The growing profile of Nigeria’s debt has
become a source of concern, given the Federal
Government’s penchant to add to its stock. The
latest addition of N473 billion, has once again
opened the floodgate of the spiral rise, with
its attendant consequences, reports SIMEON
EBULU, Group Business Editor
FEAR may well be the word to describe the state
of Nigeria’s debt profile, hovering at N11.24
trillion as at December 31, 2014 and still
rising.
The level which the nation’s debt overhang has
attained is like a death-knell. Yet it keeps
climbing.
The revelation by the Minister of Finance and
Coordinating Minister for the Economy, Dr.
Ngozi Okonjo-Nweala, that the Federal
Government has borrowed N473 billion in the
first quarter of this year to execute the 2015
National Budget, is another clear case of one-
more borrowing too many, so to speak.
Dr. Okonjo-Iweala said yesterday that of the
N882 billon budgetary provision for borrowing,
the Federal Government had already accessed
N473 billion to fund Recurrent Expenditure,
such as salaries and other overheads.
The
obvious reason for this development, she
stressed, is the 50 per cent decline in the spot
market of crude prices .which has inadvertently
resulted in a cash crunch for the country.
To remain focused on keeping the economy stable
and the government running, the government has
embarked on “front-loaded borrowing programme
to manage the cash crunch in the economy,” she
said.
Nigeria’s borrowing profile from independence,
is a study in itself. Going by the data available
to The Nation, there appears to be more
questions than answers when it comes to x-
raying how the nation arrived at this point in
time, where nothing gets done unless it is
powered by external revenue sources, rather
than internally generated funds, or revenues
earned from known government sources, such as
taxes, oil and non-oil exports
The hint that nigeria would go a borrowing
again, was given by Mrs. Okonjo-Iweala in far-
away America in April during the last
International Monetary Fund (IMF)/World Bank
Group Spring meetings in Washington DC, United
States (U.S.).
On prospects of further borrowing, she said:
“Government is considering and in fact taking
steps to actualise this with the World Bank
Group and the African Development Bank (AfDB).”
The other option of tapping the capital markets
would be left for the incoming government. She
said the government decided to look outside the
nation’s shores for the next round of borrowing
because it has reached, and almost exceeded
taking the ceiling for local debts.
Mrs. Okonjo-Iweala said: “Our borrowing strategy
is very prudent, and what we will do is that we
have a lot of domestic borrowing than we want,
so we are trying to switch and have a little
more of external borrowing, but by drawing
heavily on the multilateral institutions.
So we
will be going to the World Bank and the AfDB,
and we will also look into the markets. But for
the multilaterals, we’ve already embarked on
discussions.”
Her disclosure that N473 billion has been
borrowed is a confirmation that the proposal
has eventually been actualised.
In its 2014 Debt Sustainability Analysis (DSA),
the nation also adopted a subsisting debt
management strategy as captured in the approved
Nigeria’s Medium-Term Debt Management
Strategy (MTDS), for 2012-2015, which seeks to
achieve an optimal mix in the debt portfolio of
60:40 for domestic and external debts
respectively as against the current mix of 83:17
through a gradual substitution of relatively
more expensive domestic borrowing with cheaper
external financing. Thus, the 2014 DSA has
already incorporated government’s policy
objective of reducing the overall cost of
government borrowing at an acceptable level of
risks. This may have informed the minister’s
statement of government’s preference for
approaching multilateral agencies.
The objective of the 2014 DSA is to a$$ess the
country’s capacity to finance its projects/
programmes and service its debt obligations,
without undue large adjustments that may
compromise its macroeconomic stability, overall
growth and development
The government’s avowed confidence that it can
continue to borrow on the argument that it
falls within a safe threshold, is punctured when
examined under an uncertain economic regime, as
being faced by nigeria. Even the government
admitted this by its own record. It underlined
the risks inherent on its path.
“The pessimistic scenario ( where Nigeria is
presently), a$$umes a reduction in the growth of
the Gross Domestic Product (GDP), increase in
the rate of inflation, decline in revenue
accruing to the Federal Government as a result of
a fall in crude oil prices, deterioration in
fiscal deficit and current balance, amongst
others. Unlike in the previous years, which
made pessimistic scenario revenue-specific, this
years DSA considered deterioration in a broad
range of macroeconomic indicators and variables
that could impact negatively on the debt
portfolio,” the sustainability analysis annual
report said.
Although the results indicate that the country
will still remain at a low risk of debt distress
under the pessimistic scenario, it also shows a
rising trend for all the debt indicators
throughout the projection period. This means
that a prolonged deterioration in one or two of
the variables could increase the risk of debt
sustainability.
