Borrowing

Abuja, Dec.31, 2023:The  Senate has approved President Bola Tinubu’s request of 2022-2024 external borrowing rolling plan of 7.4 billion dollars and 100 million euros.

This followed presentation and adoption of report of Committee on Local and Foreign Debt at plenary on Saturday by the Vice Chairman .Sen. Haruna Manu(PDP- Taraba).

Manu, while presenting the report, said the committee noted with utmost importance, the genuine and very serious concerns of Nigerians about the level and sustainability, serviceability of the nation’s borrowing activities in the last decade.

He said the debt service figures constitute a huge drain on the nation’s revenue to the extent that it accounts for over 30 per cent of its expenditure in the annual budget.

Manu said due to the shortfall on the nation’s annual revenue in relation to its need for rapid infrastructural and human capital development, the National Assembly have had to pass deficit budget every year.

This, he said required borrowing to finance the deficit in the budget.

Manu said the borrowing request seeking approval of National Assembly was proposed to be borrowed from various financial institutions.

According to him, the proposed projects in the Ministries’ of Education, Agriculture and Women Affairs were mostly ongoing projects and programmes in respect of which external borrowed funds have been spent in the past, including loans.

He said the projects have a great multiplier effect on stimulating economic growth through infrastructure development, job creation and poverty alleviation, stimulation of commercial and engineering activities.

The Taraba senator said the projects also have consequent tax revenues payable to government as a result of the productive activities.

He said the committees found that the World Bank has expressed its willingness to provide funds to improve the reliability of electricity supply, achieve financial and fiscal sustainability, and enhance accountability and to also ensure that all existing grid-connected capacity is utilised to deliver more power.

According to him , the projects are also intended to improve states’ land administration, business-enabling environment and public Private partnership.

Similarly, Senate also gave expeditious approval for securitisation of the balance of N7.3 trillion ways and Means revenue in the Consolidated Revenue Fund (CRF) of Nigeria.

The approval followed expeditious consideration of its request for approval by President Bola Tinubu in a letter addressed to President of Senate, Godswill Akpabio and read at plenary.

Senate also confirmed President Bola Tinubu’s nominations of Executive Commissioners for the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).

This followed the adoption of report of Joint Committee on Petroleum Upstream on screening of the nominees.

The nominees confirmed are Bashir Indabawa North-West , Executive commissioner, exploration and acreage management

Kelechi Ofoegbu , South-East, Executive Commissioner, Corporate Services and Administration.

Enorense Amadasu South-South , Executive Commissioner, Development and Production

Babajide Fasina South-West,Executive Commissioner, Economic Regulation and Strategic Planning.

Senate thereafter, adjourned plenary to Jan 23, 2024.

Abuja, Nov. 29, 2023: President Bola Tinubu has sought the approval of the Senate for 2023-2024 external borrowing plan of 8.6 billion dollars and 100 million euros.

This is contained in a letter addressed to President of Senate,Godswill Akpiabio and read at plenary on Tuesday.

Tinubu said the request for the borrowings were earlier contained in the 2022 to 2024 External borrowing plans approved by the administration of President Muhammadu Buhari at the Federal Executive Council on May 15.

He said that it had become imperative that the Federal Government resort to prudent external borrowing to breach the financial gap.

He said the fund would be used to execute key infrastructure projects including power, railway,health among others.

“The projects cut across all sectors with specific emphasis on infrastructure, agriculture, health, education, water supply, security, employment generation amongst others, ” he said.

He said following the removal of fuel subsidy and its attendant impact on the economy, the African Development Bank(AFDB) and the World Bank Group have indicated interest to assist Nigeria mitigate the impact.

He said the projects and programmes in the borrowing plan were selected based on positive technical economic evaluation and its expected contribution to the social economic development of the country.

He also listed employment generation, skills acquisition, support towards emergence of entrepreneurs , poverty education and food security to improve the livelihood of Nigerian’s as reasons for the facility.

Akpiabio mandated the Senate Committee on Local and Foreign Debt to look at the letter for further legislative work and report back in one week.

