Question Tag: Public Finance

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  • 15 Marks

PSAF – Nov 2023 – L2 – Q6 – Fiscal Policy and Public Finance

Explains debt refinancing, project financing, and the forms of debt refinancing.

The merits and demerits of debt and tax finance for deficit financing are often debated. The choice of one method depends on the objective and overall long-term implications for the economy.

Required:

a. Explain the following:
i. Debt refinancing (1 Mark)
ii. Why debt refinancing may be of interest to a federal authority (4 Marks)
iii. Project financing (2 Marks)

b. Explain FOUR forms of debt refinancing. (8 Marks)

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  • 10 Marks

PSAF – May 2021 – L2 – Q5b – Fiscal Policy and Public Finance

Analysis of debt burden through key ratios and explanation of sources for external debt

External debt does not constitute a burden when contracted loans are optimally deployed and the return on investment is sufficient to meet maturing obligations, as and when due, while servicing of the domestic economy is not undermined. The magnitude and severity of debt burden cannot be determined on the basis of debt volume only, rather, the debt volume should be viewed in combination with certain debt ratios for better appreciation of the debt problem.

Required:

Discuss THREE ratios commonly used to analyze the degree of indebtedness of a country and explain TWO sources of external debts.

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  • 10 Marks

PSAF – May 2021 – L2 – Q2a – Fiscal Policy and Public Finance

Define debt sustainability analysis, outlining objectives and benefits.

Debt management is a key component of public finance management that enables the government to meet its financing needs at minimum costs and within acceptable levels of risk. One of the diagnostic tools that the government uses in managing its debt portfolio is to conduct an annual Debt Sustainability Analysis (DSA).

Required:
Explain the term “Debt Sustainability Analysis,” identifying its THREE objectives and FIVE benefits.

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  • 15 Marks

PSAF – May 2017 – L2 – SC – Q7 – Government Expenditure

Identify and explain factors contributing to the rapid growth in Nigeria's government spending.

A number of factors have been identified as inevitably leading to rapid growth in government spending in many countries over time.

Required:

Identify and explain FIVE of these factors as they apply to Nigeria.

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  • 15 Marks

PSAF – May 2017 – L2 – SC – Q5 – Fiscal Policy and Public Finance

Define external debt and discuss causes and adverse consequences of Nigeria's rising debt levels.

The accumulation of external debt is a common phenomenon in developing countries at the stage of development where external resources are needed to bridge budgetary gap.

Required:

a. Explain what is meant by External Debt. (3 Marks)

b. Discuss the causes and likely adverse consequences of the rising level of Nigeria’s total external debt stock. (12 Marks)

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  • 20 Marks

FR – May 2021 – L2 – Q2 – Impairment of Assets (IAS 36)

Analyze asset sale due to privatization, calculate impairment, and address valuation criteria per IAS 36.

As a result of privatisation and commercialisation exercise currently going on in the country, the Ministry of Transport sold the assets and liabilities of the newly constructed standard gauge railway to a private company known as Stalus Rail Limited (SRL) to ensure smooth operations of the railway services by freeing it from government bureaucracy.

The summarised extracts of the statement of financial position at fair value of SRL on January 1, 2019, reflecting the terms and conditions of the sales agreement of the Transport Ministry are as follows:

N’m Assets
Goodwill 150,000
Operating licence 900,000
Property – Train stations and land 225,000
Rail tracks and coaches 225,000
Two (2) train engines 750,000
Total Assets 2,250,000

Liabilities:

  • Sundry liabilities: Nil

The operating licence is for a ten-year period issued on January 1, 2019, by the Transport Ministry and is stated at cost. The carrying value of the property and rail track and coaches is based on value in use, while the engines are valued at their net selling prices.

On February 1, 2019, one of the train engines got damaged due to a technical fault from the manufacturer and was completely destroyed. The sale of the assets to SRL was without recourse to the Transport Ministry or the manufacturer of the engines.

In view of this, it was estimated that there would be reduced passenger capacity, and the estimated value in use of the whole train service business of SRL was assessed at N1,500 billion.

The number of passengers after one of the engines was damaged was below expectation, even allowing for the reduced capacity. Consequently, the value in use of SRL rail services was re-assessed on March 31, 2019, at N1,350 billion. On this date, SRL received an offer of N675 billion from Papaya Railway Services Limited (PRSL) for the operating licence (since it is transferable). The realisable value of the other assets has not changed significantly.

