The Debt Management Office, DMO, yesterday attributed Nigeria’s growing debt stock to budget deficits, continuous issuance of promissory notes and other borrowings as well as low revenue generation. On the way out of the debt quagmire, the Lagos Chamber of Commerce and Industry, LCCI, asked the government to re-strategise on revenue generation, such as a shift in focus to equity financing, among others, while the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture, NACCIMA, called for a higher level fiscal discipline by government. Recall that DMO had said last week that the country’s debt stock had risen to over N46 trillion, increasing by over N6 trillion in 2022 alone. The Diretor-General of DMO, Patience Oniha, who disclosed this in an interview on Channels Television’s breakfast programme, Sunrise Daily, yesterday, noted that Nigeria had been running budget deficits for many decades. She said several loans had been contracted multilaterally and bilaterally, while the Federal Government kept issuing promissory notes to settle obligations for which it didn’t really have the revenue. According to her, borrowing is an accepted form to fund government activities but noted that this should be supported by revenues generated. She added that when money borrowed was judiciously utilised to stimulate growth, revenue would be generated to offset the debt. Oniha said: “Nigeria’s debt stock is N46.25 trillion as of the end of 2022. It includes the debt of the 36 state governments and the Federal Capital Territory. The Federal Government is responsible for about 85% of this.“ What are the triggers and why is the debt stock growing? It is because when the debt stock is growing, the debt service also grows. The debt stock is growing because Nigeria has been running budget deficits for many decades.‘’In good and bad times with oil prices, we have borrowed. We’ve been running budget deficits and those deficits are funded largely 85 to 95% from borrowing and that is cumulative. These are publicly available data. “As we borrow each year, it adds up. So, the annual budget deficits are a major component. If you look at this year’s budget, budget size is N21trn, borrowing is N10trn.”She added that Nigeria had secured several loans in the past from multilaterals like the World Bank, and the African Development Bank and bilaterals from Germany, India, and China and disbursements are going on.“ The third part is the fact that the government has been issuing promissory notes to settle obligations for which it doesn’t really have revenue. So, that is why the debt stock has been growing,”

Govt should shift to equity financing, and other revenue strategies – LCCI

Reacting yesterday, the Director General, of LCCI, Dr Chinyere Almona, said the government should emphasize strategies for revenue growth, while blocking leakages, among other measures. Almona stated: “LCCI recommends that government must shift focus to equity financing, divestment or shedding of its equity holdings in state-owned enterprises, real estate, and infrastructure to reduce its debt commitments and improve its fiscal situation. ‘’Both capital and interest payments on borrowed sums expose the country’s fiscal vulnerabilities.“Also, the government should, as a matter of urgency, emphasize strategies for revenue growth while blocking leakages. Importantly, the government may want to consider the need to deregulate the downstream subsector of the oil industry to block a major drain on revenue.‘’Most importantly, following the commendable launching of the restructured Ministry of Finance Incorporated, MOFI, as the arrowhead of Nigeria’s efforts to optimize national assets by President Muhammadu Buhari on February 1, 2023, LCCI wishes to urge that copious references should henceforth be made to the growth in the stock of financial assets that Nigeria owns in corporate equities, real estate and infrastructure spaces and the returns Nigeria is generating on them.‘’This should be done each time government of Nigeria is providing updates on the growth in the stock of the financial liabilities Nigeria owes and the costs it is incurring them, to provide local and global observers with a balanced picture of our financial evolution.”

Higher level of fiscal discipline needed – NACCIMA

In his reaction, the Director General of the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture, NACCIMA, Mr Sola Obadimu, said the government should exercise a higher level of fiscal discipline and ensure value for money in project implementation. He stated: “There’s a huge need for a higher level of fiscal discipline as well as a need to get value for money spent.“ Some of the indirect effects may be rising inflation rates and lower quality of life of the citizenry on an average level and, if not checked, it could get calamitous if we end up with a debt crisis later. ‘’This is a situation where creditors are not motivated to lend us more and/or we are unable to service our current debts as scheduled.“In summary, we need to exercise more fiscal discipline and be more accountable by getting good value for money spent for a start. Accountability is key.”

Problem is over-spending, not revenue generation – David Adonri

In his reaction, David Adonri, Vice Chairman, of Highcap Securities, said noted that deficit budgeting and extra-budgetary expenditures of FGN were mainly responsible for the rising public debt stock. According to him, the government lacks budget discipline and works at cross purposes to monetary policy. “For the financial well-being of any organization, private or public, the debt/revenue ratio must be balanced in such a way that default threat is minimized. Now, to avoid default, FGN must reschedule repayment and balance its budget.“Revenue generation is not the problem but overspending, new debts and huge debt servicing are reasons for escalating debt stock and erroneous impression that revenue is insufficient. As it appears, this administration is determined to sink Nigeria further into the debt trap,” he stated.

We need the political will to trim the size of govt – CPPE

Also reacting yesterday, the CEO, of the Centre for the Promotion of Private Enterprise, CPPE, Dr Muda Yusuf, said all that was needed was the political will to cut down on expenditure by reducing the size of government. He stated: “We are already at a debt threshold that is not sustainable. The deepening of the debt crisis could crystallize insolvency risk. Elevated debt burden should be avoided as much as possible.“ What is needed is the political will to cut expenditures and undertake reforms that could trim the size of government, reduce governance costs and ease the financial burden on the government. “The naughty issue of fuel subsidy needs to be addressed. We have to take steps to gradually exit from the subsidy regime if we are to avoid fiscal collapse.“ Additionally, it is imperative for the country to operate as the true federation that it claims to be. The unitary character of the country is making it difficult to unlock the economic potential of the sub-nationals. It is perpetuating the culture of dependence on the federal government.“Fiscal sustainability is driven by both cost and revenue. Therefore managing the major drivers of cost and revenue is imperative. As far as possible, the government should push back in sectors or activity areas where the private sector has the capacity to deliver desired outcomes.“We should see more commissioning and privatisation at all levels of government. This would allow for the infusion of more private capital into the infrastructure space.”

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