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Tag: debt profile

  • Mounting debt profile: FG snobs IMF’s warning, seeks fresh $247.3m external loan

    The Federal Government on Wednesday finalised plans to request another fresh external loan of $247.3m despite mounting debt profile and initial warning by the International Monetary Fund (IMF) for the country’s leaders to avoid borrowing for now if possible.

    TheNewsGuru (TNG) reports that the country’s current debt stood at N24.38tn.

    The Federal Executive Council made the approval at its sitting in Abuja on Wednesday.

    Briefing State House correspondents after the meeting rose, the Minister of Finance, Mrs Zainab Ahmed, gave a breakdown of the fresh loan.

    She stated that $150m would come from the African Development Bank, to be spent specifically on rural electrification projects; $50m from Africa Grow Together Fund for other electrification projects; and $20m from French Development Agency, which would be loaned to the Lagos State Government.

    Lagos plans to use the $20m to build new roads and rehabilitate existing ones.

    Another $27.3m IADE facility was approved as part of the ‘North Core Dorsal Regional Transmission Project.’

    This will be part of the West Africa Power Pool projects with a total loan requirement of $640m.

    The minister explained that the projects were to connect Nigeria, Niger, Benin Republic, Togo, and Burkina Faso “with a high voltage 330 kilowatts transmission line, to facilitate energy trade among participant countries.”

    The minister, who gave more details on the approvals by FEC, said, “Council approved three memos for Ministry of Finance. First, it approved a $150m loan facility from AfDB and $50m loan from African Grow Together Fund to finance the Nigerian electrification project. The project is a nationwide initiative to be implemented by the rural electrification agency.

    “The project aligns with the strategy of the Federal Government on electrification of rural communities. The project has four components: First is solar hybrid mini-grid for rural economic development, the second is productive appliances equipment for up-grid communities, and the third is energising education while the fourth component is institutional capacity building.

    “The impact of the project when fully implemented, about 500,000 people will be able to have access to electricity for about 105,000 households. The maximum power that will be generated will be 76.5 megawatts installed generating capacity part of which is 68,000 megawatts of solar.

    “Eight universities will benefit from this scheme and about 20,000 small, micro, medium enterprises across different communities in the nation.

    “The second approval is the North Core Dorsal Regional Transmission Project. This is a project that is part of the pipeline for the West Africa power pool priority projects. The intention is for the creation of a regional power pool in the region of West Africa. The pool project aims to connect Nigeria, Niger, Benin Republic, Togo, and Burkina Faso with a high voltage 330 kilowatts transmission line, to facilitate energy trade among participants.

    “The project is in the total sum of $640m, out of which each of the four countries involved has a component. Nigeria has the smallest component in this pact, which is a total loan of $27.3 m IADE facility, a concessionary loan. This is a loan that the four countries are taking together; the other three countries have concluded theirs. So, this is one of the final stages for Nigeria to conclude its process.”

  • States’ debt profile increase to N3.89trn in 2016 – BudgiT

    A civic technology organization, BudgiT Nigeria has expressed concern over the rising debt (domestic and foreign) profile of the 36 states of the federation.

    According to BudiT, the debt profiles which was N3.03 trillion in 2015 increased to N3.89 trillion in 2016.

    This was revealed on Thursday in Abuja by the Lead Partner of BudgIT, Oluseun Onigbinde at the launch of the organization’s state of state report

    According to him, Lagos state has 24.2 per cent of the total debt stock of state governments with N500.8 billion debt profile in 2015 to N734.7 billion in 2016.

    Onigbinde expressed worries over the increasing debt profile of states and their inabilities to generate revenues.

    He said the high debt profile had made it difficult for most states to meet their recurrent expenditure obligations.

    In his words: “Total debt profile of states in 2015 and 2016 was N3.03tn and N3.89tn respectively. Lagos state’s total debt stock rose from the 2014 level of N500.8bn to N734.7bn in 2016 – accounting for 24.2 per cent of the total debt stock of the state governments.

    “Lagos debt is becoming really worrisome for us. Lagos debt is also entering some uncharted territory which needs to be watched carefully.

    “Many state governments are confronted by rapidly rising budget deficits as they struggle to pay salaries and meet contractual obligations and overheads due to a dip in oil price from its peak price of about $140 per barrel to about $56 per barrel.”

    He urged state governments to expand their internally generated revenue while cutting down on their debt accumulation.

    Onigbinde also called on the state governments to cut their “unreasonable” overheads bill while freeing up more spending for social infrastructure.

    He said: “Over the last few months, many state governments have been devising policy changes with strong focus on improving internally generated revenue and reining in expenditure.

    “State governments need to tremendously embrace a high level of transparency and accountability, develop workable economic plans, take haircuts-especially on overheads-expand their internally generated revenue ( IGR ) base, and cut down on debt accumulation without a concrete repayment plan.

    “The states need to look beyond the rhetorics and commit to a reduction in its operating costs, including significantly slashing its unreasonable overheads bill while freeing up more spending for social infrastructure.

    “States will need to link future borrowing to sustainable projects, which can pay back the capital cost of its current loans and improve the overall income profile of the state.

