Nigeria to service debts with N2.08tn in three years

THE Federal Government plans to spend a whopping N2.08tn to service its debts in the next three years.

This came just as findings also showed that the country’s debt profile under the current Minister of Finance, Dr. Ngozi Okonjo-Iweala, has risen by about N980bn from $42.23bn in 2011 to $48.36bn currently.

Nigeria’s debt profile under the Coordinating Minister for the Economy and Minister of Finance, Dr Ngozi Okonjo-Iweala, has risen by about N980bn from $42.23bn in 2011 to $48.36bn currently.

The figure came just as findings also revealed that the Federal Government planned to spend a whopping N2.08tn to service the country’s debt in the next three years.

The country’s total debt stock, according to figures obtained from the Debt Management Office, currently stands at $48.36bn, which is made up of external debt of $6.67bn and domestic debt of $41.69bn.

Okonjo-Iweala was instrumental in helping the country to secure a debt relief of $18bn in 2005 during her first appointment as minister of finance under the former President Olusegun Obasanjo.

Notwithstanding the country’s huge foreign reserves of about $46bn, analysts have expressed concern that the nation is gradually returning to the era of huge debt obligation.

The figures for debt servicing as well as the county’s debt stock are contained in the Medium Term Expenditure Framework and Fiscal Strategy Paper of the Federal Government, a copy of which was obtained by our correspondent.

They both fulfil a requirement of Section 11 of the Fiscal Responsibility Act 2007, which stipulates that the minister of finance shall prepare the MTEF and FSP and get them approved by the Federal Executive Council and the National Assembly.

The document stated that while N591.76bn was utilised in servicing the nation’s debt this year, the sum of N712bn, N684bn and N684bn would be used for the 2014, 2015 and 2016 fiscal periods, respectively.

According to the document, fiscal deficit is projected to rise slightly to about 1.9 per cent of Gross Domestic Product in the 2014 budget, up from 1.85 per cent projected for 2013.

This, the document stated, was as a result of declining revenue which the country had witnessed in recent times.

It said, “The fiscal deficit is projected to rise slightly to about 1.9 per cent of GDP in the 2014 Budget, up from 1.85 per cent projected for 2013, as a direct consequence of the declining revenue but helped by the expenditure restraint.

“As our concerted efforts to increase oil and non-oil revenue begin to yield benefits, government will redouble its efforts to reduce the fiscal deficit.

“Government will continue to exercise fiscal prudence and limit its borrowing requirements in compliance with the Fiscal Responsibility Act, 2007.

“In this regard, new borrowing in 2014 will be N572bn, slightly down from N577bn in 2013.”

Okonjo-Iweala had in a report of the activities of the Ministry of Finance within the last two years said that $12bn (N1.92tn) funding agreements had been concretised by the Federal Government to finance the real sector of the economy.

The amount was sourced from financial institutions such as the World Bank, African Development Bank, China Export-Import Bank and Islamic Development Bank at concessionary single digit interest rate and a moratorium of about 40 years.

The affected sectors are agriculture (N202bn); environment (N91.2bn); transport (N640bn); water resources (N126.03bn); Niger Delta (N50bn) and health (N30.35bn).

Others are power (N451.12bn); education (N39.97bn); Information and Communication Technology (N16bn) and job creation (N94.4bn).

There are also aviation, housing, Federal Capital Territory and works, where N80bn, N48bn, N80bn and N44.8bn have been secured in that order.

An analysis of the source of funding revealed that out of the N202bn secured for the agric sector, N30bn credit risk guarantee was given to Nigeria’s commercial banks to support the supply of fertilisers and seeds by the private sector.

Similarly, $500m (N32bn) was obtained from the World Bank to support the Agriculture Transformation Agenda of the Jonathan administration for staple crop processing in the six geo-political zones as well as the FADAMA project.

In the same vein, it was learnt that the Federal Government was currently negotiating $500m (N80bn) for 18 cassava processing mills and 40 rice processing units, while another $75m (N12bn) for the rural access mobility project from the China Export-Import Bank was being discussed.

In the environment sector, the report showed that $450m (N72bn) was secured for erosion and watershed management in Abia, Anambra, Cross River, Ebonyi, Enugu, Imo and Edo states; while $120m (N19.2bn) was collected for flood and waste management in Oyo State from the World Bank.

For the transport sector, findings showed that a $4bn (N640bn) Letter of Comfort to support investment in the Lekki Deep Seaport was obtained from the Ministry of Finance.

The report also revealed that the N126.03bn for the water sector was secured as follows: World Bank, $320m (N51.2bn); Islamic Development Bank, $186.34m (N29.81bn); and African Development Bank, $281.32m (N45.01bn).

The funds, it was gathered, were used to finance water reform and urban water supply in Cross River, Rivers and Kaduna states, as well as an irrigation project in Osun State.

For the aviation sector, about $500m (N80bn) was secured from China EXIM Bank for five new airport terminals in Abuja, Kano, Lagos, Enugu and Port-Harcourt; while $300m (N48bn) was secured from the World Bank for housing liquidity facility.

Similarly, the report showed that $200m (N32bn) was secured from the China EXIM Bank for various road projects, while $80m (N12.8bn) was obtained from the World Bank for the construction of the second Niger Bridge.

Okonjo-Iweala had, while defending the need for the loans, explained that the funds were mobilised at concessional rates for the real sector.

She said while some were given to the country at zero interest rates, others were secured at single-digit rates with moratorium of 40 years.

Also speaking on the country’s rising debt, the Director General, DMO, Dr. Abraham Nwankwo, said the Federal Government had created a sinking fund to reduce the nation’s debt, especially domestic borrowing.

He said, “We are not saying we won’t be adding to our debt but the rate of increase will reduce. So, a way of achieving that is to have a sinking fund and this year, N75bn has been put into the sinking fund and plans are on to put more into the fund. There is no country in the world that is without debt. What we are doing is to reduce the rate of growth of the debt so that when it’s time to refinance, we will pay off some completely and refinance only a little. In this way, we are reducing our domestic debt stock and creating more space for the private sector,” he stated.

He blamed the rising debt on a lot of factors such as the increase in population, expansion in the size of the Nigerian economy and the need to execute capital projects.

He said, “If you look at debt, are you also looking at the GDP? The Nigerian economy is growing and the population is also growing and government has to cater for everything.

“Our economy is growing over the last five years at an average of six per cent per annum. So, when you look at the rate of growth of debt without looking at the rate of growth of the GDP and other macroeconomic variables, you are missing the point as an economist.”