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N4.9trn Unsubstantiated Balances Unaccounted in 2019—Auditor-General

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Adolphus Arhotomhenla Aghughu Auditor-General

By Adedapo Adesanya

The Auditor-General of the Federation (AuGF), Mr Adolphus Aghughu, has disclosed that the sum of N4.9 trillion cannot be accounted for in the audited accounts of federal Ministries, Departments and Agencies (MDAs) in 2019.

He said this followed the audit carried out by the office on the consolidated financial statement for the fiscal year.

Mr Aghughu made the disclosure when submitting the 2019 audit report to the Clerk of the National Assembly (CNA), Mr Ojo Amos Olatunde, on Wednesday.

The Auditor-General revealed that “from the audit carried out on the 2019 Federal Government Consolidated Financial Statement, unsubstantiated balances amounting to N4.973 trillion were observed.”

“The N4.973 trillion unsubstantiated balances are above the materiality level of N89.34 billion set for the audit,” he further explained.

In auditing, materiality means not just a quantified amount, but the effect that amount would have in various contexts and it is left to the auditor to decide what the level of materiality will be, taking into account, the entirety of the financial statements to be audited.

According to the AuGF, auditing of consolidated financial statements of the federal government on yearly basis would be expeditiously carried out once made available to his office.

He said: “You will recall that on March 25th this year, Audit of Consolidated Financial Statement of the federal government for 2018 was submitted to this office for the required investigation of queries raised in it by the National Assembly. Just five months after, we are here again to make submission of the 2019 Audit Report”.

Speaking further, Mr Aghughu lamented that his office was not performing optimally due to myriad factors crippling its operations and invariably giving room for all forms of financial infractions across the various MDAs.

He explained that, “One of such problems is the absence of Federal Audit Service Law, which is a big challenge as far as effective and efficient public sector auditing is concerned. This is a law that is needed as the basis of fiscal sustainability.

“Absence of it at the federal level is very worrisome going by the fact that some of the states of the federation have the required law in place.”

He also lamented that his office had been incapacitated in so many ways from functioning effectively and efficiently as far as the detection of mismanagement of public funds by the various MDAs was concerned.

“Another problem incapacitating optimal functionality of our mandate as far as thorough and appropriate auditing of financial statements of the MDAs are concerned is gross underfunding, which is telling much on our efficiency.

“For example, the office is understaffed but there is no money for recruitment. Imagine many of our state offices having just two or three staff. Auditing is done by a team not by an individual.

“Accommodation is also part of the problem as our staff in Lagos are about to be evicted from their office due to litigations. These are aside from the problem of insecurity seriously affecting our scope of coverage,” he added.

In his remarks, after receiving the audit report, Deputy Clerk to the National Assembly, Mr Bala Yabani, who stood in for the Clerk, said the report would be submitted to the Clerk for onward submission to both the President of the Senate, Mr Ahmad Lawan and Speaker of the House of Representatives, Mr Femi Gbajabiamila, for the required legislative consideration.

According to him, all the complaints made by the AuGF would be tabled before the leadership of the parliament for required actions and solutions.

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

Economy

IMF Insists Nigeria Must Raise Taxes, Adopt Unified FX Regime for Macroeconomic Stability

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macroeconomic stability

By Dipo Olowookere

If Nigeria intends to achieve macroeconomic stability, it must take the bold step to put in place “decisive fiscal and monetary” policies, the International Monetary Fund (IMF) has declared.

These policies, according to the global lender, include increasing the tax rates, especially the value-added tax (VAT), from 7.5 per cent to double digits, adopting a single exchange rate regime, removing subsidies on petrol, and raising the benchmark interest rate to curb inflation, which is slightly above 21 per cent.

In a statement issued on Wednesday after the conclusion of its Executive Board’s consultation with Nigeria, the IMF said it was impressed with the growth recorded by the country’s economy after COVID-19 hit in 2020.

In the statement made available to Business Post, the IMF attributed this recovery to “favourable oil prices and buoyant consumption activities.”

“Nigeria’s economy has recouped the output losses sustained during the COVID-19 pandemic,” the organisation stated, praising the federal government for “containing and managing the COVID-19 infections.”

But it warned that “socio-economic conditions remain difficult” as a result of “higher domestic food prices, worsened the scarring effects of the pandemic, particularly on the most vulnerable—with Nigeria being among the countries with the lowest food security.”

“The near-term outlook faces downside risks, while there are upside risks in the medium term. Higher international food and fertilizer prices and continued widening of the parallel market premium could culminate in the de-anchoring of inflation expectations,” it said.

However, the IMF said if the country hopes to surmount these problems, the country must make “bold fiscal reforms to create needed policy space, [and] put public debt on sound footing” because high fuel subsidy costs have further widened “the general government fiscal deficit” in 2022.

The IMF “urged the authorities to deliver on their commitment to remove fuel subsidies by mid-2023 and increase well-targeted social spending.”

“Strengthening revenue mobilization, including through tax administration reforms, expanding the tax automation system and strengthening taxpayer segmentation, and improving tax compliance is also a priority.

“In the medium term, directors recommended modernizing customs administration, rationalizing tax incentives, and raising tax rates to the levels of the Economic Community of West African States (ECOWAS),” it also said after advising Nigeria last November to raise VAT to 15 per cent.

