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Economy: Danger looms over 2016 budget impasse

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  • As  Again, IMF Cautions FG on Forex Policy, Wants Disagreement on Budget Resolved

For the first time, governance may shut down unless either President Muhammadu Buhari or the National Assembly blinks early enough over the 2016 budget.

Sources in the polity had noted that this would be the first time such a development would happen, as the Constitution only gives the executive power to spend 50 per cent of the previous year’s budget  for six months in the absence of a new budget.

The development came upon the discovery of  another alleged padding of the budget of Ministry of Agriculture to the tune of N12. 6 billion.

It was gathered that while the lawmakers reduced the ministry’s N40.918 billion budget proposal to N31.618 billion, they also injected  fresh 386 projects worth N12.6 billion.  It was not clear whether all the said projects were constituency projects.

The N6.07 trillion budget passed on March 23 had been a source of squabble between the executive and the legislature, with the executive alleging fresh padding and removal of some key projects.
The executive had alleged many of its flagship projects were either removed or distorted by legislators while working on the budget bill.

A Presidency source, however, insisted that President Buhari would not assent the budget as passed.
Though the House of Representatives had made its intention known to review the budget if it received complaints from the executive, the Senate said last week, that  it was only awaiting a supplementary budget in case the executive had objections to the passed budget.

That could be a source of potential government shut down, as the government cannot spend any money legally after June.
A source close to the Presidential Villa said: “Buhari will not sign that Appropriation Bill into law and he has already made his intention known to the assemblymen.

“He has been consulting widely with both legal and political associates on how to deal with the situation. A former leader even met with him shortly before he left for China.”

“The president has so far relied on the constitutional provision, which allows him to spend up to 50 per cent of the previous year’s budget, but that could snap if the crisis is not resolved by end of June.
“And if the worst should happen and the National Assembly refuses to rework the budget proposal, the government will rather shut down than for him to allow the old forces of retrogression to have their way and humiliate him.”

It was learnt that at the emergency Federal Executive Council (FEC) meeting held to review the budget as passed by the National Assembly, there was a consensus to reject the document and return it to the lawmakers.

Sources in the executive said the flagship projects by which Buhari intended to convince Nigerians that his administration meant well, were removed or distorted.

A contentious one remains the new standard gauge rail lines between Lagos and Calabar.
“Imagine, Britain introduced electric train in 1860 and Nigerians are still being ferried in old dilapidated locomotives that take three days and most times more, to travel between Lagos and Kano,” a source said, adding that some of the other projects included  recruitment of 500,000 teachers, construction of 105 new health centres across the 36 states, construction of 2000 kilometres of roads and that most of these had been distorted by the legislators.

Sources in the executive also said the decision to resist the legislature on the budget was taken, pursuant to the advice given by the legal minds within the administration who were of the view that the legislature did not have the right to increase budgetary votes.

They also claimed that the legislature could, however, reduce proposals if they believed that there was price inflation or if the projects were frivolous.
A source said: “But how can they inject new projects or raise the figures? Do they have the capacity to commission consultants to design projects? And if projects have not been designed by the executive, how can they vote money for it?

“Actually, President Buhari feels that there are some elements within and outside the National Assembly determined to distort his lofty intentions to emancipate Nigerians.”
Such arguments had, however, remained recurrent in the budget circles for many years now.

An attempt to settle the rift once and for all was to be taken by the administration of the late President Umaru Yar’Adua in 2008, when he threatened to drag the lawmakers to the Supreme Court, but he could not pull it through because of the fear of total shut down of government.

President Buhari said in Abuja on Sunday night that he would only sign the budget that will do good to a maximum number of Nigerians.

Speaking through his spokesman, Mr Femi Adesina, on a Channels Television programme, Politics Today, he said when asked he would sign the 2016 budget into law, that he would not wish to sign the budget but to critically look into it sector by sector.

“For example, the budget was reduced by N17bn, the president would like to know why it was reduced and where the amount reduced was taken to.

“The president will only sign a document that the executive agrees to,” he said.
Also on Sunday, it emerged that the budget of the Ministry of Agriculture had run into another hitch, following the discovery of alleged paddings by the lawmakers.

In the meantime, the International Monetary Fund (IMF) Thursday restated that the federal government needs to be flexible in its foreign exchange policy(forex) particularly as it affects some list of items that are exempted from forex allocation.

The IMF Managing Director, Christine Lagarde, said during a press briefing on 2016 Spring Meetings of the IMF-World Bank in Washington D.C that the Central Bank should be flexible in its forex regime.
Lagarge said Nigeria should be open minded in her use of flexibility of the exchange rate to be able to absorb some of the shocks, adding that this was more efficient than using a list of items that are exempted from the allocation of foreign exchange.

The IMF boss also advised the federal government to resolve the differences between the executive and the legislature arms so that the budget could be signed.
She also promised the assistance of the fund in addressing some of the issues that Nigeria is facing, but added that this was only if it was invited.

Lagarde recalled that she had advised the government to diversify its economy instead of relying on oil considering the current situation in the international oil market.

Tribune with additional report from Shipping Day

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WAIVER CESSATION: Igbokwe urges NIMASA to evolve stronger collaboration with Ships owners

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…Stresses the need for timely disbursement of N44.6billion CVFF***

Highly revered Nigerian Maritime Lawyer, and Senior Advocate of Nigeria (SAN), Mike Igbokwe has urged the Nigeria Maritime Administration and safety Agency (NIMASA) to partner with ship owners and relevant association in the industry to evolving a more vibrant merchant shipping and cabotage trade regime.

Igbokwe gave the counsel during his paper presentation at the just concluded two-day stakeholders’ meeting on Cabotage waiver restrictions, organized by NIMASA.

