· Laments budget is too small to deliver essential
services
· Acting President pledges economic turnaround in 18 months
· DMO targets foreign loan debt service of $483m in 10
years
The Minister of Finance, Mrs. Kemi Adeosun, Tuesday warned that
the country must not borrow more to fund its budget and should
instead raise money internally to fund the budget.
This is just as Acting President Yemi Osinbajo also solicited
the co-operation of the private sector in the federal government’s
quest for a better country, assuring it that the government has the
will to turn the country around within 18 months.
The remark by the minister was a pointer that the country might
shelve its planned $2 billion loans from the World Bank, Reuters
reported.
Africa’s largest economy is in its first recession in 25 years, and
had planned to borrow extensively from overseas to fund a record
budget aimed at helping the country spend its way out of its
economic doldrums.
But plans for lenders like the World Bank and African
Development Bank (AfDB) to loan at least $2 billion to Nigeria have
been stalled for over a year, as international organisations’
frustrations mounted at the country’s refusal to impose key fiscal
reforms such as allowing its foreign exchange rate to float
freely.
Adeosun, who made the comments while speaking at the quarterly
business forum held at the Banquet Hall of the Presidential Villa
in Abuja, suggested that Nigeria will no longer seek such loans, or
an additional $1.5 billion it had planned to raise from
international debt markets.
“We cannot borrow anymore, we just have to generate funds
domestically to fund our budget. Mobilise revenue to fund the
necessary budget increase,” she said.
In May, the Director General of the Budget Office of the
Federation, Mr. Ben Akabueze, had said the country has a shortfall
of $7.5 billion for its 2017 budget expenditure, adding that this
would be addressed with $3.5 billion from the aforementioned loans
and debt.
The government also planned to raise $4 billion from the local
debt market, he said at the time.
But Adeosun said the government’s medium-term plan was based
strongly on increasing revenue mobilisation.
She stressed that increasing the country’s revenue was not
something that could be attained instantly.
“For example, in some cases like tax collection we needed data, we
needed to sign some treaties and we needed tax policy reforms. We
have been working hard on these measures.
“Our focus on revenue is total. Revenue generation is not as
rapid as raising debt but it is permanent. Increased revenue will
ensure sustainability, will prevent us from falling into a debt
trap and will reduce our debt service to revenue ratio,” the
minister added.
Adeosun also expressed concern over the government’s inability
to deliver essential services due to financial constraints, which
she blamed on the nation’s small annual budget.
Putting the nation’s annual budget as a percentage of gross
domestic product (GDP) at six per cent, she said this was
significantly low, adding that it was the lowest in sub-Saharan
Africa.
According to her, the situation was so precarious that salary
payments take the largest chunk of the annual budget, explaining
that the development was largely caused by non-payment of taxes by
the Nigerian public.
She said the by-product of tax evasion was the incapacity of the
federal government to deliver basic projects aimed at improving the
living standards of the people, even as she emphasised the drive of
the government to generate more revenue to alter the status
quo.
“Our budget is significantly lower relative to GDP. We are
currently at six per cent. It is lower than all our peers. We are
currently at six per cent and that is the lowest in sub-Saharan
Africa and one of the lowest in the world.
“Our budget size is too small and that means we can only pay
salaries in some cases and we don’t have money to deliver essential
services.
“There simply isn’t enough money in government to do what
government wants to do. I am sure you will say that is because
people are stealing or because you are wasting money, but I am
saying even if you plug all the stealing and all the waste, the
budget size is not big enough and that is because we are not paying
enough in terms of taxes, or we are not collecting enough in terms
of taxes.
“Statistics show our tax to GDP at 6 per cent, while the
sub-Saharan Africa average is 17 per cent; Asia’s is 26 per cent.
Most of the emerging markets and advanced countries are at 30-35
per cent.
“It is interesting, if you look at the statistics, there is no poor
country that has a high tax to GDP ratio and there is no rich
country with a lower one. And so, if we want to move with the
prosperous countries, we have to do what they do.
“We will not achieve prosperity in Nigeria if we continue on the
tax to GDP ratio that is in the peer group of Afghanistan. I’m sure
none of us aspires for Nigeria to become like Afghanistan.
“We are trying to benchmark ourselves against more developed
countries and we must address these problems in a more fundamental
sense,” she submitted.
