Nigeria plans to slow down on borrowing
Nigeria’s minister of finance, Kemi Adeosun, on Tuesday hinted of plans to slow down borrowing, as the country’s debt profile balloons.
Meanwhile, Lagos State, the country’s most affluent and most populous state, is set to return to the bond market within the next two weeks, to borrow N100 billion to further drive its infrastructural development agenda.
The Federal government’s total domestic debt profile stood at N11 trillion in March 2017, according to DMO data, while external debt amounted to $13 billion.
The country’s disappointing revenues, following a plunge in oil prices and tax receipts, have stoked heavy borrowing to fund a N2.36 trillion budget deficit.
Adeosun, who was speaking at the Presidential Business Forum held at the State House Abuja, gave the hint while making a presentation on the need to generate more revenue, as the country contends with a scathing economic recession and a ballooning infrastructural deficit.
Nigeria has flunked its revenue target for two months running now, according to data compiled by BusinessDay and sourced from the Central Bank, and analysts are uncertain if the country can see through plans to reduce borrowing in the face of low revenues.
The Federal Government of Nigeria’s fiscal deficit ran at a 12-month high in the month of February. At N404.9 billion, the deficit is almost four times the monthly provisional budget estimate of N185 billion, with the government amassing debt at a frantic pace to shore up ailing revenues.
Retained revenue came to 58 percent of the budget estimate, at N194 billion, as opposed to N337 billion, while total expenditure was N599 billion, 14.7 percent more than the budgeted N522 billion for the said month.
“We cannot borrow anymore, we just have to generate enough to fund our budget” Adeosun said, adding that the government needs to “mobilise revenue to fund the necessary budget increase” and this would be mostly drawn from tax.
The International Monetary Fund (IMF) estimates that the 2017 budget deficit will hit 3.7 percent of GDP from 2.8 percent last year, on the back of poor revenues.
“We need to mobilise additional revenue to fund our budget. We have got to get our budget bigger and to do that, we cannot borrow anymore,” the minister said.
We simply have to generate more revenue, we have to plug the leakages, we have to improve tax collection, so that we can manage our borrowing,” she added.
Furthermore,Nigeria’s budget is one of the lowest amongst her peers in the world and to join the league of global big players, Nigeria has to do what they do. She said this necessitated the Voluntary Assets and Income Declaration Scheme, which is aimed at improving revenue collection rate and generally improving domestic revenue mobilisation, so that we can fund our budget sustainably.
“Our budget is significantly lower, when compared to GDP. It is currently at 6 percent, which is the lowest in Sub Saharan Africa and one of the lowest in the world.
“Our budget size is too small and that means we can only pay salaries in some cases and we don’t have money to deliver essential services.
“There simply isn’t enough money in government to do what government wants to do. I am sure you will say that is because people are stealing or because you are wasting money but I am saying even if you plug all the stealing and all the waste, the budget size is not big enough and that because we are not paying enough in terms of tax, or we are not collecting enough in terms of tax.
“Statistics show our tax to GDP at 6%, Sub Saharan Africa average 17%, Asia 26%, most of the emerging market and the advanced countries are at 30-35 percent” she said.
Adeosun added that there is no poor country that has a high tax to GDP ratio and there is no rich country with a lower one. And so if we want to move with the prosperous countries we have to do what they do.
We will not achieve prosperity for Nigeria if we continue on the tax to GDP ratio that is in the peer group of Afghanistan. I’m sure none of us aspire for Nigeria to become like Afghanistan, we are trying to benchmark ourselves against more developed countries and we must have to address these problems in a more fundamental sense.
In his remarks, the Acting President told members of the private sector, who mostly came from the power sector, that though the government is not perfect, it will deal with the problems they currently face.
“And all I will just want to say to the private sector is be sure that we have enough willing and able partners. There is no way we can ever be perfect. I mean government is a behemoth, where there are so many problems and issues.
“But, do not doubt for one moment at all, our commitment to ensuring that we are able to deliver on the promises that we have made.
“I believe very strongly that Nigeria will turn around. I have no doubt in my mind that if we are focussed even in the next 12 to 18 months,we will certainly see a turn around. And I really would want you to join us in being able to ensure that this happens to the Nigerian economy” he said.
Meanwhile, Lagos State which is returning to the bond market in the next two weeks to raise N100bn is also to prioritise reforms in the transportation, environment and energy sectors in 2018, with the major objectives being to make the state self-sufficient in power supply through embedded power project, injection of thousands of high capacity buses into the public transportation system, and increased capacity for waste management under the state Cleaner Lagos Initiative.
The N100 billion bond which had been provided for in the state’s 2017 budget size of N812.998 billion (N512.464 billion capital and N300.535 billion recurrent expenditure) will be the second tranche of N500 billion debt issuance programme of the Akinwunmi Ambode-led administration.
The state in December 2016 approached the market to borrow the first tranche of N60 billion, but got N47 billion, in what the government said was evidence of the confidence the investing public reposed the in the economy of Lagos, and ability of the government to redeem the bond. The N47 billion bond is maturing in 2023.
Akinyemi Asahde, commissioner for Economic Planning and Budget, who also oversees the Ministry of Finance, told BusinessDay, yesterday, that the borrowing was necessary to continue to bridge the infrastructural gaps and provide for the growing population of the state, projected to hit 27 million by 2020.
Joshua Bassey, Elizabeth Archibong and LOLADE AKINMURELE
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