“NIMASA and shipowners should develop merchant shipping including cabotage trade. A good start is to partner with the relevant associations in this field, such as the Nigeria Indigenous Shipowners Association (NISA), Shipowners Association of Nigeria (SOAN), Oil Trade Group & Maritime Trade Group of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA).

“A cursory look at their vision, mission and objectives, show that they are willing to improve the maritime sector, not just for their members but for stakeholders in the maritime economy and the country”.

Adding that it is of utmost importance for NIMASA to have a through briefing and regular consultation with ships owners, in other to have insight on the challenges facing the ship owners.

“It is of utmost importance for NIMASA to have a thorough briefing and regular consultations with shipowners, to receive insight on the challenges they face, and how the Agency can assist in solving them and encouraging them to invest and participate in the maritime sector, for its development. 

“NIMASA should see them as partners in progress because, if they do not invest in buying ships and registering them in Nigeria, there would be no Nigerian-owned ships in its Register and NIMASA would be unable to discharge its main objective.

The Maritime lawyer also urged NIMASA  to disburse the Cabotage Vessel Financing Fund (CVFF)that currently stands at about N44.6 billion.

“Lest it be forgotten, what is on the lips of almost every shipowner, is the need to disburse the Cabotage Vessel Financing Fund (the CVFF’), which was established by the Coastal and Inland Shipping Act, 2003. It was established to promote the development of indigenous ship acquisition capacity, by providing financial assistance to Nigerian citizens and shipping companies wholly owned by Nigerian operating in the domestic coastal shipping, to purchase and maintain vessels and build shipping capacity. 

“Research shows that this fund has grown to about N44.6billion; and that due to its non-disbursement, financial institutions have repossessed some vessels, resulting in a 43% reduction of the number of operational indigenous shipping companies in Nigeria, in the past few years. 

“Without beating around the bush, to promote indigenous maritime development, prompt action must be taken by NIMASA to commence the disbursement of this Fund to qualified shipowners pursuant to the extant Cabotage Vessel Financing Fund (“CVFF”) Regulations.

Mike Igbokwe (SAN)

“Indeed, as part of its statutory functions, NIMASA is to enforce and administer the provisions of the Cabotage Act 2003 and develop and implement policies and programmes which will facilitate the growth of local capacity in ownership, manning and construction of ships and other maritime infrastructure. Disbursing the CVFF is one of the ways NIMASA can fulfill this mandate.

“To assist in this task, there must be collaboration between NIMASA, financial institutions, the Minister of Transportation, as contained in the CVFF Regulations that are yet to be implemented”, the legal guru highlighted further. 

He urged the agency to create the right environment for its stakeholders to build on and engender the needed capacities to fill the gaps; and ensure that steps are being taken to solve the challenges being faced by stakeholders.

“Lastly, which is the main reason why we are all here, cessation of ministerial waivers on some cabotage requirements, which I believe is worth applause in favour of NIMASA. 

“This is because it appears that the readiness to obtain/grant waivers had made some of the vessels and their owners engaged in cabotage trade, to become complacent and indifferent in quickly ensuring that they updated their capacities, so as not to require the waivers. 

“The cessation of waivers is a way of forcing the relevant stakeholders of the maritime sector, to find workable solutions within, for maritime development and fill the gaps in the local capacities in 100% Nigerian crewing, ship ownership, and ship building, that had necessitated the existence of the waivers since about 15 years ago, when the Cabotage Act came into being. 

“However, NIMASA must ensure that the right environment is provided for its stakeholders to build and possess the needed capacities to fill the gaps; and ensure that steps are being taken to solve the challenges being faced by stakeholders. Or better still, that they are solved within the next 5 years of its intention to stop granting waivers”, he further explained. 

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Breaking News: The Funeral Rites of Matriarch C. Ogbeifun is Live

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The Burial Ceremony of Engr. Greg Ogbeifun’s mother is live. Watch on the website: www.maritimefirstnewspaper.com and on Youtube: Maritimefirst Newspaper.

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Wind Farm Vessel Collision Leaves 15 Injured

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…As Valles Steamship Orders 112,000 dwt Tanker from South Korea***

A wind farm supply vessel and a cargo ship collided in the Baltic Sea on Tuesday leaving 15 injured.

The Cyprus-flagged 80-meter general cargo ship Raba collided with Denmark-flagged 31-meter wind farm supply vessel World Bora near Rügen Island, about three nautical miles off the coast of Hamburg. 

Many of those injured were service engineers on the wind farm vessel, and 10 were seriously hurt. 

They were headed to Iberdrola’s 350MW Wikinger wind farm. Nine of the people on board the World Bora were employees of Siemens Gamesa, two were employees of Iberdrola and four were crew.

The cause of the incident is not yet known, and no pollution has been reported.

After the collision, the two ships were able to proceed to Rügen under their own power, and the injured were then taken to hospital. 

Lifeboat crews from the German Maritime Search and Rescue Service tended to them prior to their transport to hospital via ambulance and helicopter.

“Iberdrola wishes to thank the rescue services for their diligence and professionalism,” the company said in a statement.

In the meantime, the Hong Kong-based shipowner Valles Steamship has ordered a new 112,000 dwt crude oil tanker from South Korea’s Sumitomo Heavy Industries Marine & Engineering.

Sumitomo is to deliver the Aframax to Valles Steamship by the end of 2020, according to data provided by Asiasis.

The newbuild Aframax will join seven other Aframaxes in Valles Steamship’s fleet. Other ships operated by the company include Panamax bulkers and medium and long range product tankers.

The company’s most-recently delivered unit is the 114,426 dwt Aframax tanker Seagalaxy. The naming and delivery of the tanker took place in February 2019, at Namura Shipbuilding’s yard in Japan.

Maritime Executive with additional report from World Maritime News

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