Abuja, Nov. 17, 2023: Mr Wale Edun, the Minister of Finance and  Coordinating Minister of the Economy,  says Nigeria cannot rely on borrowing to fund the 2024 budget.

Edun stated this on Thursday when he appeared before the joint Senate Committee on the 2024-2026 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) in Abuja.

He stated that the best way Nigeria could fund its budget was to spend more money on infrastructure to generate more revenue.

“Clearly the environment that we have now, internationally as well as nationally we are in no position to rely on borrowing.

“We have an existing borrowing profile. Our direction of tariff is to reduce the quantum of borrowing or intercepting deficit financing in the 2024 budget.

“Simply put internationally there is focus among rich countries on bringing down the inflation rate to stabilise the economies and give them opportunity for investment growth.

“They are in the process, sacrificing that immediate goal for compacting their economies or at least contracting the money supplies and pushing up the interest rates and of course high interest rates and investments don’t go together,” he said

Edun added: “What is left for us to access those funds are expensive so it is the last thing that we must rely on.

“As we know we have all the figures and debt servicing and cushioning 98 per cent of government revenue.

“The last thing you can think of is to pile up more debts. Government needs to not just maintain its activity, it needs to spend more.

“If you look at government spending,  if you look at the budget as a percentage of GDP,  ours is one of the lowest being 10 per cent, even Ghana  is at 25 per cent, rich ones they are 50 per cent.”

“The very rich countries have to be most advanced in terms of social safety nets and its social security system at 70 per cent of GDP. Government spending definitely will lead to increase in revenues

“The number one source of revenue especially in short term, even in the medium term is all revenue.”

Sen. Sani Musa, the Chairman of the committee expressed the fears that the revenue projections of government Ministries, Departments and Agencies that had so far appeared before the MTEF-FSP panel, were lower that the Federal Government projections for 2024.

Abuja, Nov. 2, 2023: President Bola Tinubu has sought the approval of Senate for the 2022-2024 external borrowing plan of 7.8 billion dollars and 100 million euros.

Tinubu’s request was contained in a letter addressed to President of Senate, Godswill Akpabio and read at plenary on Wednesday.

Tinubu in the letter said the past administration had approved the 2022-2024 borrowing plan at the Federal Executive council on May 15 .

He said: “Following the removal of fuel subsidy and its impact on the economy in the country, Africa Development Bank (AFDB)and World Bank Group have indicated interest to assist the country in mitigating the economic shocks, and its recent reforms.

“While the AFDB will assist the country with the sum of One billion dollars, the world bank will give two billion dollars in addition to the Federal Executive council approved 2023-2024 external borrowing plan.”

Tinubu said the projects due to be utilised with the fund cut across all sectors with specific emphasis on infrastructure, agriculture, health , education, water supply, security and employment generation and financial management reforms.

He said that the projects and programmes in the plan were selected based on technical economic evaluation and its expected contribution to the social economic development of the country.

He listed the areas to include employment generation, skills acquisition , supporting the emergence of more entrepreneurs, poverty reduction and food security to improve the livelihood of an average Nigerian.

He said the projects and programs would be implemented in all 36 states of the Federation, and the FCT.

“In view of the economic realities , facing the country, it has become imperative that the country resort to prudent external borrowing, to breach the financing gap which will be applied to key infrastructure projects including power , railway , health amongst others , given the nature of these facilities.

” In a quest to bring the country to normalcy, it has become exigent to request the senate consideration and approval of the 2022 -2024 external borrowing plan to enable the government deliver it’s responsibility to Nigerians through expeditious disbursement and efficient project implementation”.

The Minister of Finance and Co-ordinating Minister of the Economy, Mr Wale Edun, has said that the federal government had no intention to borrow from any local or foreign body because of the removal of fuel subsidy and exchange rates harmonisation.

Edun, revealed at the end of the inaugural Federal Executive Council meeting in Abuja on Monday.

He said that the benefit of the subsidy removal would be ploughed back into various sectors aimed at boosting government revenue and improving business environment for local and foreign investment.

Edun said that with the increased revenue from subsidy removal, various palliatives had been made available to cushion its effects on a short, medium and long term bases.

