New Loans Raise Nigeria’s Debt To N20.3trn | Independent Newspapers Limited
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New Loans Raise Nigeria’s Debt To N20.3trn

Posted: Jul 8, 2016 at 4:31 am   /   by   /   comments (0)

Isuma Mark

 Abuja – If the Federal Government goes ahead to borrow additional  $7.8 billion to finance the N2.2 trillion deficit in the 2016 budget, the country could be indebted to a staggering N20.3 trillion by the end of the year.

Currently, the country’s $63.5 billion loan has ballooned to N18.09 trillion due to currency devaluation which started few weeks ago. An additional $7.8 billion, (equivalent to N2.22 trillion) would increase the debt to gross domestic product, a different scenario twelve months ago.

Again put against the unsteady and unreliable control measures from the Central Bank of Nigeria (CBN) even as the dollar continues to rake in values against the naira, there could be worse case scenario where the country’s debt could even be far higher than the projection.

Already, experts are discountenancing the tag, biggest economy in Africa, since the fall in debt/GDP ratio.

The Debt Management Office (DMO) had recently announced that the country’s total debt profile stood at N12.06 trillion or $63.5 billion as at the end of October 2015 as against the $ 9.4 billion recorded in March.

The DMO had further argued that the country’s debt was sustainable as its debt sustainability analysis. The bulk of the Federal Government loans were concessionary with low interests and long moratorium, it said.

According to the Director General of Debt Management Office (DMO), Dr. Abraham Nwankwo, “Nigeria’s debt to GDP ratio is 13 percent, compared to the 56 percent of peer group. So in that essence, our debt is still very sustainable. In this respect, I am encouraging all Nigerians to continue to make sure that they pay their taxes fully as and when due because our tax revenue to GDP ratio is relatively low compared to countries in our peer group,” he had said.

Yet Nwankwo acknowledged that “Nigeria is currently under severe revenue pressure arising from a volatile macro-economic environment and uncertain global economic outlook, which are due to the structural collapse in the international price of crude oil”.

This development has forced a non-governmental organisation, Social Action (SA), to condemn further borrowing which, it said, would imperil the country and heap too much burden on future generation.

The organisation which specialises in public debt and social welfare, through its Abuja Head, Vivian Bellonwu-Okafor, said in a statement obtained by our correspondent that “Nigeria had in the hey days of oil boom established mechanisms, including the Excess Crude Account and the Sovereign Wealth Fund, the essence of which was to shield the country from the eventuality of such shocks.

“These fall-back instruments were, however, in most ominous circumstances liquidated to the point of near carcass as they are today. These fiscal rascality and sleaze were among the top elements that in reality exposed Nigeria to the eventualities of oil price slump.”

According to her, “The so-called Borrowing Plan 2016-2019 as put forward by the Ministry of Finance in conjunction with the DMO is shallow, vague and does not make effective room for monitoring as it does not definitively tie credit facility to any specific measurable project.

“This is contrary to the provisions of Section 41 (1) of the Fiscal Responsibility Act, 2007. The borrowing plan, as it is, will frustrate any oversight effort by the legislature or monitoring by citizens or civic groups.

“We wish to reiterate that in place of acquiring more vague loans, government should put in place mechanisms to investigate and recover the several past failed loans but of which Nigeria is repaying in debt servicing nevertheless; plug leakages, which still abound in the system, and adopt strict fiscal discipline.”

According to an economic analyst in Abuja, Eze Onyekwere, unfortunately, the government captured the reason it wants to borrow in the budget but it is not a good idea to further deepen the debt profile of the country. “If the government wants to go ahead to borrow, it should do so but the government must remember that borrowing is not the best option,” he said.

According to him, “If the government must borrow, it should consider Nigeria’s capacity to repay especially if it would borrow on foreign currency. Anyway you look at it it is going to heap more debt on the country because we have just devalued our currency.

“The best scenario is to create enabling environment to bring in investors. We are not talking of foreign investors alone but local investors as well. For instance, look at the number of empty houses in Abuja, has the government considered how much these are worth and what taxes these luxurious houses can bring into its coffers?

“Government must take a holistic approach in managing the economy and not resort to borrowing especially now when the currency has been devalued. The factors that promoted the need to borrow are no longer the same. But factors that always promote investments can always remain the same in so far as the government creates the enabling environment for both local and foreign investors to invest into various sectors,” he explained.