By Emeka Anaeto, Economy Editor

Federation accounts consolidated revenue fund is set to rise by over N1.0 trillion, following the successful take-off of the flexible exchange rate this week.

The policy, which brought down the value of Naira by over 40 per cent, has led to a surge in the Naira cash from oil revenue.

But the increase would still fall short of the N3.9 trillion projected in the 2016 budget due to shortfalls so far recorded in the first five months of the year, while further shortfalls are expected down the year due to drops in oil production below budgeted target.

The budgeted revenue was based on oil production benchmark of 2.2 million barrels per day, mbpd, and exchange rate of N199/USD1.0, but fiscal revenue analysts had to base their analysis on actual production level of 1.4mbpd recorded last month, while the exchange rate for oil revenue has been marked up on the basis of this week’s average exchange rate of N282.8/ USD1.0 recorded in the new forex market.

Financial market analysts indicated that by the end of this trading week in the new forex market, the Central Bank of Nigeria, CBN, would have raised about N1.24 trillion from the projected sale of about USD4.4 billion on both spot and forward markets, against N875.6 billion which that same quantity of dollars would have yielded under the previous forex regime.

Sources at Finance Ministry told Vanguard that the ministry was expecting a spike in revenue as a result of the new forex policy but could not confirm the figures.

According to him, the ministry cannot give any figure since the rates are not fixed and cannot be determined by either the CBN or the ministry.

Using exchange rate of between N260 and N270/USD1.0 which was the CBN’s forecast rate when the new forex system eventually stabilizes, analysts at FSDH Merchant Bank said: ‘’We expect currency adjustment to US$/N260 to increase the FGN retained revenue for 2016 to about N3.522 trillion.”

In a similar comment, analysts at Afrinvest West Africa, a Lagos-based investment house, said:   “Translation of oil earnings at lower forex rate is expected to reduce the impact of decline in oil productions on federation revenue based on our estimates.

“We analysed that if equilibrium exchange rate settles at N280/USD (40.6% higher than budget benchmark of N199/USD1.0) and oil production remained at 1.4mbpd (36.5 per cent lower than budget benchmark of 2.2mbpd) with global oil price up by average 26.3% to USD48/pb,  Federation Accounts Allocation Committee, FAAC, allocation will receive a boost, thus strengthening fiscal revenue capacity of Federal and sub-national governments.

“Also restoration of foreign credit lines/capital market borrowings of sovereign and municipals, subsequent to the implementation of the flexible system, will aid budget implementation and buoy aggregate demand.”