He reiterated the President Bola Tinubu-led administration’s desire to bring back the economy from the wood it has found itself over time.

Similarly, the Minister of Industry, Trade and Investment, Doris Uzoka-Anite, said investment offers were already coming up in different sectors of the economy, including oil and gas, health, solid minerals and agriculture.

She said that her ministry would collaborate with relevant Ministries, Departments and Agencies of government to achieve the president’s commitment to creation of jobs for the teeming youthful population of Nigeria.

On his part, the Minister of Health, Prof. Ali Pate, said that critical sections of the health value chain would be exploited to improve the economy and create jobs for Nigerians.

He said that the president had directed them to be courageous and innovative in taking decisions that would benefit the country, adding that the president is already taking such moves.

Pate said that the president was responsive to the need to set the economy on the path of progress with his move to remove subsidy on petrol on his first day in office.

The Minister of Information and National Orientation, Alhaji Mohammed Idris, said that the president charged the cabinet members to be transparent in their dealings, especially in disseminating necessary information.

He urged the media to avail themselves the opportunity of verifying and fact checking their stories in order not to misinform the public.

Abuja, Aug. 28, 2023: The Federal Government says it has no intention to borrow from any local or foreign organisation with its removal of subsidy on petrol and exchange rate harmonisation.

The Minister of Finance and Coordinating Minister for the Economy, Chief Wale Edun, revealed this at the end of the inaugural Federal Executive Council meeting on Monday in Abuja.

He said that the benefit of the subsidy removal would be ploughed back into various sectors aimed at boosting government revenue and improving business environment for local and foreign investment.

Edun said that with the increased revenue from subsidy removal, various palliatives have been made available to cushion its effect on a short, medium and long term basis.

He reiterated the President Bola Tinubu-led administration’s desire to bring back the economy from the wood it has found itself over time.

Similarly, the Minister of Industry, Trade and Investment, Doris Uzoka-Anite, said investment offers were already coming up in different sectors of the economy, including oil and gas, health, solid minerals and agriculture.

She said that her ministry would collaborate with relevant Ministries, Departments and Agencies of government to achieve the president’s commitment to creation of jobs for the teeming youthful population of Nigeria.

On his part, the Minister of Health, Dr Ali Pate, said that critical sections of the health value chain would be exploited to improve the economy and create jobs for Nigerians.

He said that the president had directed them to be courageous and innovative in taking decisions that would benefit the country, adding that the president has already taken such moves.

Pate said that the president was responsive to the need to set the economy on the path of progress with his move to remove subsidy on petrol from the first day on his inauguration.

The Minister of Information and National Orientation, Alhaji Mohammed Idris, said that the president charged the cabinet members to be transparent in their dealings, especially in disseminating necessary information.

He urged the media to avail themselves of the opportunity of verifying and fact checking their stories in order not to misinform the public.

Abuja, Aug. 8, 2023: President Bola Tinubu has promised to break the cycle of overreliance on borrowing for public spending that results in burden of debt servicing and management of government revenues.

He made the commitment on Tuesday in Abuja at the Inauguration of the Presidential Committee on Fiscal Policy and Tax Reforms.

The President charged the committee to improve the country’s revenue profile and business environment.

He also said that the Federal Government was moving towards achieving 18 per cent Tax-to-GDP ratio within three years.

The President directed the Committee to achieve its one-year mandate, which is divided into three main areas: fiscal governance, tax reforms, and growth facilitation.

He also directed all government ministries and departments to cooperate fully with the committee towards achieving its mandate.

Tinubu said that the Committee has the responsibility of assisting the administration in meeting the high expectations of citizens to make their lives better.

”We cannot blame the people for expecting much from us. To whom much is given, much is expected.

”It is even more so when we campaigned on a promise of a better country anchored on our Renewed Hope Agenda.

‘’I have committed myself to use every minute I spend in this office to work to improve the quality of life of our people,” he said.

Acknowledging Nigeria’s current international standing in the tax sector, the President said the nation was still facing challenges in areas such as ease of tax payment and its Tax-to-GDP ratio.

