Interface Newshub
Uncategorized

Buhari’s Legacy of Debts for Incoming Government


For a nation like Nigeria, proclivity for both domestic and foreign loans has done much damage to this great nation’s microeconomics and macroeconomics. What could have informed this huge debts and borrowing by leaders of this country remains a mistery.
However, in a recent media report awash with the debacle of Nigeria’s debt running into trillions of naira made staring headlines.
For instance, the report had it that: There are fears of N77trn debt for Buhari’s successor worries experts
A situation that Debt Management Office (DMO) revealed that the debt stock may hit N77 trillion before Muhammadu Buhari’s government leaves office.
Fielding questions from journalists in Abuja at the public presentation and breakdown of the highlights of the 2023 Appropriation Act, DMO Director General Patience Oniha said the move by the federal government to securitise the loans (Ways & Means) from the Central Bank of Nigeria(CBN) would drive up the debt to about N77 trillion.
The disclosure comes as the All Progressives Congress (APC)-led federal government prepares to leave office May 29, 2023, while the presidential elections hold February 25, 2023 to elect Buhari’s successor.
Conversely, earlier data released by the DMO had put Nigeria’s public debt at N44.06 trillion as at third quarter 2022, while the federal government is planning to further borrow to finance its supplementary budget.
On the other hand President Buhari’s requests before NASS in a letter to the National Assembly requested the two chambers to approve the sum of N819.5 billion supplementary budget for 2022.
In the Lower House’ version of the letter read by Speaker Femi Gbajabiamila, President Buhari said the budget would be financed with new domestic borrowing.Meanwhile the supplementary budget is approved and it would take the total deficit in 2022 to N8.17 trillion.
In yet another letter, the president also informed the lawmakers that the government would take another N1 trillion loan from the CBN through Ways and Means.
The President said the additional N1 trillion would take the total government’s obligation to CBN to N23 trillion which the government seeks to convert to bonds.
Nevertheless, the DMO giving an update on the nation’s debt status at a media parley in Abuja, said if the president’s request for securitised loans before the National Assembly sails through, then it would drive up the debt to about N77 trillion.
She said: “Secondly, there are a lot of discussions on the Ways and Means.
“In addition to the significant cost saving in loan service we would get by securitizing it, there is an element of transparency in the sense that it is now reflected in the public debt stock. Once it is passed by the National Assembly, it means we will be seeing that figure included in the public debt. You will see a significant increase in public debt to N77 trillion.
“The other area of the debt stock we are trying to highlight is to say the debt stock is also growing from the issuance of promissory notes which are not true borrowing as such by the government.”
Nonetheless, the government position according to the Minister of Finance, Budget and National Planning, Hajiya Zainab Ahmed emphasised that when the Ways and Means gets legislative backing, it would help reduce the current interest on it to about nine per cent as well as stretch repayment period to about 40 years.
She added: “Currently, the Ways and Means is running interest rates, which today is averaging 18.5%. That’s a very, very harvest.
“So, if this is not affordable, the interest rates accruing again and adding to the Ways and Means anything from N1.8 trillion to N2.2 trillion. So, that will be the consequence. I’m sure they will understand. So, once that approval is given, it will benefit from a lower interest cost of 9%, and will benefit from a stretched initiated plan of 40 years with a three- year moratorium which will provide very significant relief to the federal government.”
A glimpse at the 2023 Budget outlook
With a budget of N21.08 trillion for 2023, deficit financing is expected to finance the deficit budget of N11.34 trillion which represents 5.03% of GDP.
The budget deficit is to be financed mainly by borrowings from domestic, foreign, multi-lateral/bi-lateral loan draw downs of N7.04 trillion, N1.76trillion and N1.77 billion respectively.
Despite the huge debt overhang, the minister said, “Nigeria is not planning on restructuring its debt as it remains committed to meeting its domestic and external debt obligations.”
According to her, “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.”
With dwindling oil revenue, the minister said the government had come up with several initiatives to improve its revenues.
She noted, however, that nonoil revenues remained more stable than oil revenue.
To improve, nonoil revenue receipts tax administration would be improved and efforts sustained to expand the nonoil revenue base.
In addition, the tax system will be further strengthened over the medium term by improving collection efficiency, enhancing compliance, and reorganizing the business practices of revenue agencies as well as employing appropriate technology; Furthermore, efforts will be made to bring more businesses in the informal sector into the tax net,” she said.
In the medium term, the minister said the Nigeria Customs Service would introduce frameworks for recovering duties, taxes and appropriate fees from transactions conducted over electronic networks.
With independent revenue of the federal government hitting the N1 trillion mark in 2021,” the government will further enhance independent revenue generation and collection; the government will continue to maximise the huge potentials and optimise the operational and collection efficiency of the Government Owned Enterprises (GOEs).
The federal government will also further enhance port efficiency, strengthen anti-smuggling measures review tariffs and waivers and issue more licenses to build modern terminals in existing ports, especially outside Lagos.
What then is the implementation and burdens.
The N77 trillion debts for the incoming administration would affect capital projects and at the same time lead to a higher spend on debt service.
Further it would strain capital projects implementation in 2023 and could lead to poor budget achievement.
Another is higher costs will be incurred in debt servicing and major infrastructural projects will be affected.
Meanwhile this economy presently in a dire strait and and can’t afford additional borrowings to finance the budget, the situation could get worse in an election year.
The country does not presently have the carrying capacity to service debts of up to N77 trillion unless the government creates more avenues for revenue growth.
The huge debt would be a drawback to the incoming administration’s dream of funding the country’s development needs.
it would have grave implications for the incoming administration as both macroeconomics and microeconomics would be hit.
Majority of government policies would suffer from paucity of funds thereby making them less effective.
Government’s revenue would only serve the purpose of paying old debt, hence leading to more borrowing and loans. It could also lead to the government not being able to meet up with payment of workers’ salary as well as other welfare for the workers.
Lastly, this could also lead to mistrust and misgivings between the people and the incoming government, especially if the incoming government does not have a sizable number of political appointees.
The Wayforward.
The incoming government would need to cut down on the size of political appointees and initiate stringent measures against wastage and inefficient programmes.
The incoming administration will need to focus on government priorities that would ensure profitable government ventures, and be proactive in the fight against corruption and poor accountability of public fund.
The government should reposition its fiscal policies to target key growth areas like the power sector implementation plan, Petroleum Industry Act to actually jumpstart the economy. The government needs to dissipate more energy in increasing commerce by making sure that the energy and petroleum sectors are given adequate attention in 2023 to increase government revenue and improve investment interest by both local and foreign investors.

Related posts

NCDC Records 63 Deaths in One Week as Suspected Cholera Fatalities Exceed 2,000

penielpossible

NCC’s Yakubu Gontor Honoured by Youth Organisation

Dayo Omoogun

Lassa Fever Cases Hit 81 in Edo, as 10 New Cases Recorded

Dayo Omoogun

Leave a Comment