The growing concern over the country’s debt
overhang has been on the front burner for
years, but often times, government officials
have always argued that the nation’s debt level
has not gone out of a safe trajectory.
However,
the lid over this confidence margin, appears to
be weakening and increasingly contested.
[TN News]: Nigeria’s Economy Under Threat As Debts Hit ₦11trillion
become a source of concern, given the Federal
Government’s penchant to add to its stock. The
latest addition of N473 billion, has once again
opened the floodgate of the spiral rise, with
its attendant consequences, reports SIMEON
EBULU, Group Business Editor
FEAR may well be the word to describe the state
of Nigeria’s debt profile, hovering at N11.24
trillion as at December 31, 2014 and still
rising.
The level which the nation’s debt overhang has
attained is like a death-knell. Yet it keeps
climbing.
The revelation by the Minister of Finance and
Coordinating Minister for the Economy, Dr.
Ngozi Okonjo-Nweala, that the Federal
Government has borrowed N473 billion in the
first quarter of this year to execute the 2015
National Budget, is another clear case of one-
more borrowing too many, so to speak.
Dr. Okonjo-Iweala said yesterday that of the
N882 billon budgetary provision for borrowing,
the Federal Government had already accessed
N473 billion to fund Recurrent Expenditure,
such as salaries and other overheads.
The
obvious reason for this development, she
stressed, is the 50 per cent decline in the spot
market of crude prices .which has inadvertently
resulted in a cash crunch for the country.
To remain focused on keeping the economy stable
and the government running, the government has
embarked on “front-loaded borrowing programme
to manage the cash crunch in the economy,” she
said.
Nigeria’s borrowing profile from independence,
is a study in itself. Going by the data available
to The Nation, there appears to be more
questions than answers when it comes to x-
raying how the nation arrived at this point in
time, where nothing gets done unless it is
powered by external revenue sources, rather
than internally generated funds, or revenues
earned from known government sources, such as
taxes, oil and non-oil exports.
The hint that nigeria would go a borrowing
again, was given by Mrs. Okonjo-Iweala in far-
away America in April during the last
International Monetary Fund (IMF)/World Bank
Group Spring meetings in Washington DC, United
States (U.S.).
On prospects of further borrowing, she said:
“Government is considering and in fact taking
steps to actualise this with the World Bank
Group and the African Development Bank (AfDB).”
The other option of tapping the capital markets
would be left for the incoming government. She
said the government decided to look outside the
nation’s shores for the next round of borrowing
because it has reached, and almost exceeded
taking the ceiling for local debts.
Mrs. Okonjo-Iweala said: “Our borrowing strategy
is very prudent, and what we will do is that we
have a lot of domestic borrowing than we want,
so we are trying to switch and have a little
more of external borrowing, but by drawing
heavily on the multilateral institutions.
So we
will be going to the World Bank and the AfDB,
and we will also look into the markets. But for
the multilaterals, we’ve already embarked on
discussions.”
Her disclosure that N473 billion has been
borrowed is a confirmation that the proposal
has eventually been actualised.
In its 2014 Debt Sustainability Analysis (DSA),
the nation also adopted a subsisting debt
management strategy as captured in the approved
Nigeria’s Medium-Term Debt Management
Strategy (MTDS), for 2012-2015, which seeks to
achieve an optimal mix in the debt portfolio of
60:40 for domestic and external debts
respectively as against the current mix of 83:17
through a gradual substitution of relatively
more expensive domestic borrowing with cheaper
external financing. Thus, the 2014 DSA has
already incorporated government’s policy
objective of reducing the overall cost of
government borrowing at an acceptable level of
risks. This may have informed the minister’s
statement of government’s preference for
approaching multilateral agencies.
The objective of the 2014 DSA is to a$$ess the
country’s capacity to finance its projects/
programmes and service its debt obligations,
without undue large adjustments that may
compromise its macroeconomic stability, overall
growth and development.
The government’s avowed confidence that it can
continue to borrow on the argument that it
falls within a safe threshold, is punctured when
examined under an uncertain economic regime, as
being faced by nigeria. Even the government
admitted this by its own record. It underlined
the risks inherent on its path.
“The pessimistic scenario ( where Nigeria is
presently), a$$umes a reduction in the growth of
the Gross Domestic Product (GDP), increase in
the rate of inflation, decline in revenue
accruing to the Federal Government as a result of
a fall in crude oil prices, deterioration in
fiscal deficit and current balance, amongst
others. Unlike in the previous years, which
made pessimistic scenario revenue-specific, this
years DSA considered deterioration in a broad
range of macroeconomic indicators and variables
that could impact negatively on the debt
portfolio,” the sustainability analysis annual
report said.