In his remarks at the business forum, Osinbajo solicited the
co-operation of the private sector in the federal government’s
quest for a better country, assuring it that the government has the
will to turn the country around within 18 months.
“Day after day, night after night, we are working on these things.
Practically every night we work on these issues. I believe very
strongly that Nigeria will turn around.
“I have no doubt in my mind that if we are focused, even in the
next 12 to 18 months, if we are focused, we will certainly see a
turn around. And I really would want you to join us in being able
to ensure that this happens to the Nigerian economy,” he said.
The acting president, who reiterated the necessity for active
private sector involvement in the development of the nation,
recalled that 40 per cent of Indian companies generate their own
power and thus help the country to make progress in the face of its
challenges.
He insisted that the government has the requisite discipline and
enabling environment to build a stable and dynamic economy,
pointing out that the Economic Recovery and Growth Plan (EGRP)
recently launched by President Muhammadu Buhari was an attestation
to government’s commitment to build a vibrant and productive
economy.
“When Mr. President launched the Economic Recovery and Growth
Plan (EGRP) sometime in April, one of the things that he
emphasised was the fact that we have made up our minds as to where
we are going.
“And I think that we have the discipline to be able to do so,
but this is a complex environment. It is a complex economy. And I
have said this repeatedly, that in some sense, we are fortunate to
have a leader like the president who at least we know is
straightforward and honest, and committed to ensuring that
government expenditure is spent the way it should be spent, and
that people don’t do what they like.
“To that extent, I think we have the right environment, at least
in terms of government discipline and all of that, to be able to
deliver on the promises that we have made.
“And all I will just want to say to the private sector is be sure
that we have enough willing and able partners. There is no way we
can ever be perfect.
“Government is a behemoth, where there are so many problems and
issues. But do not doubt for one moment our commitment to ensure
that we are able to deliver on the promises that we have made,”
Osinbajo stressed.
The Minister of Power, Works and Housing, Mr. Babatunde Fashola,
while answering questions from journalists at the end of the
meeting, said the federal government’s roadmap on electricity
supply was predicated on “incremental power” as well as stable and
uninterrupted power supply.
“But we are focusing on incremental power. Just yesterday, as
one of our incremental power initiatives, we commissioned the
Kukoba power substation to increase electricity supply to Abuja by
another 120 megawatts (MW) carrying capacity.
“So, it involves not only transmission but also involves
generation work, distribution work, enabling the distribution
companies (DISCOs) to perform better; for the generation companies
(GENCOs) to perform better and carrying out our own responsibility
which is transmission.
“It is an ongoing undertaking, and as I said, you must measure
what we have done from where we started.
“On May 29, 2015, the power from the grid was 2,690MW and we
have kept it now relatively stable at about 4,000Mw. With that,
it’s going to be the minimum except for occasions when we have
mechanical and electrical outages and we fix them,” he
explained.
On his face-off with the National Assembly, Fashola said it was
wrong to view the development as a feud, describing it as a mere
disagreement between himself and the lawmakers over project
priorities in the 2017 budget.
“There is no problem between me as an individual and the
National Assembly. And let me make that very clear, many of the
senators and honourable members are my personal friends, and so you
don’t fight your friends.
“But we have a disagreement. And the context of that
disagreement is as follows: You will remember when President
Muhammadu Buhari launched the Economic Recovery and Growth Plan, he
had enormous support from the leadership of the National
Assembly.
“So it means that we all agreed that there is a problem. Then
there is also a disagreement which I don’t think should make us
disagreeable about the best way to implement that plan and I think
that is all there is to it,” he said.
$483m for Debt Service
Meanwhile, the Debt Management Office (DMO) has said it plans to
use $483.4 million to service the nation’s foreign debt over a
10-year period and make repayments starting from next year as its
dollar debts begin to mature.
The DMO, in its annual report, projected debt service payments
to amount to a total of $4.47 billion to be made in 2018, 2021 and
2023.
Nigeria issued a debut Eurobond in 2011 with a follow up tranche
in 2013. Between February and March the country also issued $1.5
billion due in 2032.
The DMO report said Nigeria’s debut $500 million bond will mature
in 2021, while a $1 billion issue will be due next year.
Thisday
· Laments budget is too small to deliver essential
services
· Acting President pledges economic turnaround in 18 months
· DMO targets foreign loan debt service of $483m in 10
years
The Minister of Finance, Mrs. Kemi Adeosun, Tuesday warned that
the country must not borrow more to fund its budget and should
instead raise money internally to fund the budget.
This is just as Acting President Yemi Osinbajo also solicited
the co-operation of the private sector in the federal government’s
quest for a better country, assuring it that the government has the
will to turn the country around within 18 months.
The remark by the minister was a pointer that the country might
shelve its planned $2 billion loans from the World Bank, Reuters
reported.
Africa’s largest economy is in its first recession in 25 years, and
had planned to borrow extensively from overseas to fund a record
budget aimed at helping the country spend its way out of its
economic doldrums.
But plans for lenders like the World Bank and African
Development Bank (AfDB) to loan at least $2 billion to Nigeria have
been stalled for over a year, as international organisations’
frustrations mounted at the country’s refusal to impose key fiscal
reforms such as allowing its foreign exchange rate to float
freely.
Adeosun, who made the comments while speaking at the quarterly
business forum held at the Banquet Hall of the Presidential Villa
in Abuja, suggested that Nigeria will no longer seek such loans, or
an additional $1.5 billion it had planned to raise from
international debt markets.
“We cannot borrow anymore, we just have to generate funds
domestically to fund our budget. Mobilise revenue to fund the
necessary budget increase,” she said.
In May, the Director General of the Budget Office of the
Federation, Mr. Ben Akabueze, had said the country has a shortfall
of $7.5 billion for its 2017 budget expenditure, adding that this
would be addressed with $3.5 billion from the aforementioned loans
and debt.
The government also planned to raise $4 billion from the local
debt market, he said at the time.
But Adeosun said the government’s medium-term plan was based
strongly on increasing revenue mobilisation.
She stressed that increasing the country’s revenue was not
something that could be attained instantly.
“For example, in some cases like tax collection we needed data, we
needed to sign some treaties and we needed tax policy reforms. We
have been working hard on these measures.
“Our focus on revenue is total. Revenue generation is not as
rapid as raising debt but it is permanent. Increased revenue will
ensure sustainability, will prevent us from falling into a debt
trap and will reduce our debt service to revenue ratio,” the
minister added.
Adeosun also expressed concern over the government’s inability
to deliver essential services due to financial constraints, which
she blamed on the nation’s small annual budget.
Putting the nation’s annual budget as a percentage of gross
domestic product (GDP) at six per cent, she said this was
significantly low, adding that it was the lowest in sub-Saharan
Africa.
According to her, the situation was so precarious that salary
payments take the largest chunk of the annual budget, explaining
that the development was largely caused by non-payment of taxes by
the Nigerian public.
She said the by-product of tax evasion was the incapacity of the
federal government to deliver basic projects aimed at improving the
living standards of the people, even as she emphasised the drive of
the government to generate more revenue to alter the status
quo.
“Our budget is significantly lower relative to GDP. We are
currently at six per cent. It is lower than all our peers. We are
currently at six per cent and that is the lowest in sub-Saharan
Africa and one of the lowest in the world.
“Our budget size is too small and that means we can only pay
salaries in some cases and we don’t have money to deliver essential
services.
“There simply isn’t enough money in government to do what
government wants to do. I am sure you will say that is because
people are stealing or because you are wasting money, but I am
saying even if you plug all the stealing and all the waste, the
budget size is not big enough and that is because we are not paying
enough in terms of taxes, or we are not collecting enough in terms
of taxes.
“Statistics show our tax to GDP at 6 per cent, while the
sub-Saharan Africa average is 17 per cent; Asia’s is 26 per cent.
Most of the emerging markets and advanced countries are at 30-35
per cent.
“It is interesting, if you look at the statistics, there is no poor
country that has a high tax to GDP ratio and there is no rich
country with a lower one. And so, if we want to move with the
prosperous countries, we have to do what they do.
“We will not achieve prosperity in Nigeria if we continue on the
tax to GDP ratio that is in the peer group of Afghanistan. I’m sure
none of us aspires for Nigeria to become like Afghanistan.
“We are trying to benchmark ourselves against more developed
countries and we must address these problems in a more fundamental
sense,” she submitted.
