberg