Nigeria’s debt burden looks set to hit about N77 trillion with the planned securitisation of the N22.7 trillion loans from the Central Bank of Nigeria (CBN) to the federal government, coupled with new borrowing proposed for 2023.
The country’s public debt stock increased to N44.06 trillion in the third quarter of last year from N39.56 trillion at the end of 2021, according to the Debt Management Office (DMO).
“Nigeria’s debt was already N44 trillion as at September; once the National Assembly approves the securitisation of the CBN’s ways and means, the figure will be added to the public debt. We are already at about N77 trillion, if the new borrowing is added, give or take N5 trillion depending on market conditions,” Patience Oniha, director-general of DMO, said on Wednesday.
Oniha said this while responding to questions on debt during the public presentation and breakdown of the 2023 Appropriation Act held in Abuja.
The debt stock is also growing from the issuance of promissory notes, some of which are inherited, with more to be issued between now and June, according to her.
President Muhammad Buhari had last week written a letter to the National Assembly, seeking approval for restructuring of N22.7 trillion ways and means advances given to the Federal Government by the CBN. But the lawmakers failed to approve it last week when the 2023 budget was passed, insisting on conducting appropriate checks.
Zainab Ahmed, minister of finance, budget and national planning, said it would be beneficial if the securitisation request is approved, describing the compounding interest on the debt as worrisome.
She said if the request is not approved, the interest rate will continue to grow to the tune of N1.8 trillion-N2.2 trillion in addition to the principal.
“Once this is approved, it brings a very significant fiscal relief to the federal government; currently the ways and means is running at an interest rate of MPR+3, which is averagely 18.5 percent and a very high cost,” she said.
Ahmed said other benefits of the approval include a lower interest rate of 9 percent and a sketched negotiated plan of 40 years with a three-year moratorium, which will provide a significant relief to the federal government.
Speaking on the N21.83 trillion budget framework christened ‘Budget of Fiscal Consolidation and Transition’, the minister said the key parameters and macroeconomic projections driving the medium-term revenue and expenditure framework have been revised in line with the emergent realities, with some of them deviating from the projections in the National Development Plan (NDP) 2021-2025.
The oil price benchmark is set at $75 per barrel, real GDP growth is projected at 3.75 percent in 2023 compared to 4.39 percent in the NDP. Growth is expected to moderate to 3.30 percent in 2024 before picking up to 3.46 percent in 2025.
The inflation rate is projected to average 17.16 percent in 2023, as against the 14.93 percent projected in the NDP for 2023.
According to her, the projected fiscal outcome in the 2023 budget is based on the assumption that petrol subsidy will be phased out by mid-2023. Following the 18-month extension announced early 2022, only N3.36 trillion has been provided for petrol subsidy.
She expressed optimism that the efforts of the government and other related agencies in boosting oil production has yielded positive results, with hopes that this will be sustained going forward and will boost revenue inflow
“There will be tighter enforcement of the performance management framework for GOEs (government-owned enterprises) that will significantly increase operating surplus/dividend remittances in 2023,” she said.
Total revenue to fund the 2023 budget is estimated at N10.49 trillion, of which 22 percent is expected from oil-related sources, while 78 percent is to be earned from non-oil sources.
“The total revenue includes the gross revenues of 63 government-owned enterprises totalling N3.87 trillion; of this, FGN oil revenue share is projected at N2.29 trillion, non-oil taxes are estimated at N2.43 trillion, FGN independent revenues are projected to be N2.62 trillion while other revenues expected is N762 billion,” Ahmed said.
In order to improve revenue generation, she said some industries – which she did not mention – will be exempted from some incentives like pioneer tax.
“To achieve the objectives of the budget, we will intensify our revenue mobilisation efforts and intensify current efforts towards the realisation of our crude oil production and export targets. We will augment available resources by accelerating the implementation of public private partnership initiatives, especially those designed to fast-track the pace of our infrastructural development,” she said.
Aggregate expenditure is projected to be N21.83 trillion of the budget inclusive of GOEs and project-tied loans, which is 20 percent higher than the amended 2022 budget as well as a recurrent (non-debt) spending, estimated to amount to N8.33 trillion inclusive of the N200 billion social investment programme.
Further breakdown of the expenditure shows that aggregate capital expenditure of N6.46 trillion is 30 percent of total expenditure and is 3.5 percent lower than the 2022 budget, while the N6.1 trillion debt is 29 percent of total expenditure and is 71 percent higher than 2022 estimate as it includes interest payment of N1.2 trillion for Ways and Means.
Consequently, a deficit of N11.34 trillion has been projected for 2023, which will be financed mainly by borrowings from domestic sources (N7.04 trillion), foreign sources (N1.76 trillion), multilateral/bilateral loan drawdowns (N1.77 billion) and privatisation proceeds (N206.18 billion)
“The gap between the revenue, additional financing and total expenditure, amounting to N553.46 billion is expected to be financed by additional revenue from Spectrum fees and tax on the maritime sector,” she said.
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On the country’s debt-to-GDP ratio, which stood at 22.97 percent as at September 30, 2022, the finance minister said it is still within the 55 percent threshold recommended by the International Monetary Fund and World Bank as well as Nigeria’s self-imposed limit of 40 percent. However it is expected to increase to 35.33 percent after including the outstanding balance on CBN ways and means advances.
She added that the implementation of the Medium Term Debt Management Strategy 2020-2023 is expected to moderate the level of debt related risks, especially refinancing and exchange rate risk, and further improve the structure of the public debt portfolio.
Ahmed also insisted that Nigeria is not planning on restructuring its debt as it remains committed to meeting its domestic and external debt obligations.
“The FGN will however continue to utilise appropriate debt management tools to streamline the cost and risk profile in the debt portfolio, including through concessional loans, spreading out of debt maturities to avoid bunching, and re-profiling of the debt maturities by refinancing short-term debt using long-term debt instruments,” she said.
She said the exposure to refinancing risk remained stable as a result of the strategy of issuance of long-dated securities in the domestic and international markets in addition to accessing long-term funds from multilateral and bilateral lenders.
