The status of Nigeria’s economic crisis continues to deteriorate with the Federal Government borrowing of N882.12bn so far to finance the 2015 budget deficit.
The amount, sourced internally, included what was budgeted for internal and external borrowing for the fiscal year.
The Permanent Secretary of the Ministry of Finance, Anastasia Daniel-Nwaobia, said this in her presentation to the House of Representatives Ad-Hoc Committee on Non-Implementation of Capital Projects in the 2015 appropriation in Abuja on Tuesday.
The national economic crisis and the attendant depreciation of the Naira, increase in interest rates and inflation, may not end soon with the figures from the National Bureau of Statistics indicating that the Gross Domestic Product earlier projected to grow at a rate of 5.5 percent (as of January 2015) now stands at 2.63 per cent as of June 2015 .
This, the Permanent Secretary, who was represented by the Director General, Budget Office of the Federation, Aliyu Yahaya Gusau, said, “is not unconnected with the global slowdown and its attendant impact.”
“The economy is not expected to outperform global growth rate of 3.3 per cent. Significant drop in oil price has led to exchange rate depreciation, pushing the dollar to N197 as of June 2015. This has led to the adoption of stringent measures in fiscal and monetary policies to ensure stability in the economy,” she explained.
On debt management, she said, “Public debt to GDP ratio as of 2013 was 10.82 per cent, and that the total amount of N882.12bn appropriated for both domestic and external borrowing has been fully raised to finance the 2015 budget accordingly.
“Debt service to revenue ratio however needs to be kept under close watch. Given that it was 19.63 percent by the end of June 2015 against the cognate arbitrary threshold of 28 per cent.
“External debt as of June 30, 2015 stood at $7.74bn and $3.42bn for states and the FCT; bringing it to the total amount of $8.31bn.”
The Debt Management Office had put the Federal Government’s total domestic debt as of December 31, 2014 at N7.9tn.
With N882.12bn borrowed from domestic sources already in 2015, the Federal Government’s total domestic debt comes up to N8.79tn.
The country’s total debt stock stood at N12.12tn as of June 30, 2015 with the domestic debt of the Federal Government accounting for N8.39tn.
Director General of DMO, Dr. Abraham Nwankwo, at a press conference in May 2013 to unfold the details of the nation’s Middle Term Debt Management Strategy approved by the Federal Executive Council, had said the domestic debt of the country was too high compared to the foreign debt component.
He said there was an urgent need to rebalance the structure of the nation’s debt because the interest rate payable on domestic debt was too high.
As of 2013, the ratio of the Federal Government’s domestic debt stood at 88 per cent while the ratio of the foreign debt stood at 12 per cent.
Nwankwo said the appropriate ratio should be 60 per cent for domestic debt and 40 per cent for foreign debt, adding that the newly-approved Medium Term Debt Management Strategy would seek to achieve this ratio.
The DMO boss said the time of high borrowing from the domestic market had served its purpose, which included developing a market structure and culture for long-term savings and investment.
“The delisting of Nigeria from the JP Morgan index watch has further heightened the fear of currency devaluation, import restriction and inflation,” Nwaobia also said.
Speaking specifically on the performance of the 2015 budget, the permanent secretary explained that N3.45tn was budgeted for 2015 out of which capital appropriation was N557bn.
She said of this amount, N194.49bn has been released as of September 15, representing 34.89 percent of total releases.
Members of the House Committee expressed dissatisfaction with the ministry’s presentation, noting that it was “sketchy and lacked essential details.”
Chairman of the committee, Aliyu Patigi, said, “My own view of the presentation is that it is very sketchy and does not give a holistic view for full understanding of what the 2015 budget implementation is all about.
“We had expected you to provide vivid insights into the regime of import duty waiver, using explanatory notes to describe how and what was done and why.
“You have not done that and we can’t say for sure that the position you presented before us is the right one because each day companies keep declaring profits running into hundreds of billions and yet they are given incentives and waiver when sectors such as the textile industry has no such consideration for revival.”
He asked officials of the ministry to ensure that the details sought were provided during the next hearing slated for Tuesday, September 22.
He further said, “On domestic debt of N8.396tn, we are interested in knowing who the Federal Government is indebted to, what necessitated this huge amount of borrowing as well as how this money so borrowed was spent. We also want to know from when to when this debt accumulated and how this amount will be liquidated in both short and long terms,” Patigi said.
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