Although the results indicate that the country
will still remain at a low risk of debt distress
under the pessimistic scenario, it also shows a
rising trend for all the debt indicators
throughout the projection period. This means
that a prolonged deterioration in one or two of
the variables could increase the risk of debt
sustainability.
The growing concern over the country’s debt
overhang has been on the front burner for
years, but often times, government officials
have always argued that the nation’s debt level
has not gone out of a safe trajectory.
However,
the lid over this confidence margin, appears to
be weakening and increasingly contested.
Lagos, Dr. Austin Nweze, pointed out a grave
danger in accumulating excessive foreign debts
as such would place undue burden on future
generations, especially if the loans are not
channeled into capital projects.
He said that the danger lies ahead for the
economy, should the existing level of borrowing
from big nations continue, which could make the
country to depend on lending nations.
Nweze, however, said that there is nothing
wrong in borrowing provided the funds are well
utilised or invested in the provision of
infrastructure.
According to him, the fall in oil prices has
reduced revenue receipts, forcing the government
to look for money to run the economy.
He urged the government not to leave behind a
heavy foreign debt burden for the present and
unborn generations. He cautioned that Nigeria,
already under a heavy burden of foreign debts
could be in great danger.
He urged the ruling cla$$ and the older
generations to set good example and educate the
coming generations for a better and secured
future. According to him, such example should
be set by not accumulating debt for future
generations to inherit
He urged the government to invest borrowed
money in projects that will benefit the economy,
instead of consuming the money.
Dr. Isaac Nwaogwugwu, a lecturer at Department
of Economics, University of Lagos, said there is
no way we are going to finance capital budget
without borrowing.
He said: “That is why the allocation to capital
account or expenditure is very small unless the
government says it not ready to invest or
provide for the future then it’s going to
borrow.
“If government is committed to developmental
issues there is no way it can run away from
that? So, the volume of borrowed amount, or our
debt stock wouldn’t matter so much.
They can
always try to cut down what they have
borrowing and not that they can’t borrow.”
Leakages
Nwaogwugwu went on: “The danger on borrowing
lies on fiscal leakages. If government can block
leakages, that will be fine and that is the task
for the new government, though the president-
elect will find his hands tight on many issues
We can’t run away from borrowing but all we
have to do is to ensure that we block all
leakages. All we have to do is that we become
bold enough to address some fiscal issues
involved in recurrent spending. Many things we
spend on recurrent expenditures are simply used
to maintain some people who run government.
Funds not tied to specific projects
“That issue started under former President
Olusegun Obasanjo. If you look at the letter
which Soludo (the former Central Bank of Nigeria
Governor) wrote when he was talking about the
Jonathan administration and how he mismanaged
the economy, he raised the issue of using the
budget to finance consumption expenditure.
Basically, Soludo called the budget under
President Jonathan a consumption appropraition.
In as much as I agree with Soludo totally, I
also hold him accountable for some of the
mistakes. It was when Obasanjo was in the office
that Soludo was the CBN Governor, before Sanusi
Lamido, took over with this minister of state
for finance, who replaced Okonjo-Iweala . “It
was after that we borrowed money, they called it
capital receipt and we used that money to pay
salaries and wages; we used that money for
recurrent expenditure. We borrowed money and we
don’t tie it to capital projects. That is one of
the biggest issue and where the dangers lie.
Such loans must be tied to the budget and if we
don’t, we’ll be mortgaging the future of
Nigerians.
The way out
Nwaogwugwu said: “We have to be fiscally
discipline. We saw the Senate pa$$ the bill; we
saw the House of Representatives pa$$ the bill
and what did we see? The budget has increased.
It has gone up to N4.5 trillion. But, what we
discovered that National a$$embly increased
spending and mark up expenditure on things that
might not be necessary. That has always been
the problem. If the National a$$embly can look
at the budget critically and say, ‘we don’t need
this; we don’t need that; let us start with
their own remuneration; begin to cut them down,
look at how much they are collecting’.
“Look at the severance allowances… unless you
cut these down, there is no way out. You look at
the state bureaucrat today; the havoc they have
caused to the economy is huge. Look at the
monetisation policy of Obasanjo, they have
abandoned it completely. Unless we have a
National a$$embly that is bold enough to say,
‘lets block this and that’, then we will move
forward. The way out is that those we have
elected should block all leakages. If the
politicians do the right thing we won’t have
any problem.
Culled from TheNation
Nigeria’s Economy Under Threat As Debts Hit ₦11trillion
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Oleh
Unknown
