Economists have come hard on the Federal Government, as it proposes another round of borrowing for the 2023 budget year. Unanimously, they warned government to stop borrowing, just as the Director-General of the Debt Management Office (DMO), Mrs. Patience Oniha, yesterday, confirmed that Nigeria’s dept profile as at March 2022 stood at N41.60 trillion.
Even as the Nigerian Customs Service (NCS) faulted the Nigerian National Petroleum Company (NNPC) Limited over the latter’s claim of billions of naira spent on petroleum subsidy yearly.
Oniha, during her appearance at the ongoing engagement on the 2023 – 2025 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) held by the House of Representatives Committee on Finance, yesterday, attributed Nigeria’s high debt profile to lack of revenues and approval of the yearly budget with a deficit by the National Assembly, which increased the nation’s debt stock.
She regretted that the country has been running a deficit budget for many years with an increased level of borrowing, especially since the outbreak of COVID-19 pandemic, stressing that the only way out of the problem is improved revenue generation.
She said: “As at December 2020, the debt stock of the federal, state governments and the Federal Capital Territory was N32.92 trillion. By December 2021, it jumped to N39.556 trillion. We publish quarterly, and as at March of this year, it was N41.6 trillion. On the average, Federal Government is owing about 85 per cent of the total sum.
“We have been running deficit budget for many years and each time you approve a budget with a deficit, by the time we raise that money because when you approve it, it is giving us a mandate, authority to borrow, it will reflect in the debt stock, so debt stock will increase. Also, note that states are also borrowing. So, we add their own.
“Until the issues of personnel, overhead and capital expenditure are properly addressed in the budget, borrowing would not stop.”
Recall that the Minister of Finance, Budget and National Planning, Zainab Ahmed, had laid before the lawmakers on Tuesday, the 2023-2025 MTEF/FSP, where she disclosed that the Federal Government will borrow over N11 trillion and sell national assets to finance the 2023 budget deficit.
Last year’s total deficit (fiscal and project-tied loans) stood at N7.35 trillion. The figure, in the best scenario) is expected to jump by 53.7 per cent to N11.3 trillion next year. Under subsidy removal conditions, it will hit N12.4 trillion.
Continuing, Oniha said: “A World Bank report showed that in terms of debt to GDP ratio, Nigeria is low but for debt service to revenue ratio, we are very high. So, if you look at tax to GDP ratio of these other countries, they are in multiples of Nigeria.
“The World Bank survey report of about 197 countries revealed that Nigeria is number 195, meaning we beat only two countries and that is Yemen and Afghanistan. I don’t think we want to be like those places.
“You must look at revenues very closely for funding our activities as opposed to deficit. We talk about N11 trillion deficit and borrowing for 2023, how much is the revenue there? That’s one. When we look at the first tranche that was N10 trillion for full year of subsidy and N9 trillion for subsidy next year, the size of the borrowing was 62 per cent of the budget. That’s high. The responsibilities, I think, are on both sides. Query the various expenditure lines and see what it is we can handle. So, if the deficit is lower, the borrowing will be lower and that’s how to grow on a slower pace.”
Besides, the Controller General (CG) of Customs, Hameed Ali, accused NNPC of churning out fictitious figures in the name of subsidy payments to the detriment of the masses.
Ali, who also appeared before the committee, disagreed with NNPC’s 98 million litres daily petroleum consumption figure in the country, saying it should not be more than 62 million based on the service’s findings.
According to the CG, the 36 million litres deficit in daily consumption is never accounted for by NNPC, yet, it remains subsidised.
“It is not possible for everyone to fill their tank everyday. The deficit of 36 million litres requires over 500 tankers to carry. Where do they load and take it to that we do not know?” he queried.
Deputy chairman of the committee, Saidu Abdullahi, who presided at the session, said: “The country is on a good pedestal to keep borrowing. The need for borrowing will always be there. It doesn’t matter how much we make, the country must borrow. What we should be interested in is the sustainability of what we are borrowing and from what she has said, the country is on a good pedestal in terms of managing its borrowing.”
WEIGHING in on the debt debacle, the Chief Executive of Economics Associates, Dr. Ayo Teriba, said it would be extremely difficult to achieve a balanced budget under the fiscal condition.
“Between January and April, we spent N4.7 trillion but made only N1.6 trillion in revenue. The deficit was more than N3 trillion. If you want to limit spending to revenue, you would spend only N1.6 trillion. And that would not cover interest payment, which was N1.94 trillion. So, there is no question of doing a cash budget,” Teriba said.
While the economist forecloses a cash back zero budgeting, as it were, he believes the recourse to debt funding is a matter of policy choice and not a necessity. He lamented that the government has, in the past seven years, ignored the suggestion for it to turn moribund national assets into revenue.
Nine months to the end of its second tenure, the current administration has hit the brick wall in its hardline position on debt funding.
Teriba said it is a tough one to expect the government to make a u-turn nine months to the end of its tenure after over seven years of holding tenaciously to a less sustainable funding option.
“I think we would have to take it as the legacy of the administration; that it was an administration that handed over more or less 100 per cent deficit. The next regime would have to pay the debts accumulated by the regime and find the revenue to cover its expenditure,” he said.
On whether pushing the responsibility to the next administration would be a crisis, the economist insisted “Nigeria is not in any crisis but has options” which the current regime fails to explore. The asset lease option, he said, is a win-win that has been leveraged by Saudi Arabia, India and Brazil to unlock stable and sustainable cash flow and trigger growth.
“Attract foreign investments to idle assets to generate revenue for the government. We have idle assets, underutilised infrastructure and companies whose market value we don’t know,” Teriba concluded.