Required:

a. Draft a memo addressed to the MD of Stalus Rail Limited (SRL) explaining the basis of allocating an impairment loss to the assets of a cash-generating unit in accordance with IAS 36 on impairment of assets.
(6 Marks)

b. Calculate the carrying amount of the assets of SRL Limited as at February 1, 2019, and March 1, 2019.
(10 Marks)

c. Explain TWO conditions that must exist before an impairment loss can be reversed.
(4 Marks)

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  • 15 Marks

PSAF – May 2023 – L1 – SA – Q5 – Fiscal Policy and Public Finance

Explains why government intervenes in the economy and identifies Nigeria's macroeconomic objectives.

A national economy requires the involvement of government to thrive, and its presence supports citizens’ livelihoods.

Required:

i. Identify and explain FIVE reasons why the government intervenes in the economy. (7.5 Marks)
ii. Identify and explain FIVE macroeconomic objectives in Nigeria. (7.5 Marks)

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  • 15 Marks

PSAF – Nov 2015 – L2 – Q7 – Public Sector Reforms

Distinguish between basic infrastructure and development projects with examples and identify funding sources and characteristics.

In order to achieve some development objectives, nations place emphasis on priority programmes like the provision of basic infrastructure and development projects, all of which require appropriate funding.

Required:

a. By means of specific relevant examples, distinguish between “basic infrastructure” and “development projects”. (3 Marks)

b. Discuss TWO development objectives which the priority programmes you refer to in (a) above are planned to achieve. (4 Marks)

c. Identify TWO sources of funding for these priority projects stating TWO distinct characteristics of each source identified and TWO factors that facilitate the commercial viability of the projects. (8 Marks)

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  • 15 Marks

PSAF – May 2024 – L2 – SB – Q7 – Public Sector Reforms

Categories of public finance and rationale for public sector involvement in the economy.

Public finance is concerned with the income and expenditure of public authorities and with the adjustment of one to the other. Also, it opines that the subject matter of public finance looks into the financial problems and policies of the government at different levels and studies the inter-governmental financial relations.

Required:
a. Identify and explain FIVE categories of public finance. (7½ Marks)

b. Discuss FIVE rationale for public sector in the economy. (7½ Marks)

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  • 15 Marks

PSAF – May 2024 – L2 – SB – Q5 – Government Revenue

Principles and factors affecting revenue allocation in Nigeria.

In Nigeria, public revenue belongs to its citizenry and is allocated to them through the National Revenue Mobilisation, Allocation and Fiscal Commission.

a. State and explain FIVE principles that guide revenue allocation in Nigeria. (7½ Marks)

b. Explain FIVE factors that led to the controversies surrounding revenue sharing in Nigeria. (7½ Marks)

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  • 15 Marks

PSAF – Nov 2023 – L2 – Q6 – Fiscal Policy and Public Finance

Explains debt refinancing, project financing, and the forms of debt refinancing.

The merits and demerits of debt and tax finance for deficit financing are often debated. The choice of one method depends on the objective and overall long-term implications for the economy.

Required:

a. Explain the following:
i. Debt refinancing (1 Mark)
ii. Why debt refinancing may be of interest to a federal authority (4 Marks)
iii. Project financing (2 Marks)

b. Explain FOUR forms of debt refinancing. (8 Marks)

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  • 10 Marks

PSAF – May 2021 – L2 – Q5b – Fiscal Policy and Public Finance

Analysis of debt burden through key ratios and explanation of sources for external debt

External debt does not constitute a burden when contracted loans are optimally deployed and the return on investment is sufficient to meet maturing obligations, as and when due, while servicing of the domestic economy is not undermined. The magnitude and severity of debt burden cannot be determined on the basis of debt volume only, rather, the debt volume should be viewed in combination with certain debt ratios for better appreciation of the debt problem.

Required:

Discuss THREE ratios commonly used to analyze the degree of indebtedness of a country and explain TWO sources of external debts.

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  • 10 Marks

PSAF – May 2021 – L2 – Q2a – Fiscal Policy and Public Finance

Define debt sustainability analysis, outlining objectives and benefits.

Debt management is a key component of public finance management that enables the government to meet its financing needs at minimum costs and within acceptable levels of risk. One of the diagnostic tools that the government uses in managing its debt portfolio is to conduct an annual Debt Sustainability Analysis (DSA).

Required:
Explain the term “Debt Sustainability Analysis,” identifying its THREE objectives and FIVE benefits.

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  • 15 Marks

PSAF – May 2017 – L2 – SC – Q7 – Government Expenditure

Identify and explain factors contributing to the rapid growth in Nigeria's government spending.

A number of factors have been identified as inevitably leading to rapid growth in government spending in many countries over time.

Required:

Identify and explain FIVE of these factors as they apply to Nigeria.

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  • 15 Marks

PSAF – May 2017 – L2 – SC – Q5 – Fiscal Policy and Public Finance

Define external debt and discuss causes and adverse consequences of Nigeria's rising debt levels.

The accumulation of external debt is a common phenomenon in developing countries at the stage of development where external resources are needed to bridge budgetary gap.

