By Jeph Ajobaju, Chief Copy Editor
Abuja has reiterated plans to take more loans to finance the 2022 federal budget and to service debts, which cost N1.8 trillion between January and May against N973.13 billion spent on capital projects and N1.84 trillion revenue.
Data from the Debt Management Office (DMO) shows Nigeria’s total loans increased from $86.39 billion (Q4 2020) to $87.24 billion in the first quarter of 2021 (Q1 2021), an additional $847 million loan in three months.
Debt rose by N20.8 trillion to N32.92 trillion between July 2015 and December 2020, and to N33.11 trillion in Q1 2021, according to the DMO.
Last week, the International Monetary Fund (IMF) approved $3.35 billion new loan for Nigeria, adding to its $87.239 billion debt in Q1 2021 owed by federal and states and the Federal Capital Territory (FCT).
The Ministry of Finance, Budget and National Planning, DMO and the Budget Office confirmed the new borrowing plans at a public hearing by the House of Representatives Finance Committee in Abuja.
The committee organised the stakeholders’ meeting on the 2022-2024 Medium Term Expenditure Framework and Fiscal Strategy Paper on which the 2022 Appropriation Bill will be based.
Relying increasingly on borrowings
DMO Director Patience Oniha, while explaining some points in the presentation early made by Finance Minister Zainab Ahmed, said Nigeria’s debt will keep on increasing as revenue is declining, per reporting by The PUNCH.
Her words: “I think one of the things that have come out from the presentation from [Ahmed] is, much as we have been conservative in projecting revenues, we still see that we are underperforming in revenue.
“So, it means that we are relying increasingly on borrowings to finance the activities of the government. And if you look at the figures from last year when the budget was revised because of COVID-19, we can see that the borrowing levels are going higher.
“So, what that means is that the debt stock as expected will keep rising and debt service will also keep increasing, as shown in the presentation.
“I just thought I should highlight that this is primarily where the debt stock is growing from, and the debt service, which means that we are also servicing, taking from the revenue which has not grown as expected.
“I thought I should highlight that because there is a lot of concern about debts. But really, this is the source and we can see the trend.
“So, to respond to your question is to say that we have looked at it; just note some numbers in the MTEF, just looking at where the public debt stock is today and what we project it to be, based on the new borrowings provided for in the MTEF; debt stock will grow naturally – look at the trillions of new borrowings there – and we see that debt to GDP [Gross Domestic Product] as well will also grow.
“The committee may be aware that early this year, the public debt to GDP ratio was increased to 40 per cent primarily because of the increases in new borrowings and other activities of the government.
“So, debt to GDP will also grow over the period but we are still within the limit of 40 per cent that was approved in February. I just said I should highlight these.”
Faleke highlights borrowing spree
Committee Chairman James Faleke noted that the Buhari administration has been widely criticised over its borrowing spree.
“It is important that I ask that question because Nigerians just believe that we are borrowing, borrowing and borrowing; some even said we might even be speaking Chinese. But it is good that you (Oniha) have cleared the air,” Faleke said.
Akabueze acknowledges debt burden
Budget Office Director General Ben Akabueze also acknowledged that the country is spending more than it earns, which makes borrowing inevitable.
“As [Ahmed] highlighted in her presentation, as of June, in terms of revenue performance, our non-oil tax revenues were running ahead of or very close to target,” he said.
“But our oil revenue performance was a drag – just under 50 per cent of target. That pulled down our overall revenue performance percentage.
“On the expenditure side, we are running over 90 per cent, not surprisingly because we are meeting all of our recurrent expenditure and there are also strenuous efforts being made to fund the capital budget.
“So, that has meant that the deficit was running ahead of plan as of that date. Overall, the deficit is still within the ceiling set in the Appropriation (Act 2021). Expenditure is over 90 per cent but our revenue is a little under 70 per cent; that is the overall in aggregate.
“On capital, as of the number that we have presented, extrapolated to August. But as of June, releases for capital were over N900 billion. But that figure has gone up to N1.3 trillion (as of August).
“As [Ahmed] has reported, as of August is 63.5 per cent appropriated for capital has been released, which is the N1.3 trillion.”
Faleke warns MDAs against padding projects
Faleke, in his opening address, read the riot act to ministries, departments and agencies (MDAs) which introduce and recycle spurious projects in their budgets.
Speaker Femi Gbajabiamila, while declaring the hearing open, said the pandemic has had a significant disruptive effect on the global economy, with countries all over the world experiencing economic contraction of varying degrees of severity.
“Our situation has, of course, been compounded by other factors unique to society,” said Gbajabiamila, represented by Majority Leader Alhassan Ado-Doguwa.
The consequence is that Nigeria’s ability to pursue a robust development agenda has been severely constrained, he added.
