Home Economy Budget Office raises alarm over Nigeria’s debt profile as Buhari seeks Senate approval of fresh $800m loan,

Budget Office raises alarm over Nigeria’s debt profile as Buhari seeks Senate approval of fresh $800m loan,

by Business News Report

Muhammadu Buhari has written the Senate, asking it to approve a new loan request of $800million. But the Director- General, Debt Office of the Federation, Ben Akabueze raised alarm over the nation’s high debt profile, saying the trend was becoming unsustainable. Speaking in Abuja at the International Conference Centre, ICC  on the topic, “Budget Process and Money Bills at the ongoing Induction Programme for Members- elect  of the National Assembly organised by the National Assembly and National Institute for Legislative and Democratic Studies, NILDS, Akabueze said that it was unfortunate that the Federal government of Nigeria does not have what he termed, an organic  budget law. The DG said, “Once a country’s debt service ratio exceed 30 per cent, that country is in trouble and we are pushing towards 100 per cent and that tells you how much trouble we are in. We have limited space to borrow. When you take how much you can generate in terms of revenue and what you can reasonably borrow, that establishes the size of the budget. The next thing would be to pay attention to government priority regarding what project gets what.

“The budget is not a shopping list. In the last the budget only contained expenditure, but we have changed that at the Induction of new lawmakers”. In a letter read by the President of the Senate, Senator Ahmad Lawan in Abuja, President Buhari said that the loan would be utilised to scale up the National Social Safety Net Programme. He said  that the loan would be sourced from the World Bank. The letter from President Buhari was dated 2nd May, 2023, received and acknowledged by Senate on 10th May, 2023. The letter read in full, “It is with pleasure that I forward the above subject to you. Please note that the Federal Executive Council (F EC) approved an additional loan facility to the tune of $800  million to be secured from the World Bank, for the National Social Safety Net Programme  (NASSP) and the need to request for your consideration and approval to ensure early implementation (Copy of FEC Extract attached).  The Senate, may wish to note that the Programme is intended to expand coverage of shock responsive Safety Net support among the poor and vulnerable Nigerians. This will assist them in coping with the costs of meeting basic needs. 

“You may wish to note that, the Federal Government of Nigeria under the conditional cash transfer window of the programme will transfer the sum of N5,000 per month to 10.2 million poor and low-income household for a period of six months with a multiplier effect on about 60 million individuals. In order to guarantee the credibility of the process, digital transfers will be made directly to beneficiaries’ account and mobile wallets. The NASSP being a social intervention programme will stimulate activities in the informal sector, improve nutrition, health, education and human capital development of beneficiary households.  Given the above, I wish to invite the Senate to kindly approve an additional loan facility to the tune of USD8OO million to be secured from the World Bank for the National Social Safety Net Programme (NASSP). While hoping that these submissions will receive expeditious consideration by the Senate, please accept, Distinguished Senate President, the assurance of my highest regards.” Speaking further on the nation’s debt profile,  Akabueze said, “We are not even an oil rich economy. To classify oil rich economies, you talk of countries like Saudi Arabia where they are 34 million of them and pump 10 million barrels of crude per day or Kuwait where there are 3 million of them and pump 3 million barrel per day. There are over 200 million of us and we are currently pumping about 1.9million barrel per day.So, we are not a rich economy and must resist the temptation we are an oil rich economy. Let me make it clear that we are potentially rich country, but we are not.

“I often hear people say that Nigeria is not short of  development plan, but that the problem is implementation and I disagree because a plan that cannot speak to implementation is not a good plan. Development plan in Nigeria dates back to the early 90s, but you can argue that it has not been successful in the desirable manner. Annual budget are essentially back sizes of development plans. They contain achievable objectives within a year. A budget that seats outside the development plan is not a good budget. For us to be able to fix the infrastructural needs of the country, we need to be spending about 100 billion dollars annually as a country, including private spending on infrastructure. The aggregate budget of the Federal government is only about 30 billion dollars and the aggregate of the states and FCT budget don’t even add up to the federal budget. This means that even if we spend every thing, we will still be left with a huge infrastructural deficit. Each country has to determine its budget system that works for it. Budget is multi dimensional in coverage. One, it is political because it allocate scarce resources of the country among multiple competing and sometimes, competing interest. It is also an economic document  because it help as the primary fiscal instrument for stimulating economic growth, ensuring employment and maintaining economic stability. It is an accounting document and provides a ceiling and it is legally binding for government to operate. It is also a moral.document. You can know what a country cherishes by looking at its budget document.”

The DG who lamented that Nigeria as a country does not have an organic budget law, said, “The Federal government of Nigeria does not have an organic budget law. It is really unfortunate that we don’t have an organic budget law. Hopefully, there is one in the work in the 9th Assembly and may be passed before the Assembly winds up.  I don’t know any serious country in the world that does not have an organic budget law.” He further said that “You may have heard that we have one of the lowest GDP to debt ratio in the world. While the size of the FG budget for 2023 created some excitement, the aggregate budget of all government in the country amount to about 30 trillion Naira. That is less than 15 percent in terms of ration to GDP. Even on the African continent, the ration of spending is about 20 percent. South Africa is about 30 percent, Morocco is about 40 percent and at 15 percent, that is too small for our needs. That is why there is a fierce competition for the limited resources. That can determine how much we can relatively borrow. We now have very limited borrowing space, not because out debt to GDP is high, but because our revenue is too small to sustain the size of our debt. That explains our high debt service ratio.”

Akabueze said that the country has an unimplementable budget. He said “members have to balance national and regional interest. As it is right now, we have practically un implementable budget. Every year, we have over 20,000 abandoned projects because they are not properly monitored. That is why the number of abandoned projects kept increasing every year.

 “That is why I talked about balancing national, regional and constituency interest, today, our national health care policy requires that if we have 10,000 functional primary health care centres, 70 percent of our healthcare needs would have been met. But today, we have nearly 40,000 physical structures called primary health care centres. A large number of these comes through constituency projects. In one constituency, you may have one primary health care centre built by a member and instead of equipping it and making it functional, the other member coming in built another structure and the community end up having two structures that are useless to them. So, we need to streamline these things in the national interest. Today, we are scored low in the budget credibility index and this is measured. What is contained in the budget and what is actually implemented.”

Related Posts