Required:

a. Explain what is meant by External Debt. (3 Marks)

b. Discuss the causes and likely adverse consequences of the rising level of Nigeria’s total external debt stock. (12 Marks)

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  • 20 Marks

FR – May 2021 – L2 – Q2 – Impairment of Assets (IAS 36)

Analyze asset sale due to privatization, calculate impairment, and address valuation criteria per IAS 36.

As a result of privatisation and commercialisation exercise currently going on in the country, the Ministry of Transport sold the assets and liabilities of the newly constructed standard gauge railway to a private company known as Stalus Rail Limited (SRL) to ensure smooth operations of the railway services by freeing it from government bureaucracy.

The summarised extracts of the statement of financial position at fair value of SRL on January 1, 2019, reflecting the terms and conditions of the sales agreement of the Transport Ministry are as follows:

N’m Assets
Goodwill 150,000
Operating licence 900,000
Property – Train stations and land 225,000
Rail tracks and coaches 225,000
Two (2) train engines 750,000
Total Assets 2,250,000

Liabilities:

  • Sundry liabilities: Nil

The operating licence is for a ten-year period issued on January 1, 2019, by the Transport Ministry and is stated at cost. The carrying value of the property and rail track and coaches is based on value in use, while the engines are valued at their net selling prices.

On February 1, 2019, one of the train engines got damaged due to a technical fault from the manufacturer and was completely destroyed. The sale of the assets to SRL was without recourse to the Transport Ministry or the manufacturer of the engines.

In view of this, it was estimated that there would be reduced passenger capacity, and the estimated value in use of the whole train service business of SRL was assessed at N1,500 billion.

The number of passengers after one of the engines was damaged was below expectation, even allowing for the reduced capacity. Consequently, the value in use of SRL rail services was re-assessed on March 31, 2019, at N1,350 billion. On this date, SRL received an offer of N675 billion from Papaya Railway Services Limited (PRSL) for the operating licence (since it is transferable). The realisable value of the other assets has not changed significantly.

Required:

a. Draft a memo addressed to the MD of Stalus Rail Limited (SRL) explaining the basis of allocating an impairment loss to the assets of a cash-generating unit in accordance with IAS 36 on impairment of assets.
(6 Marks)

b. Calculate the carrying amount of the assets of SRL Limited as at February 1, 2019, and March 1, 2019.
(10 Marks)

c. Explain TWO conditions that must exist before an impairment loss can be reversed.
(4 Marks)

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  • 15 Marks

PSAF – May 2023 – L1 – SA – Q5 – Fiscal Policy and Public Finance

Explains why government intervenes in the economy and identifies Nigeria's macroeconomic objectives.

A national economy requires the involvement of government to thrive, and its presence supports citizens’ livelihoods.

Required:

i. Identify and explain FIVE reasons why the government intervenes in the economy. (7.5 Marks)
ii. Identify and explain FIVE macroeconomic objectives in Nigeria. (7.5 Marks)

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  • 15 Marks

PSAF – Nov 2015 – L2 – Q7 – Public Sector Reforms

Distinguish between basic infrastructure and development projects with examples and identify funding sources and characteristics.

In order to achieve some development objectives, nations place emphasis on priority programmes like the provision of basic infrastructure and development projects, all of which require appropriate funding.

Required:

a. By means of specific relevant examples, distinguish between “basic infrastructure” and “development projects”. (3 Marks)

b. Discuss TWO development objectives which the priority programmes you refer to in (a) above are planned to achieve. (4 Marks)

c. Identify TWO sources of funding for these priority projects stating TWO distinct characteristics of each source identified and TWO factors that facilitate the commercial viability of the projects. (8 Marks)

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  • 15 Marks

PSAF – May 2024 – L2 – SB – Q7 – Public Sector Reforms

Categories of public finance and rationale for public sector involvement in the economy.

Public finance is concerned with the income and expenditure of public authorities and with the adjustment of one to the other. Also, it opines that the subject matter of public finance looks into the financial problems and policies of the government at different levels and studies the inter-governmental financial relations.

Required:
a. Identify and explain FIVE categories of public finance. (7½ Marks)

b. Discuss FIVE rationale for public sector in the economy. (7½ Marks)

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  • 15 Marks

PSAF – May 2024 – L2 – SB – Q5 – Government Revenue

Principles and factors affecting revenue allocation in Nigeria.

In Nigeria, public revenue belongs to its citizenry and is allocated to them through the National Revenue Mobilisation, Allocation and Fiscal Commission.

a. State and explain FIVE principles that guide revenue allocation in Nigeria. (7½ Marks)

b. Explain FIVE factors that led to the controversies surrounding revenue sharing in Nigeria. (7½ Marks)

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