The growing profile of Nigeria’s debt has become a source of concern, given the Federal Government’s penchant to add to its stockpile. The latest addition of N473 billion, has once again opened the floodgate of the spiral rise, with its attendant consequences, reports SIMEON EBULU, Group Business Editor FEAR may well be the word to describe the state of Nigeria’s debt profile, hovering at N11.24 trillion as at December 31, 2014 and still rising.
The level which the nation’s debt overhang has attained is like a death-knell. Yet it keeps climbing.
The revelation by the Minister of Finance and Coordinating Minister for the Economy, Dr. Ngozi Okonjo-Nweala, that the Federal Government has borrowed N473 billion in the first quarter of this year to execute the 2015 National Budget, is another clear case of one-more borrowing too many, so to speak.
Dr. Okonjo-Iweala said yesterday that of the N882 billon budgetary provision for borrowing, the Federal Government had already accessed N473 billion to fund Recurrent Expenditure, such as salaries and other overheads. The obvious reason for this development, she stressed, is the 50 per cent decline in the spot market of crude prices which has inadvertently resulted in a cash crunch for the country.
To remain focused on keeping the economy stable and the government running, the government has embarked on “front-loaded borrowing programme to manage the cash crunch in the economy,”
she said.
Nigeria’s borrowing profile from independence, is a study in itself. Going by the data available to The Nation, there appears to be more questions than answers when it comes to x-raying how the nation arrived at this point in time, where nothing gets done unless it is powered by external revenue sources, rather than internally generated funds, or revenues earned from known government sources, such as taxes, oil and non-oil exports.
The hint that Nigeria would go a borrowing again, was given by Mrs. Okonjo-Iweala in far-away America in April during the last International Monetary Fund (IMF)/World Bank Group Spring meetings in Washington DC, United States (U.S.).
On prospects of further borrowing, she said: “Government is considering and in fact taking steps to actualise this with the World Bank Group and the African Development Bank (AfDB).”
The other option of tapping the capital markets would be left for the incoming government. She said the government decided to look outside the nation’s shores for the next round of borrowing because it has reached, and almost exceeded taking the ceiling for local debts.
Mrs. Okonjo-Iweala said:
“Our borrowing strategy is very prudent, and what we will do is that we have a lot of domestic borrowing than we want, so we are trying to switch and have a little more of external borrowing, but by drawing heavily on the multilateral institutions. So we will be going to the World Bank and the AfDB, and we will also look into the markets. But for the multilaterals, we’ve already embarked on discussions.”
Her disclosure that N473 billion has been borrowed is a confirmation that the proposal has eventually been actualised. In its 2014 Debt Sustainability Analysis (DSA), the nation also adopted a subsisting debt management strategy as captured in the approved Nigeria’s Medium-Term Debt Management Strategy (MTDS), for 2012-2015, which seeks to achieve an optimal mix in the debt portfolio of 60:40 for domestic and external debts respectively as against the current mix of 83:17 through a gradual substitution of relatively more expensive domestic borrowing with cheaper external financing. Thus, the 2014 DSA has already incorporated government’s policy objective of reducing the overall cost of government borrowing at an acceptable level of risks. This may have informed the minister’s statement of government’s preference for approaching multilateral agencies.
The objective of the 2014 DSA is to assess the country’s capacity to finance its projects/programmes and service its debt obligations, without undue large adjustments that may compromise its macroeconomic stability, overall growth and development.
The government’s avowed confidence that it can continue to borrow on the argument that it falls within a safe threshold, is punctured when examined under an uncertain economic regime, as being faced by Nigeria. Even the government admitted this by its own record. It underlined the risks inherent on its path.