The body emphasised that the Central Bank of Nigeria (CBN) must further increase the policy rate if needed, and implement additional actions, including fully sterilizing central bank financing of fiscal deficits and phasing out credit intervention programs.

Last year, the bank raised the Monetary Policy Rate (MPR) by 5.00 per cent to 16.50 per cent in an attempt to bring down inflation, which moderated in December to 21.34 per cent. Last month, it further jerked the rate higher by 100 basis points.

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Economy

US Markets May Give Back Ground In Early Trading

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US markets give back ground

By Investors Hub

The major US markets are currently pointing to a lower open on Wednesday, with stocks likely to give back ground after moving notably higher in the previous session.

Traders may look to cash in on some of yesterday’s gains, which came amid a positive reaction to comments by Federal Reserve Chair Jerome Powell.

Powell acknowledged recent indications of easing inflation but noted that the disinflationary process has a long way to go and cautioned further interest rate hikes could be needed.

Overall trading activity may be somewhat subdued, however, with a relatively light economic calendar keeping some traders on the sidelines.

Reports on initial jobless claims and consumer sentiment are likely to attract attention in the coming days, with the consumer sentiment report including readings on inflation expectations.

Despite staying weak until noon and suffering a setback after a subsequent recovery, U.S. stocks closed on a buoyant note on Tuesday thanks to strong buying at several counters.

The major averages all ended with impressive gains. The Dow ended higher by 265.67 points or 0.8 per cent at 34,156.69. The S&P 500 closed up 52.92 points or 1.3 per cent at 4,164.00, and the Nasdaq surged 226.34 points or 1.9 per cent to 12,113.79.

A positive reaction to Federal Reserve Chair Jerome Powell’s remarks at the Economic Club of Washington lifted the market.

In a Q&A session at the Economic Club of Washington, Powell told Carlyle Group co-founder David Rubenstein that he expects 2023 to be a year of “significant declines in inflation.”

Powell said inflation is beginning to ease, though he expects it to be a long process and cautioned that interest rates could rise more than markets expect if the economic data doesn’t cooperate.

“The disinflationary process, the process of getting inflation down, has begun, and it’s begun in the goods sector, which is about a quarter of our economy,” Powell said. “But it has a long way to go. These are the very early stages.”

Microsoft shares gained nearly 4 per cent. Boeing surged 3.8 per cent, and Chevron climbed 2.6 per cent.

Walt Disney, Merck, Travelers Companies, Apple, Intel, Salesforce.com, JP Morgan Chase, American Express, Goldman Sachs and Walgreens Boots Alliance also posted impressive gains.

Hertz climbed 7.5 per cent, and DuPont shares surged 7.8 per cent on stronger-than-expected results.

Verizon, Home Depot, P&G and Caterpillar ended weak. Chegg plunged more than 17 per cent after the company came out with disappointing guidance.

In economic news, data showed the US trade deficit widened to $67.4 billion in December 2022 from a downwardly revised $61.0 billion in November.

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Economy

Naira Swap: Governors Saved Nigeria from Needless Political, Economic Chaos

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Bola Tinubu saved Nigeria from needless political

By Modupe Gbadeyanka

The presidential candidate of the All Progressives Congress (APC) in the February 25, 2023, election, Mr Bola Tinubu, has praised Nigerian governors, especially those of Kaduna, Kogi, and Zamfara States, for standing by the people of Nigeria.

On Wednesday morning, the Supreme Court granted an interim injunction seeking to stop the federal government and the Central Bank of Nigeria (CBN) from banning the use of old N200, N500, and N1,000 notes as legal tender in the country from February 10.

In a statement issued by the Director of Media and Publicity of the APC Presidential Campaign Council, Mr Bayo Onanuga, the former Governor of Lagos State, noted that the policy has subjected the masses to pains.

He stated that the Governors intervened and saved Nigeria from needless political and economic chaos and miseries, which have clearly become the unintended consequences of the monetary policy of the apex bank.

However, Mr Tinubu called on the CBN to ensure the execution of the Supreme Court ruling by taking all necessary steps to ensure sufficient availability of old and new Naira notes to citizens and properly sensitise the public on the ruling and the consequent validity of old Naira.

“I want to salute the courage of our Governors and most especially the Progressives Governors in APC who acted to save our country from avoidable and dangerous political crises and social unrest which the Central Bank policy on new Naira notes has brought on our country.

“Our country was dangerously careering toward anarchy and political and economic shutdown. But with the Supreme Court interim ruling, our country has been pulled back from the precipice. We thank our Supreme Court Justices for ruling wisely on the side of the people who have been subjected to undue agony and pain since this policy was announced.

“The Federal Government and relevant stakeholders can now sit down and work out a better framework on how to proceed with the new policy without causing any social and economic disruption and inconvenience to our people. We have examples of other countries that have successfully and seamlessly changed their currencies to learn from.

“Those countries give a long time, at least 12 months, to effect the currency change. They do not engage in a CBN-like fire brigade approach.

“We have seen how a good policy can be poorly implemented to cause unintended problems for the people who should be the beneficiaries. While lessons have been learnt, we must now move on as a country and people with a Renewed Hope for a better tomorrow.

“The sole aim of my running to be the president of our country is to make life better and more abundant for our people, and this is an ideal to which I will remain eternally committed,” he said.

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