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Nigeria's leading finance and market intelligence news report.

Welcome to The Publisher's Diary, a well-informed and exciting commentary on current affairs at home and abroad. I hope you can come along with me on the morning of every last Monday of each month. 

Coming to Nigeria soon – The mother of all debt crisis amidst collapsing public revenues

In many ways, Nigeria is a nation of paradoxes. A country that is one of the global crude oil producers but imports all her petroleum products. A country where its massive oil endowment is a curse. A nation whose sons and daughters are acclaimed leaders at the White House and Whitehall and even at Buckingham Palace yet its people point to leadership or the lack of it as the bane of the country. And now, there is the incredible matter of piling up debt to cover mainly salaries of civil servants while public revenues are collapsing at an alarming pace.

By March of this year, Nigeria’s total debt stock had ballooned to N33.1trn.When the ways and means i.e. advance from the central bank, the liabilities of AMCON, Nigeria’s ‘bad bank’, and the projected deficit for 2021 are added to this, the total debt of Africa’s most populous nation will hit N54trn according to top economist Doyin Salami.

Salami says the current debt level is unsustainable; though the country’s debt to GDP ratio of 35% might appear comfortable, the debt service to revenue ratio of 97.7% paints a frightening picture. And it is getting worse. The shortfall between the retained revenue and expenditure of the federal government swelled to N6.15trn (or 4% of GDP) by the end of 2020 from N500bn in 2011...

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Welcome to The Publisher's Diary, a well-informed and exciting commentary on current affairs at home and abroad. I hope you can come along with me on the morning of every last Monday of each month. 

Coming to Nigeria soon – The mother of all debt crisis amidst collapsing public revenues

In many ways, Nigeria is a nation of paradoxes. A country that is one of the global crude oil producers but imports all her petroleum products. A country where its massive oil endowment is a curse. A nation whose sons and daughters are acclaimed leaders at the White House and Whitehall and even at Buckingham Palace yet its people point to leadership or the lack of it as the bane of the country. And now, there is the incredible matter of piling up debt to cover mainly salaries of civil servants while public revenues are collapsing at an alarming pace.

By March of this year, Nigeria’s total debt stock had ballooned to N33.1trn.When the ways and means i.e. advance from the central bank, the liabilities of AMCON, Nigeria’s ‘bad bank’, and the projected deficit for 2021 are added to this, the total debt of Africa’s most populous nation will hit N54trn according to top economist Doyin Salami.

Salami says the current debt level is unsustainable; though the country’s debt to GDP ratio of 35% might appear comfortable, the debt service to revenue ratio of 97.7% paints a frightening picture. And it is getting worse. The shortfall between the retained revenue and expenditure of the federal government swelled to N6.15trn (or 4% of GDP) by the end of 2020 from N500bn in 2011.

This year alone, the actual fiscal deficit for the first three months was N3.01trn which is about 53.8% of the total projected deficit for the year. An insatiable appetite for expenditure is another worrying trend of the government. Money spent on infrastructure among others grew by 102% to an unbelievable N10.1trn in 2020 from N5trn in 2015, a period when revenues rose by just 15%. So, if you are not around before the debt collector comes knocking on our door, prepare your kids to expect them!

VAT ‘wars’

The wars have broken out. I mean the dispute over value-added tax (VAT) and the insistence of some states to kick out the Federal Inland Revenue Service (FIRS) as the authority responsible for its collection. It is important to note that VAT was introduced in 1993 to replace the sales tax hitherto levied by the states, And every state kept what it collected then.

The total VAT receipts at issue came to about N1.5trn in 2020 or about a per cent of GDP but it is a 25% of the expected federal deficit for 2021. Who collects VAT may not be such a big deal, the real issue is how it is shared and the principle of equity . The point has already been made about how northern states of Nigeria don’t refrain from spoils of VAT charged on alcohol which is forbidden in their region .

More importantly, the debate is about what amount flows back to states where a considerable value of VAT collections are harvested in order to oil the machines that generate them. Take Apapa for instance, the place is sinking under the unbearable weight of the economic activities that go on there despite the VAT revenues it generates. Yet this isn’t considered when VAT is being shared. While Lagos should be encouraged to press for collecting and holding on to the VAT the state generates, care must also be given to the pain and misery of businesses and residents of areas like Apapa where the golden egg is laid. ....

So they rig at the World Bank?

Last week, the world was gripped by the kind of scandal often associated with movies – that the World Bank rigged the ease of doing business index, its global rankings, in favour of China. The annual ranking has been cancelled .

In their 16-page report titled “investigation of data irregularities in doing business 2018 and doing business 2020” Ronald Machen, Matthew Jones, George Varghese and Emily Stark found that “beginning as early as May 2017 and continuing through the Doing Business 2018 circle, high ranking Chinese government officials repeatedly expressed their concerns to World Bank President Jim Young Kim and other senior bank officials…”.

The investigators reported that under intense pressure from the bank’s leadership, irregular changes were made to China’s data in Doing Business 2018 and they cited current head of the IMF and then CEO of the World Bank Georgieva as having connived to rig the data in China’s favour. Their report makes interesting reading and their findings are corroborated by leaked text messages exchanged between senior officials of the World Bank. In one of such messages that I saw, senior director for development economics wrote to Georgieva, “In light of the fact that we have considered several alternatives to recasting the data, and found none of them satisfactory, I suggest we go back to Plan A.” ....

Beating global alcohol trend

The world continues to learn how it is changing in the covid pandemic that began to sweep across the nations in March of last year. It has now emerged that while we were all locked down, global alcohol consumption fell last year by six per cent but in Nigeria more alcohol was consumed. While this can be explained by people moving up market or switching sideways to other brands, in Nigeria, beverages giant Diageo saw its volumes in Africa rising 30% and by 59% in Nigeria according to global CEO Ivan Menezes. Well done Guinness!