“The pessimistic scenario ( where Nigeria is presently), assumes a reduction in the growth of the Gross Domestic Product (GDP), increase in the rate of inflation, decline in revenue accruing to the Federal Government as a result of a fall in crude oil prices, deterioration in fiscal deficit and current balance, amongst others. Unlike in the previous years, which made pessimistic scenario revenue-specific, this years DSA considered deterioration in a broad range of macroeconomic indicators and variables that could impact negatively on the debt portfolio,” the sustainability analysis annual report said. Although the results indicate that the country will still remain at a low risk of debt distress under the pessimistic scenario, it also shows a rising trend for all the debt indicators throughout the projection period. This means that a prolonged deterioration in one or two of the variables could increase the risk of debt sustainability.
The growing concern over the country’s debt overhang has been on the front burner for years, but often times, government officials have always argued that the nation’s debt level has not gone out of a safe trajectory. However, the lid over this confidence margin, appears to be weakening and increasingly contested.
A lecturer at the Pan Atlantic University, Lagos, Dr. Austin Nweze, pointed out a grave danger in accumulating excessive foreign debts as such would place undue burden on future generations, especially if the loans are not channeled into capital projects.
He said that the danger lies ahead for the economy, should the existing level of borrowing from big nations continue, which could make the country to depend on lending nations.
Nweze, however, said that there is nothing wrong in borrowing provided the funds are well utilised or invested in the provision of infrastructure.
According to him, the fall in oil prices has reduced revenue receipts, forcing the government to look for money to run the economy.
He urged the government not to leave behind a heavy foreign debt burden for the present and unborn generations. He cautioned that Nigeria, already under a heavy burden of foreign debts could be in great danger.
He urged the ruling class and the older generations to set good example and educate the coming generations for a better and secured future. According to him, such example should be set by not accumulating debt for future generations to inherit.
He urged the government to invest borrowed money in projects that will benefit the economy, instead of consuming the money.
Dr. Isaac Nwaogwugwu, a lecturer at Department of Economics, University of Lagos, said there is no way we are going to finance capital budget without borrowing.
He said: “That is why the allocation to capital account or expenditure is very small unless the government says it not ready to invest or provide for the future then it’s going to borrow.
“If government is committed to developmental issues there is no way it can run away from that? So, the volume of borrowed amount, or our debt stock wouldn’t matter so much. They can always try to cut down what they have borrowing and not that they can’t borrow.”
CLICK HERE to follow us on Google+ so as to get instant updates on published posts.
CLICK HERE to Subscribe to our BBM Channel (C002D3966 or search for '9ja Ninja') to get live updates on published post.
Follow @9ja_Ninja
Please drop your comments below
Top Stories
- Emmanuel Adebayor Blasts His Family Members (Full Detail)
- Pandemonium Breaks Out In Edo Following Discovery Of Grave In Classroom
- Breaking News: Armed Gang Blocks Lekki-Ikoyi Bridge
- Rihanna's See Through Dress Exposes Nipples And Hickey Love Sore
- Man Beats Wife To Death In Katsina State
- Buhari Meets Tunde Thompson, Journalist He Jailed 30 Years Ago
- Sound Sultan opens up on his friendship with 2 face idibia
- VJ Denrele Edun Finally Opens Up About His Sexuality
- Floyd Mayweather sued by baby mama for $20m
- [Photos] Victoria's Secret Model, Nina Agdal Runs Naked In New Racy Photo Shoot.
- Jonathan Has Looted The Economy - APC Governors
- Lawsuit filed against Manny Pacquiao for not disclosing shoulder injury before mega fight
- Beyonce Signs Three Aspiring Singers for $1.5M
- Lagos Pastor Flees With Church Member's N10m Given To Him To Anoint And Pray Over
- Selfie Is Prohibited at Kim Kardashian's 'Selfish' Book Signing (See Why)
- Buhari Admits To Being Nervous, Says Nigerians Expectations Too High
- Triple MG Artist Tekno Releases Stylish New Photos
- Soyinka Denies Insulting Igbos (Full Story)
- Nigeria Has No Power To Deregulate DSTV Prices - MultiChoice
- Driver and conductor attack policemen with faeces in Imo state
No comments :
Post a Comment
News/Tip Off/Advert, Email: 9janinja9@gmail.com