“Our aim is to transform the tax system to support sustainable development while achieving a minimum of 18% tax-to-GDP ratio within the next three years.

”Without revenue, government cannot provide adequate social services to the people it is entrusted to serve.

”The Committee, in the first instance, is expected to deliver a schedule of quick reforms that can be implemented within thirty days.

‘’Critical reform measures should be recommended within six months, and full implementation will take place within one calendar year,” the President directed.

Recounting the President’s track record on revenue transformation, the Special Adviser to the President on Revenue, Mr Zacchaeus Adedeji, described the committee members, drawn from the public and private sectors, as accomplished individuals from various sectors.

”Mr President, you have the pedigree when it comes to revenue transformation. You demonstrated this when you were the Governor of Lagos State over 20 years ago,” Adedeji said.

Chairman of the Committee, Mr Taiwo Oyedele, pledged the commitment of members to give their best in the interest of the nation.

“Many of our existing laws are out-dated, hence they require comprehensive updates to achieve full harmonisation to address the multiplicity of taxes, and to remove the burden on the poor and vulnerable while addressing the concerns of all investors, big and small,” he said.

Lagos, July 9, 2023: Some financial experts have urged the Federal Government to explore Public Private Partnership (PPP) option in addressing the country’s infrastructural challenges.

They also urged government to be cautious on new borrowings in order not to incur more debts.

The former Executive Secretary, Chartered Institute of Bankers of Nigeria (CIBN), Dr Uju Ogubunka, said the Federal Government could be innovative in fixing developmental projects without incurring more debts.

“The government should harness the enormous prospects of the PPP in tackling infrastructural challenges impeding our economic growth.

“This model is one of the solutions in tackling our infrastructural dearth, due to our poor fiscal revenue currently,” Ogubunka said.

He noted that the three tiers of government need to reduce the increasing cost of governance in order to free funds for infrastructural purpose.

“Adopting this cost saving measures is imperative so as government can reallocate the resources to other productive needs of the society.

“This approach will stop wastages in governance and reduce the spate of being in debt from borrowings from international lenders,” Ogubunka said.

Also, the President Standard Shareholders Association of Nigeria, Mr Godwin Anono, said the government should reduce the rate of borrowings because the country’s debt stock was assuming a worrisome dimension.

“The three tiers of government should reduce borrowings and be innovative in improving Internal Generated Revenue.

“As every state in the country has enormous revenue potential that could be harnessed for our common good,” Anono said.

He noted that the Federal Government could tackle its infrastructural headwinds without more borrowings from international lenders.

“The government could harness the Infrastructural Company of Nigeria which is saddled with the appropriate template for private sector funding for public infrastructure.

“This will ultimately catalise growth and provide the necessary infrastructue that will unlock capacity to appropriate our natural resources to enhance the lives of the people,” Anono said.

Also, the founder of the Independent Shareholders Association of Nigeria, Mr Sunny Nwosu, said the Federal Government should muster the political will to sell some state owned assets to enhance revenues.

“They are too many redundant national assets which are increasing government overheads with no economic viability currently.

“The government should have a committee where they will be evaluated and consessioned and others sold outrightly,” Nwosu said.

This, he said, would boost the country’s revenues and ameliorate the urge for more debts.

NAN reports that Nigeria’s total public debt rose by fiat to N82 trillion following the unification of the naira. It was N73 trillion before the unification.

The Central Bank of Nigeria issued a press release titled Operational Changes to the Foreign Exchange Market, signaling a unification of the multiple exchange rates.

However, the implementation of the scheme which saw the exchange rate first depreciate to N662/$1 attracted several consequences for the economy one of which includes the automatic increase of the public debt.

Before now, the nation’s public debt was quoted at N448.50/$1 by the Debt Management Office as the official exchange rate but this has now been depreciated to N662/$1.

This means the total public debt increases from an estimated N79 trillion to N82 trillion.

The increase is due to the conversion of the dollar portion of the debt which is estimated at about $41.6 billion. When adjusted for the most recent exchange rate it converts to N27.6 trillion.

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.