Nigeria’s debt is expected to reach N77 trillion, while loan servicing will cost N5.2 trillion

If the National Assembly agrees to President Muhammadu Buhari’s request to restructure the Ways and Means Appropriations, Nigeria’s federal debt might reach N77 trillion.

The Central Bank of Nigeria uses a borrowing instrument called the Three Ways and Means Advances to pay for budgetary gaps in the government.

The Federal Government would spend N5.24 trillion on debt payments in 2022.

Dr. Zainab Ahmed and Patience Oniha, the Director-General of the Debt Management Office, made this announcement on Wednesday during the public presentation of the 2023 budget, which the Minister of Finance, Budget, and National Planning hosted.

But she added that without N5 trillion in additional borrowing and N2 trillion in promissory notes, the debt would be N70 trillion.

“You don’t expect the DMO’s figure for the country’s debt stock as of September to be considerably different from December,” Oniha added. Second, the ways and means are the subject of numerous discussions. In addition to the substantial cost savings in debt servicing that securitization would provide,

“There is some openness in that it is now represented in the stock of public debt.” Once it has been approved by the National Assembly, that amount will be added to the public debt. The public debt will significantly rise to N77tn.

She says that income is getting more and more important, even though the debt is getting bigger because people are borrowing more.

Like DMO usually says, discussing debt without discussing revenue is impossible. “The two must collaborate,” she continued.

As of September of last year, the country’s total debt was N44,06 trillion. This is because the FG has been borrowing so much under the current government, which has made the financial situation worse.

Experts and major players in the economy had criticised the DMO and the government for the country’s rising debt levels.

In the meantime, the National Assembly has received a request from President Major General Muhammadu Buhari (ret.) for approval of a restructure of the Ways and Means Appropriations worth N23.7 trillion.

During the session on December 21, the President of the Senate, Ahmad Lawan, and the Speaker of the House, Femi Gbajabiamila, both told the members of their chambers about Buhari’s request.

“The Central Bank of Nigeria’s Ways and Means Advances to the Federal Government have been a funding option for the Federal Government to cater for short-term or emergency finance to fund delayed government expected cash receipt of fiscal deficit,” the President wrote in his request titled “Restructuring of Ways and Means Advances.”

“As of December 19, 2022, the Ways and Means balances are N23,719,703,774,306.90. I have given my approval for the securitization of the Ways and Means balances under the following conditions: $23.7 trillion over 40 years; a three-year moratorium on principal payments; and a 9% pricing interest rate. Your cooperation and consent are required in order for the plan to go into effect.

The Senate, on the other hand, said no to the President’s request to change how the N23.7 trillion Ways and Means advances were used.

FG will pay N5.24 trillion in debt service in 2022.

The Federal Government spent N5.24 trillion on debt servicing alone between January and November 2022, according to the finance minister, out of its total N12.87 trillion in spending during that time.

She asserted that interest on ways and means consumed N1.64 trillion, N1.08 trillion, and N2.51 trillion respectively in domestic debt, foreign debt, and domestic debt.

In its December 2022 edition of the Nigeria Development Update, the World Bank predicted that despite the restructuring plan, interest payments on the federal government’s borrowing from the CBN would consume nearly 62% of government revenue by 2027.

“Despite the reorganisation of the Ways and Means stock in 2023, interest payments are expected to rise by 2.4 percentage points of GDP between 2018 and 2027, with interest payments accounting for nearly 62 percent of revenues by 2027,” the report stated in part.

Due to this, the government borrowed more money from the CBN in October 2022 than it had in December 2021, for a total of N23.77 trillion.

According to the Debt Management Office, the country’s total public debt stock, which stood at N44.06 trillion in the third quarter of 2022, does not include the N23.77 trillion that the FG owes the apex bank.

Only the debts of the Federal Government, the 36 state governments, and the Federal Capital Territory are included in the public debt stock.

The Nigerian government was warned by the World Bank against funding deficits by borrowing from the CBN through the Ways and Means Advances in November last year, claiming that doing so would put fiscal pressure on the nation’s spending.

The Federal Government has been borrowing from the CBN to cover budget deficits in spite of recommendations from experts and organisations.

The central bank’s lending to the government, according to Mr. Johnson Chukwu, managing director and chief executive officer of Cowry Asset Management Limited, is pressuring the currency rate and inflation rate by introducing “liquidity with no productivity tied to it” into the system.

A professor of development macroeconomics at the University of Lagos, Prof. Olufemi Saibu, said that the government had taken on too much debt.

