The debt stock of Nigeria may rise to over N77 trillion by May 29 this year from the current amount of N44.06 trillion as at third quarter of last year, it was revealed yesterday.
While the “Ways and Means” facility of the Central Bank of Nigeria (CBN) is already standing at about N22.3 trillion with an interest rate of 18.5 per cent, government is expected to borrow additional N8 trillion before it exits office on May 29, this year.
Speaking at the 2023 Budget breakdown in Abuja, Director General, Debt Management Office (DMO), Ms Patience Oniha, explained that if the new borrowings are included in the current debt of N44.06 trillion, the total debt stock would amount to N77 trillion.
According to her, the debt stock is still growing from the issuance of promissory notes which are not true borrowing as such by the government.
She said “It will be safe to say that we will be looking at N77 trillion. While the debt is growing because of new borrowing, revenue is receiving significant importance. Like DMO always say, you can’t talk about debt without talking about revenue. We need the two to work together”.
Earlier, the Minister of Finance Budget and National Planning, Mrs Zainab Shamsuna Ahmed, revealed that Nigeria is not planning on restructuring its debt as it remains committed to meeting domestic and external debt obligations.
“The FGN will however continue to utilise appropriate debt management tools to streamline the cost and risk profile in the debt portfolio, including through concessional loans, spreading out of debt maturities to avoid bunching, and re-profiling of the debt maturities by refinancing short-term debt using long-term debt instruments,” she said.
She noted that most vessels lifting oil from Nigeria are not paying taxes vowing that the government would make sure that those vessels would begin to pay taxes to augment the budget.
According to her, government would exit some of the pioneer companies that have been enjoying tax exemptions so as to bring in new ones.
The minister said “We have to create a balance that we are not giving much more than we are getting,”.
She noted that as of November 2022, government’s retained revenue was N6.50 trillion, 87 per cent of the prorata target of N7.48
trillion and its share of oil revenues was N586.71 billion (representing 35.7 per cent performance), while non-oil tax revenues totalled N2.09 trillion – a performance of 123.3 per cent.
“Companies Income Tax (CIT) and Value Added Tax (VAT) collections were N1.08 trillion and N295.2 billion, representing 158.6 per cent and 124.3 per cent of their respective targets.
“Customs collections (comprising import duties, excise, fees, and special levies) exceeded the target by N15.42 billion (ie, 102 per cent performance).
Other revenues amounted to N3.72 trillion, of which independent revenue was N1.32 trillion.
“The aggregate budgeted expenditure for 2022 (inclusive of the supplementary budget of N819.5 trillion) was N18.14 trillion, with a prorata spending target of N16.63 trillion at the end of November.
“The actual spending as of November 30 was N12.87 trillion. Of this amount, N5.24 trillion was for debt service; N3.94 trillion for personnel costs, including pensions; statutory transfers, overhead and service wide votes expenditures totalled N1.81 trillion; and N1.88 billion was released for capital expenditure.
“The fiscal deficit for 2022 was estimated at N8.17 trillion, inclusive of the supplementary budget. As at November 30, 2022, the deficit was N6.37 trillion; “The deficit was totally financed by borrowings, mostly from domestic sources,” she noted.
On key assumptions and macro framework for the 2023 Budget, the minister stated that the oil price benchmark is set at US$75 per barrel while some of the parameters underlying the 2023 projections have deviated from the projections in the National Development Plan (NDP) 2021-2025. They have been updated based on a combination of current realities and a modified medium-term outlook.
These, she said, is that the real Gross Domestic Products (GDP) growth is projected at 3.75 per cent in 2023 compared to 4.39 per cent in the NDP. “Growth is expected to moderate to 3.30 per cent in 2024 before picking up to 3.46 per cent in 2025.
“The inflation rate is projected to average 17.16 per cent in 2023, and the 14.93 per cent projected in the NDP for 2023,” she noted.
Reacting to the Federal Government’s rising debt obligations, Dr Frank Onyebu, Chairman, Manufacturers Association of Nigeria, (MAN), Apapa branch, said “I don’t know why this government is so obsessed with borrowing. Haven’t they borrowed enough already?
They would only be creating more problems for the incoming government. The most painful part is that the impact of the borrowed funds is not being felt. Infrastructures are still dilapidated. The economy is still in shambles. I do not support fresh borrowing until we work on how to pay for existing debts.”
Also reacting, Dr Nathan Owhor, political economist noted that the alleged N77 trillion debt burden for the incoming administration will put undue pressure on the government.
He said: “The first pressure will be how to deal with the high repayment cost. The interest rate will certainly be high and government will face the challenge of debt rescheduling as a way of giving the economy a breathing space. The second pressure will be the challenge of dealing with human capital development. This will certainly diminish because government will be unable to fund the education sector amongst others because of limited resources. The third pressure will be the fear of under performance against campaign promises because of cash squeeze. The government will certainly be on edge and the possibility of increased socio-Economic tension will not be ruled out.
“All of these pressures have huge implications for the economy. The safety valve will be to deliberately freeze further borrowing and focus on growing the domestic economy. This will come with huge cost and sacrifices by the political class who feed fat on the available resources,” he said.
For his part, Dr Muda Yusuf, Director, Centre for the Promotion of Private Enterprise (CPPE) said the new administration needs to brace up to challenges of managing the economy under a very tight fiscal situation, because it’s not going to be easy.
“It will require some very drastic reforms and sacrifices both on the public sector side and the private sector side. It will require political will to take some tough decisions. It will also require a very good economic team that can provide a proper guidance and direction beyond what is in the manifesto to whoever that takes over the government in 2023. he said.
If we get our reforms right, reforms around the forex, policy, reforms on oil and gas, both upstream and downstream, reforms around our electricity sector, which is ongoing but still wobbling, things will be better positioned,” he said.
He also called for reforms of the budgetary process saying there were many loose ends in the budget like duplication of projects, repetition, cutting and pasting and padding.
He said: “We need to tidy up the budget. The budget processes need to be properly cleaned up and the capacity of the bureaucracy to prepare budgets has to be strengthened. And we should commit properly to what is called zero-based budgeting, which means every budget has its proper justification.
“The current administration said it is doing the zero- based budgeting, but it was not able to commit to it. We need to look at how we have to optimise revenue efficiency of tax administration.”
Yusuf said the tax base has to be broadened by bringing in more people into the tax net.
“These are what the new administration has to commit to so as to manage the fiscal situation. It’s not beyond redemption. If there are very good economic managers and if the president listens to them, things will be better. Under this administration there are good managers in the presidential economic council, but no one listens to them.That will make the difference.”
Daniel Dickson-Okezie, chairman, Lagos Chamber of Commerce and Industry (LCCI) SMEs Group said the high level of debt would make things difficult for the incoming administration.
“We know that the presidential aspirants already have their plans on how they can make the difference when they get in there. The new administration has a lot to do. The major trajectory for the incoming government is to cut down cost, which is economic waste.
It has to improve revenue and ensure there is a sincere approach in dealing with oil thieves..It must also ensure the country refines its products and subsidy has to go. More borrowing means more poverty, a bleak future and making things more difficult for the incoming administration to find its feet,” he said.
SUN NEWS
