Nigeria’s Debt Profile: No Cause For Alarm, Says Government

Nigeria’s Debt Profile: No Cause For Alarm, Says Government

The Federal Government on Monday defended Nigeria’s rising debt profile.

It described those warning that the  over $83.8 billion domestic and external debt signposted danger for the economy as scaremongers.

Minister of Information and Culture Lai Mohammed said in Lagos that there were misrepresentations in the figures being bandied in certain quarters on the debt profile.

Mohammed argued that Nigeria  had not even reached its debt ceiling of 25 per cent in total public debt stock to Gross Domestic Product (GDP).

Former President Olusegun Obasanjo said at the weekend that Nigeria faced  impending bankruptcy, with its external debt ballooning by 700 per cent in four years.

The former President put Nigeria’s external debt at $81.2 billion  (about N24.947 trillion) from $10.32 billion within four years.

Highlighting the achievements of the Muhammadu Buhari-led administration in the last one year,   Mohammed said it was  wrong for some people to assume that the government  was responsible for the nation’s rising debt portfolio.

He said: ”There have been concerns in certain circles about the country’s growing debt, both domestic and external. In the process, there have been some misrepresentations and scare-mongering.

”The public debt stock is actually a cumulative figure of borrowings by successive governments over many years. It is therefore not appropriate to attribute the public debt stock to one administration.

“Nigeria’s total public debt stock in 2015 was $63.80 billion, comprising $10.31 billion of external debt and $53.49 billion domestic debt. By June 2019, the total debt stock was $83.883 billion, made up of $27.163 billion of external debt and $56.720 billion domestic debt.

“It is therefore not correct to say that Nigeria’s external debt alone is $81.274 billion. There is yet no cause for alarm. This is because Nigeria has a debt ceiling of 25 per cent in the total public debt stock to Gross Domestic Product (Debt/GDP), which it has operated within the ratio for December 31, 2018 and June 30, 2019 were 19.09 per cent and 18.99 per cent respectively.

“The debt service to revenue ratio has however been higher than desirable, hence the push by the government to diversify the economy and increase oil and non-oil revenues significantly.

“The government is also widening the tax base to capture more tax-paying citizens.

“In the face of massive infrastructural decay, no responsible government will sit by and do nothing. “This administration’s borrowing, therefore, is aimed at revamping our infrastructure, including roads, bridges, railways, waterways and power  to help unleash the potential of the nation’s economy.

“The loans for the educational sector will contribute to the development of our human capital while the loans for the agricultural sector will help the move to diversify the economy.”

He also said the nation’s non-oil exports doubled from about N1 trillion to N2 trillion between 2018 and 2019.

Mohammed said while the value of crude oil exports decreased by 3.78 per cent,  non crude oil exports rose by more than 30 per cent in value between 2018 and 2019.

According to him, the value of exports grew by 2.5 per cent between 2018 and 2019 as at the third quarter, rising from N14 trillion to N14.4 trillion

”Strong performance in the external sector suggests increasing diversification of exports and export revenue.

“This resulted in a stronger overall performance and an increase in the value of total trade by 10 per cent between 2018 and 2019.’’

The minister said that the value of imports in 2019, as at the third quarter stood at N11.6 trillion, compared to N9.6 trillion as at third quarter of 2018.

“This represented an annual growth rate of 21 per cent between 2018 and 2019.

“Other than refined petroleum products, major imports have been machinery and vehicles,’’ he said.

On the performance of the 2019 budget, he said while  revenue shortfalls occurred in the first half of the year, capital expenditure was prioritised, leading to higher expenditure performance.

He added that as at half year 2019, actual aggregate revenue stood at N2 trillion or 58 per cent of pro-rated target.

“This comprised oil revenue of N900 billion (49 per cent performance), Company Income Tax (CIT) of N349 billion (86 per cent performance), Value-Added Tax (VAT) of N81 billion (71 per cent performance), and Customs Collections of N184 billion (100.47 per cent performance).’’

On government expenditure, Mohammed said that as at June, out of the total appropriation of N8.9 trillion for 2019, about N3.4 trillion had been spent, representing 76 per cent performance for that period.

He stressed that capital spending had been prioritised in favour of critical ongoing infrastructural projects in the power, roads, rail and agricultural  sectors.

The minister said there was significant improvement on Capital importation comprising mainly foreign direct investment, portfolio investment and other investment flowing into the country.

He said as at the third quarter of 2019, total capital importation had reached nearly $20 billion, which was 34 per cent higher than the $15 billion recorded for the first three quarters of 2018.

Mohammed said while the inflow of Foreign Direct Investment declined over the period by 39 per cent from $1 billion   to $700 millio, portfolio investment and other investments both rose significantly by 39 per cent and 42 per cent respectively.

He said apart from banking and shares, some of the major sectors that witnessed high volume of capital inflows in 2019 were telecommunications, production and services.

The minister said nearly all of the total capital importation as at Quarter three in 2019 flowed to Lagos and Abuja.

He also said Nigeria was  closer to attaining self sufficiency in rice production  owing to the border drill that has drastically reduced smuggling.

Mohammed said: “We recently visited some of Nigeria’s 34 integrated rice mills as well as rice clusters in Kano. The rice mills are either operating at full capacity or have doubled their production.

“Before the drill, there were 12.2 million rice farmers in Nigeria, but now six million people, mostly youths, are venturing into rice production.

”Before the drill, farmers were cultivating rice twice a year, now that has increased to three times a year, and some rice farmers are now venturing beyond rice cultivation to milling, packaging and marketing.

“Overall, the integrated mills currently produce 150,000 bags of rice daily and about 35 million bags per annum.’’

The minister added that the border drill had curbed the smuggling of other prohibited items into the country and  led to significant seizures with estimated monetary value of over N3.5 billion.

He said the exercise had also  reduced the importation of arms, ammunitions and drugs.

Mohammed said because of the drill, terrorists and other criminals were  finding it hard to procure arms and ammunition while criminal elements no longer found their  way into the country.

The minister said smuggling of petroleum products out of Nigeria had been drastically curtailed, and had led to a 30 per cent reduction in domestic fuel consumption.

He added: “Before the drill, the Nigeria Customs Service was recording about N4.5 billion daily. Since the drill started, the figure has increased to between N5 billion and N8 billion daily.

“There has been a drastic reduction in illegal migration.’’

The minister accused some neighbouring countries  of circumventing  the ECOWAS protocol on transit.