“I believe we are overborrowing,” he remarked. We keep using worldwide standards as our benchmarks, which results in laziness in our revenue generation.

Saibu told the government to cut back on its huge spending and put the money into more productive parts of the economy.

“The government needs to find a manner of decreasing its spending,” he said, “given our existing massive infrastructure debt and the low productivity in the local sector.” We must refocus government spending on sectors that are productive and cut back on consumer borrowing.

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In 2023, the FG plans to invest N3.36 trillion in gasoline subsidies.

The Nigerian 2023 budget, according to the finance minister, has N3.36 trillion set aside for fuel subsidies.

During her presentation, Ahmed talked about the 18-month extension that was announced at the beginning of 2022. She said that gasoline subsidy payments would continue until the middle of 2023.

This means that subsidy payments for gasoline will end in June 2023, after a new government is put in place as a result of the general elections in February 2023.

She stated, “The PMS subsidy reform scenario is the basis for the expected fiscal outcome in the 2023 budget.” Based on the 18-month extension announced early in 2022, it is projected in the framework for the 2023 budget that the gasoline subsidy will continue through mid-2023.

Only N3.36 trillion has been allocated in this regard for the PMS subsidy. The performance management system for government-owned enterprises will be more strictly enforced, which will result in a considerable increase in operating surplus and dividend remittances in 2023.

Regarding federal government revenue, the minister stated that as of November 2022, $6.50 trillion had been earned.

This, she continued, represents nearly 87% of the prorated goal of N7.48 trillion.

She estimated that the Federal Government’s share of oil income was N586.71 billion, marking a performance of 35.7%, while non-oil tax collections were N2.09 trillion, representing a performance of 123.3%.

According to her, the companies collected N1.08 trillion in income tax and N295.2 billion in value-added tax, or 158.6 percent and 124.3%, respectively, of their respective goals.

Ahmed also said that the N15.42 billion that Customs collected, which was made up of import duties, excise taxes, fees, and special levies, was more than the goal.

She said that as of November 30, N12.87tn had been spent out of the 2022 budget.

Of this sum, N5.24 trillion was used for debt service, N3.94 trillion for personnel costs, including pensions and statutory transfers, and N8.1 trillion went toward overhead and service-wide operating expenses.

She added that oil was no longer a major factor in the economy.

The term “mono-economy” no longer applies to us. She claimed that the Nigerian economy was now more diversified.

Ahmed ascribed the modification to the rise in non-oil sector revenue.

She said, “While the mining, oil, and gas industries are driving down the economy, the non-oil sector is currently producing more revenue for the country.” Agriculture and financial services are the two main industries that contribute to the nation’s revenue, besides oil.

The president would sign the Finance Bill 2022, according to the finance minister, “in a couple of days.”

She blamed the delay on the president’s desire that the bill be examined by legal professionals.

lacking a stamp

The finance minister also said that the National Assembly and security officials are looking into the claim of missing stamp duty money.

According to Ahmed, if the claim is confirmed and the money is recovered, it will help the government pay for its significant budget deficit.

Muhammed Kazaure, a member of the House of Representatives, said that N89.1 trillion in stamp duty money had been stolen, and he said that CBN Governor Godwin Emefiele was to blame.

According to the minister, the national economy is being held back by both the mining and oil industries. She also said that the expensive system of fuel subsidies was a major drag on the economy.

The minister said that in 2022, the oil sector’s contribution to the economy was only 22%, which she cited as evidence that “the economy is truly, truly diversified.”

Ahmed says that the economy has grown a lot because of the non-oil sector, which is driven by agriculture and communications.

Ahmed also said that the government spent a total of N18.14 trillion during the implementation of the 2022 budget, which included the supplementary budget.

lost N6tn

The finance minister also said that the FG will take a few industries off the list of pioneers who can get tax breaks. She said that this might not be a popular decision and that the general public might not like it.

She did, however, add that new industries would be added to the list and given tax breaks to help them survive.

She claimed that a total of N6 trillion had been forgone in tax waivers between 2021 and the present under the tax waiver programme, and she insisted that gradually eliminating the tax exemptions would boost the government’s revenue.

According to a recent article in The Punch, between 2019 and 2021, the Federal Government awarded large businesses tax relief and concessions worth N16.76 trillion.

By the end of 2021, 46 businesses had benefited from various tax advantages and duty waiver programmes, while 186 businesses’ requests were still being processed.

The PUNCH also noted that as the FG plans to phase out tax waivers beginning in 2022, at least 172 companies may not benefit from around N2.4 trillion in tax waivers under the Pioneer Status Incentive and other tax exemptions.