By Kadiri Abdulrahman
On May 29, former President Muhammadu Buhari officially handed over presidential powers to President Bola Tinubu.
In addition to assets Buhari also handed over to Tinubu is a N46.25 billion (103.11 billion dollars) domestic and foreign debt stock as well as N22.7 billion debt to the Central Bank of Nigeria (CBN) incurred through the Ways and Means Advances.
The Debt Management Office (DMO) said the total public debt stock of the country consisted of the domestic and external debts of the Federal Government and the sub-national governments.
The sub-national governments are the 36 state governments and the Federal Capital Territory (FCT).
According to the DMO, among the reasons for the increase in total public debt stock are new borrowings by the Federal Government and sub-national governments, primarily to finance budget deficits and execute projects.
“The issuance of promissory notes by the Federal Government to settle some liabilities also contributed to growth in the debt stock,’’ it said.
The new government led by Tinubu is, therefore, saddled with the responsibility of steering the ship of the Nigerian state ashore in the midst of huge fiscal and infrastructure deficits, low revenue base and huge indebtedness.
Many economic experts and institutions consider boosting revenue generation as one of the key ways to avoid the falling into the debt trap.
The International Monetary Fund (IMF) has urged Tinubu to take steps to increase the country’s revenue base.
Ari Aisen, Resident Representative, IMF Nigeria Office, who said this during a virtual forum on the Nigerian debt situation, also advised the incoming government to drastically reduce dependence on borrowing to fund expenditure.
According to Aisen, to resolve the debt issues of Nigeria the country needs to concentrate on its revenue and expenditure.
He said that the debt situation had deteriorated because the Federal Government spent more than it was actually getting in revenues.
“How do you reduce the spending needs of the government? That should be the question.
“It is really about fiscal discipline. People should not permanently spend beyond what they generate in revenue because it becomes unsustainable.
Aisen said that the critical thing to do was for countries to rely more on their own revenue to finance their own expenditure.
“That is the autonomy and the Independence that we like to see our member-countries rely on,” he said.
Stakeholders are already beaming their searchlights on the new president to see what he would do differently to create a fiscal balance and move the economy away from perennial deficit budgeting.
Vahyala Kwaga, a Senior Research and Policy Analyst at BudgIT, a Nigerian company that provides social advocacy using technology, urged the incoming government to address the distortion between fiscal and monetary authorities.
According to Kwaga, there is a lot of money being pumped into the economy, and this has its impact.
“The Ways and Means is another lump sum of money that affected the economy significantly in the sense that it compounded the problem of inflation.
“A lot of these monies, according to the president, were used for infrastructure projects. Some were also given to the state governors as bailouts,” he said.
He urged Nigerians to also beam their searchlights on the state governors and their fiscal behaviour.
“The federal system allows the centre to provide monies for the states. The question is, how prudent are these monies expended when they are given to the states?
“The transparency and accountability problem we have in the use of funds is extremely problematic at the level of the states,” he said.
He tasked the legislature to rise up to its responsibility by curbing abuse of process by the executive as witnessed in the Ways and Means Advances.
According to Kolawole Oluwadare, Deputy Director, Socio – Economic Rights And Accountability Project (SERAP), an NGO, the issues are less about whether the borrowings are lawful or not.
“It is more about the use of the loans. Both the issues of borrowing and the use of the loans are related.
“That is why the Fiscal Responsibility Act has provided clearly that borrowings by government should be strictly for capital projects.
`The Act also provides that government should undertake a cost-benefit analysis among other requirements before any borrowing is done ” he said.
The DMO is saddled with the responsibility of managing Nigeria’s debt.
Monday Usiade, Director, Market Development Department, DMO, said that the office received approval from the authorities based on the difference between revenue position and expenditure, and the actual amount to be borrowed.
“We are at the service of the country, and our job is to look at the best ways, options, sources and all that we can put together to fund government as approved by the authorities,” he said.
He also said that the DMO was transparent in carrying out its functions.
He urged the incoming government to be more concerned about how to narrow the gap between expenditure and revenue so as to limit borrowings.
Meanwhile, economic experts at a recent American Business Council (ABC) Economic Update charged the incoming administration to embrace strategies aimed at tackling Nigeria’s debt overhang for economic growth and development.
Dr Yemi Kale, Chief Economist, KPMG, said that focus should be on the Consumption, Investment, Government Expenditure, Exports and Imports (CIGXM) economic indices to fully harness the potential of the country’s economy.
Kale said under the CIGXM, Nigeria must begin to boost consumer purchasing power, enhance ease of doing business, provide the right infrastructure, increase public investment and enact fund usage transparency.
He said the country must increase export tentacles, enhance competitiveness, promote income substitution and address large debt burden and debt servicing ratio to ensure long term economic sustainability.
“Since 2013 Nigeria’s public debt has increased by almost seven folds and inflation and high debt servicing costs are factors that have raised debt levels.
“Although debt to the Gross Domestic Product (GDP) remains relatively low at less than 40 per cent, arbitrary borrowing from the Central Bank of Nigeria to cover budget deficit has undermined fiscal prudence.
“The incoming administration must curtail excessive borrowing by raising revenues from both oil and non-oil sources and engage in prudent budget practices,” he said.
He urged the incoming government to implement fiscal restraint, enhance revenue production through taxation changes, diversify the economy, and successfully control governmental expenditure to lower the debt load and foster economic growth.
Also, Mrs Mokutima Ajileye, the Managing Director, P&G Nigeria said the country’s manufacturing sector needed the certainty and predictability that came with stable and long-termed government policies to increase the sector’s contribution to the GDP.
According to her, the sector is frustrated by policies that keep changing, timelines while some policies are unrealistic and the fluctuating foreign exchange rate.
“The manufacturing sector needs to be able to plan business on certainties and it is important to bring industry players into the room when making policies,” she said.
Prof. Bongo Adi of the Lagos Business School said a reform in the power sector was critical and the new administration needed to bring in a technical management contract to manage the transmission of electricity to add stability to the power sector.
He urged the government to give incentives to human capital development and improve the standard and quality of education by ensuring that universities matched curriculum to the demands of the markets.
Mr Dapo Olagunju, Managing Director, JP Morgan West Africa, said that government must tackle the full chain that engages in oil theft and other loopholes in government expenditures to save additional revenue for the government.
Olagunju emphasised the need for a policy reset at the CBN to engender the unification of exchange rate.
Nigerians expect the new leadership under President Bola Tinubu to avoid the mistakes of the past government in the management of the nation’s economy, particularly in the area of borrowing.
