In defiance of warnings from local and international monetary authorities against rising debt level, Federal Government is going to international debt market to raise $2.8 billion in Eurobond to fund capital projects in its 2018 budget.
The Central Bank of Nigeria (CBN) expressed worries at its last Monetary Policy Committee (MPC) meeting on the growing level of sovereign debts which it warned could push the economy back into recession.
“There was a fresh threat of recession as the economy recorded growth rate of 1.95 per cent and 1.5 per cent during the first and the second quarters of this year respectively. The slowdown emanated from the oil sector, with strong linkages to employment and growth, late implementation of the 2018 budget, weakening demand and consumer spending, rising contractor debts, and low minimum wage’ noted the CBN Governor, Godwin Emefiele who was also worried about growing level of sovereign debts.”
The International Monetary Fund ( IMF) last week ranked Nigeria alongside eight African economies as in debt distress.
The Finance Minister, Zainab Ahmed, said that Nigeria still has much legroom for further borrowings since its total debt of over N72 trillion represents only 3 percent of the nation’s GDP.
She explained that the budget has approval to borrow both locally and internationally with a bond issuance within the range of $2.8 billion to raise before this year closes to finance capital projects in the 2018 budget.”
The nation’s debts have ballooned to N72trillion ( $42billion) this year, rising from $40billion recorded in 2015.
The foreign components according to the National Bureau of Statistics (NBS) was $22.08 billion as at June.
This represents a 17 per cent rise over the $18.9 billion recorded at the end of 2017.
The breakdown shows that foreign borrowings amounting to $10.88 billion were from multilateral agencies; $274.98 million from bilateral agencies and another $2.12 billion bilateral from the Exim Bank of China, JICA, India and KFW, while $8.80 billion was commercial debt.
The Debt Management Office (DMO), last month, put the domestic debt stock of the 36 states and the Federal Capital Territory (FCT) at N3.5 trillion as at the first half of the year , which was six per cent over the N3.3 trillion recorded at the end of December 2017.
The finance minister however said Nigeria’s challenge at the moment was not about the size of its debt, but about its lean revenue streams that are making serving obligations an Herculean tax for the government.
“What we have is a revenue problem and that means we need to work harder to increase our revenue to ease our debt service obligations. So we have to enhance our domestic revenue mobilisation so that we can ease the debt service burden that we now carry. We have a lot of headroom to borrow, but we are not rushing to borrow more because we have to consider the foreign debt service obligations that we carry now,” she said.
CBN in its Economic Report for August 2018 noted that “At N745.52 billion, estimated federally collected revenue (gross) in August 2018 fell below both the 2018 monthly budget estimate of N1.1 trillion and the receipt in the preceding month of N947.62 billion by 32.7 and 21.3 per cent respectively.
The decline in the monthly budget estimate was attributed to a shortfall in both oil and non-oil revenue.
Oil receipts at N403.59 billion, or 54.1 per cent of total revenue, was below the monthly budget estimate of N640.21 billion by 37 per cent, as well as below the preceding month’s receipt of N513.54 billion by 21.4 per cent.
The fall in oil revenue relative to the monthly budget estimate was attributed to the drop in crude oil production arising from repairs and maintenance of oil facilities at various NNPC terminals.”
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