In his remarks at the business forum, Osinbajo solicited the
co-operation of the private sector in the federal government’s
quest for a better country, assuring it that the government has the
will to turn the country around within 18 months.
“Day after day, night after night, we are working on these things.
Practically every night we work on these issues. I believe very
strongly that Nigeria will turn around.
“I have no doubt in my mind that if we are focused, even in the
next 12 to 18 months, if we are focused, we will certainly see a
turn around. And I really would want you to join us in being able
to ensure that this happens to the Nigerian economy,” he said.
The acting president, who reiterated the necessity for active
private sector involvement in the development of the nation,
recalled that 40 per cent of Indian companies generate their own
power and thus help the country to make progress in the face of its
challenges.
He insisted that the government has the requisite discipline and
enabling environment to build a stable and dynamic economy,
pointing out that the Economic Recovery and Growth Plan (EGRP)
recently launched by President Muhammadu Buhari was an attestation
to government’s commitment to build a vibrant and productive
economy.
“When Mr. President launched the Economic Recovery and Growth
Plan (EGRP) sometime in April, one of the things that he
emphasised was the fact that we have made up our minds as to where
we are going.
“And I think that we have the discipline to be able to do so,
but this is a complex environment. It is a complex economy. And I
have said this repeatedly, that in some sense, we are fortunate to
have a leader like the president who at least we know is
straightforward and honest, and committed to ensuring that
government expenditure is spent the way it should be spent, and
that people don’t do what they like.
“To that extent, I think we have the right environment, at least
in terms of government discipline and all of that, to be able to
deliver on the promises that we have made.
“And all I will just want to say to the private sector is be sure
that we have enough willing and able partners. There is no way we
can ever be perfect.
“Government is a behemoth, where there are so many problems and
issues. But do not doubt for one moment our commitment to ensure
that we are able to deliver on the promises that we have made,”
Osinbajo stressed.
The Minister of Power, Works and Housing, Mr. Babatunde Fashola,
while answering questions from journalists at the end of the
meeting, said the federal government’s roadmap on electricity
supply was predicated on “incremental power” as well as stable and
uninterrupted power supply.
“But we are focusing on incremental power. Just yesterday, as
one of our incremental power initiatives, we commissioned the
Kukoba power substation to increase electricity supply to Abuja by
another 120 megawatts (MW) carrying capacity.
“So, it involves not only transmission but also involves
generation work, distribution work, enabling the distribution
companies (DISCOs) to perform better; for the generation companies
(GENCOs) to perform better and carrying out our own responsibility
which is transmission.
“It is an ongoing undertaking, and as I said, you must measure
what we have done from where we started.
“On May 29, 2015, the power from the grid was 2,690MW and we
have kept it now relatively stable at about 4,000Mw. With that,
it’s going to be the minimum except for occasions when we have
mechanical and electrical outages and we fix them,” he
explained.
On his face-off with the National Assembly, Fashola said it was
wrong to view the development as a feud, describing it as a mere
disagreement between himself and the lawmakers over project
priorities in the 2017 budget.
“There is no problem between me as an individual and the
National Assembly. And let me make that very clear, many of the
senators and honourable members are my personal friends, and so you
don’t fight your friends.
“But we have a disagreement. And the context of that
disagreement is as follows: You will remember when President
Muhammadu Buhari launched the Economic Recovery and Growth Plan, he
had enormous support from the leadership of the National
Assembly.
“So it means that we all agreed that there is a problem. Then
there is also a disagreement which I don’t think should make us
disagreeable about the best way to implement that plan and I think
that is all there is to it,” he said.
$483m for Debt Service
Meanwhile, the Debt Management Office (DMO) has said it plans to
use $483.4 million to service the nation’s foreign debt over a
10-year period and make repayments starting from next year as its
dollar debts begin to mature.
The DMO, in its annual report, projected debt service payments
to amount to a total of $4.47 billion to be made in 2018, 2021 and
2023.
Nigeria issued a debut Eurobond in 2011 with a follow up tranche
in 2013. Between February and March the country also issued $1.5
billion due in 2032.
The DMO report said Nigeria’s debut $500 million bond will mature
in 2021, while a $1 billion issue will be due next year.
Thisday
Read more https://nairalaw.com/nigeria-cant-borrow-anymore-warns-adeosun/