…Edun says high interest rate limits govt from borrowing more
The Joint Senate Committee on the 2024-2026 Medium Term Expenditure Framework and Fiscal Strategy Paper has said Nigeria may need to borrow more to fund the 2024 budget, expressing concerns over the ability of revenue-generating ministries, departments and agencies (MDAs) to meet their targets.
Sani Musa, chairman of the committee said the responses received so far from MDAs at the ongoing hearing on MTEF indicated they may not meet their revenue target.
“The responses we are getting from MDAs as, finance committee; I am afraid if such targets would be met.
Sani said this during a meeting of the committee with Wale Edun, minister of finance and coordinating minister of the economy, the director-general of the Debt Management Office (DMO) and chairman of the Federal Inland Revenue Service (FIRS) on Thursday.
The senator expressed worry that borrowing more loans would increase the deficit and the burden of debt servicing.
The chairman further expressed concerns over leakages in government resources.
“I cannot believe that an agency will receive revenue in 2022, and is showing a receipt of collection in October 2023. I don’t know how these collections are made and how the accountant-general of the federation issues receipts.
Sani said the issuance of receipts has created room for misappropriation and mismanagement of funds and should be probed further
The chairman further said the government was recording revenue shortfalls due to the issuance of waivers, even as he decried the lack of clarity on the agency issuing the waiver between FIRS, Nigeria Investment Promotion Council, or the Ministry of Finance.
In response, Edun said Nigeria couldn’t afford to rely on loans at the moment and, therefore, needed to ramp up revenue.
“In the environment that we have now, we are clearly in no position to rely on borrowing. We have an existing borrowing programme, our direction is to reduce reliance on borrowing, reduce the quantum and percentage of deficit financing in the 2024 budget”, he said.
“Internationally, there is a focus among the rich countries on bringing down the inflation rate to stabilise their economies and give them an opportunity for investment and growth. But they are sacrificing that immediate growth for contracting economies or at least contracting money supplies and pushing up their interest rates.
And of course, high interest rate and loan don’t go together. What it means is that access to those funds are expensive, so it is the last thing we want to rely on.
“And as you know our debt servicing was pushing 98 percent of revenue. The last thing to think of is piling more debt”, he added.
He said the solution was revenue, and that the government needed to not just maintain its activity, but also spend more.
“If you look at government spending, if you look at the budget as a percentage of GDP, it is one of the lowest, maybe around 10 percent; even Ghana is at 25 percent. The most advanced countries in terms of social safety nets and social security systems are at 70 percent of GDP. So, we need to increase”, Edun said.
Mukhail Abiru, chairman of the Senate committee on banking, insurance, and other financial institutions, highlighted the need to screen the budget of all those revenue agencies and find a way to optimise the opportunities sought.
“I believe we can help the revenue situation from those angles”, he said.