Bamidele Famoofo
Nigeria’s total debt stock as at December 31, 2019 stood at about N27.4 trillion according to data obtained from the Debt Management Office (DMO). That figure surely must have increased as the largest country in Africa both by population and GDP has continued to borrow to keep the wheel of its economy running.
Since the economy is swimming in troubled waters due to oil price crash and the budgeted $57 per barrel slashed to a new benchmark of $20 per barrel, coupled with low revenue generation from the non-oil sector and tax as the Covid-19 pandemic ravages, the surest way to finance the marginally reviewed budget, according to government, is to borrow.
But analysts and economic pundits have raised the alarm that the decision to keep borrowing to satisfy the appetite of government officials and the legislative arm of government which feast on recurrent expenditure rather than deploy the cash to infrastructural development to grow the economy, will be to the detriment of the nation’s fragile economy.
A handsome N2.45trillion was estimated in the initial budget document by President Muhammadu Buhari to the National Assembly in October 2019 to service debt while provision for a sinking fund to retire maturing bonds issued to local contractors is N296 billion.
As it is the custom in Nigeria, nondebt recurrent expenditure of N4.88 trillion more than double capital expenditure which stood at N2.14 trillion. This excludes capital component of statutory transfers. The expenditure estimate includes statutory transfers of N556.7 billion.
Following the last budget review, former Vice President Atiku Abubakar, said in a press statement that the nation cannot afford to live in luxury during an austerity.
“It is to my consternation that despite the crash in the price of oil, and the inability of Nigeria to expand our revenue base through the non-oil sector, the federal government of Nigeria has only seen fit to slash our budget by a mere 0.6 percent, from N10.594 trillion to N 10.523 trillion. This represents a reduction of only N71 billion,” he said.
Atiku argued that the budget cut by the federal government was grossly insufficient and showed that ‘we have lost touch with the current realities in the global political economy.’
It would be noted that when the 2020 budget was presented to the National Assembly on Tuesday October 8, 2019, it was predicated on a projection that Nigeria would generate crude oil production of 2.18 million barrels a day, at an expected oil price of $57 per barrel.
“Today, that is no longer the case. Both our production and the price of oil have been severely affected by the coronavirus pandemic, to the extent that we have unsold vessels, and our income has tanked by more than 50 percent. Given that this is the case, how can anyone justify a reduction in expenditure of just 0.6 per cent? We cannot be the only nation bucking the trend?
“Saudi Arabia, a nation with a much stronger production capacity than ours and with a larger global market share, as well as foreign reserves that is 12 times ours, has slashed her budget by almost 30 percent. Ditto for other oil economies,” he queried.
As far as Atiku is concerned, Nigeria cannot make up for the loss of expected revenue by taking out more loans and issuing out more bonds. He said debt will be the death of our economy and bonds will put our people in bondage.
He suggested that the best way out of the nation’s economic quagmire is to reduce its expenditure, noting that a 0.6 percent reduction is no reduction. It is only window dressing.
The former vice president wants government to realistically slash the budget. “Every pork barrel has to go. The billions budgeted for the travels and feeding of the president and vice president has to be reduced. The N27 billion budget for the renovation of the National Assembly has to go. The massive budgets to run both the presidency and the legislature have to be downsized. The budget for purchasing luxury cars for the president, his vice, and other political office holders must be jettisoned. Leave the salaries of civil servants alone, but reduce the salaries of political appointees. Sell eight or nine of the jets in the Presidential Air Fleet.”
According to Atiku, any budget slash that is less than 25 percent will not be in the interest of Nigeria. And beyond a budget slash, Nigeria needs a budget realignment, to redirect expenditure away from running a massive bureaucracy, into social development sectors like education, infrastructure, and above all, healthcare. “We must invest in the goose that lays the golden egg the Nigerian people.”
“These are the types of sacrifices that we need in a time of crisis. We do not need empty gestures that will lead to empty treasuries. In times of austerity, no nation, not the least a mono-product economy, such as ours, should be living in luxury at a leadership level,” he argued.
Meanwhile, Minister of Finance, Budget and National Planning, Zainab Ahmed, has said there were still consultations on the revised budget. She recently disclosed that her team met with the leaders of some key committees of the National Assembly to get their input for the revised 2020 budget.
The minister, who was accompanied by the Director-General, Budget Office of the Federation, Mr. Ben Akabueze, said the interactive session was a continuation of the process she had started with the leadership of the two chambers of the nation’s parliament on the proposed fiscal document.
She spoke shortly before the meeting was held behind closed doors. Ahmed said, “We are here today as part of another consultative process just to take input from the leadership of the National Assembly regarding the work that we are doing in the process of amending the MTEF 2020-2022 and the 2020 budget. “The outcome of this meeting will form an input into the work that we are doing, which will subsequently be confirmed by the National Assembly.” Chairman, Senate Committee on Appropriation, Barau Jibrin, said the consultation was to ensure a rancourfree deliberation during the budget defense session.
Mounting Debt Stock Recently the 2020 Appropriation Act approved a total of about N1.6 trillion as new borrowing to part-finance the deficit in the budget. This was made up of about N745 billion domestic borrowing and N850 billion external borrowing.
“With the COVID-19 Pandemic and its attendant effect on the world economy and the International Capital Market, the federal government reappraised its borrowing plans and decided that it would be more expedient to raise the N850 billion, earlier approved as external borrowing, from domestic sources. This conversion from external to domestic is to ensure that the implementation of the 2020 Appropriation Act is not jeopardised by lack of funds,” DMO disclosed.
The nation’s debt managers, however, explained that the N850 billion is not new or incremental borrowing, but rather an amendment of the source of borrowing from external to domestic. “With this change, the total new domestic borrowing under the 2020 Appropriation becomes N1,594.99 billion which is the same as the total new borrowing in the 2020 Appropriation Act.”