    “Improve spending is also critical for value-added tax revenue, manufacturing, trade, logic and tourism abound across states but it seems states lack the rigor and foresight to explore them.

    Earlier in her remarks, Executive Secretary, Nigeria Investment Promotion Council, Yewande Sadiku, said all states are competing for investment from the Federal Government, forgetting that what the government gets was insufficient for Nigeria’s economic development.

    According to her, if state governments consider investing in their states the rate of debt would drop.

    She said: “Our work at the federal level will not achieve anything if we don’t work along with the state governments

    “It is certain that if states governments work more on investing in their states, the rates of debts will drop.”

    She urged Nigerians to invest more in their country instead of going out to invest, noting that Nigeria’s economic potential would be converted to its economic wealth.

  • Mounting debt profile: DMO bars states from further borrowing

    Mounting debt profile: DMO bars states from further borrowing

    …urges states to be more proactive in generating funds internally

    The old practice where States had easy access to borrowing from either foreign or local borrowing windows has now been halted.

    The new Director –General of the Debt Management Office (DMO), Ms. Patience Oniha made this disclosure yesterday in Abuja when the Edo State Governor, Mr. Godwin Obaseki visited to congratulate her on her recent appointment as the new Director General of the DMO.

    Oniha said the decision was taken because there was no longer huge allocation to states at the end of monthly Federation Accounts Allocation Committee (FAAC) meetings “from where borrowed funds could be deducted, hence continuous exposure to new lines of borrowings may no longer be sustainable.”

    As a result, the component units of the Nigerian Federation have been advised to henceforth imbibe frugality and a new strategic way of fiscal plans and implementation

    Oniha lamented that it was unfortunate that oil mineral resources has continued to be the dominant contributor to the Federation Account.

    She however advising that States should “deploy new strategic thinking on how to address the financing of their already bloated debt stocks as well as how to generate funds to execute their plans aside from borrowings.”

    According to Oniha, “previously, we could rely on funds from FAAC and in addition to that we could borrow both at the Federal and at the State levels because there wasn’t a challenge. But I think the times have changed. Revenues are under severe pressures, we are still dependent on oil revenues, non-oil revenues are picking up, but that is still a journey.”

    She noted that what this “means now, and in future, is that we need to do things so much differently, we must be more strategic in the management of public finance so the language I always use in my previous work where I was at the Efficiency Unit is that it’s no longer business as usual.”

    Oniha warned that “we can’t collect money from FAAC, borrow, continue and wait until the next month. So at various levels, we need to be more strategic and more creative in the things that we do.”

    At the Federal level Oniha said the federal government has “initiated several measures to increase non-oil revenue and control cost.”

    The DMO boss stated that “the law recognizes the States for being responsible for fiscal laws relating to the States, but we decided to partner with them in the belief that Nigeria is one project, hence we should not be looking at the center, we should be looking at the various tiers of governments.”

    As a result of the federal government’s big brother role, Oniha said “what we did in that regards was to work with the various tiers of the states to have enabling laws , create their own debt managements and then help them through training and other activities to create their own domestic debt data.”

    Regarding the states’ compliance to generating debt data, the DMO boss said “we have major challenges. At the DMO, we have done a lot with the states in terms of assisting in developing their debt data, passing debt laws leading to the establishment of Debt bureaux and so on. As we speak, we have a good understanding of the debt portfolios at the sub- national levels.”

     

  • Expert dispels fear over Nigeria’s N19trn debt profile

    Expert dispels fear over Nigeria’s N19trn debt profile

    Prof. Uche Uwaleke, says there was no need to be apprehensive over the nation’s N19.16 trillion debt profile, if the loans were utilised for the development of capital projects.

    Uwaleke, a Professor of Banking and Finance, Nasarawa State University, Keffi, said this in an interview with the News Agency of Nigeria (NAN) in Abuja on Wednesday.

    The Debt Management Office (DMO), on Monday released the overall debt profile of the country with an increase from the N17.36 trillion in December 2016 to N19.16 trillion in March 31 2017.

    Economic analysts had repeatedly expressed concerns over Nigerian’s unmanageable debt profile.

    The World Bank had also stated that almost a quarter of the country’s GDP will be used to service debts, thus painting a bleak future for the country.

    To this end, Uwaleke, told NAN that the nation’s high debt rate should not be a total concern, If the loans had been utilised in line with section 41 of the Fiscal Responsibility Act 2007.

    “So, the concern with the country’s current debt profile should be more with what the loans have been used for“.

    He said that the improper application of the loans might result into a bleak future for the coming generations.

    “But where loan proceeds have been largely used to finance consumption or non-viable projects, then, the government has only succeeded in mortgaging future generations,“ he said.

    He however said, it was important for a country like Nigeria with huge infrastructure deficit to borrow, if it must develop fast.

    Uwaleke said that in the event of not borrowing, other alternative was to increase taxes, sale of national assets, printing of money among other sources of raising fund.

    He, however, said that an economy experiencing high inflation, huge unemployment and downturn in economic activities cannot afford to adopt any of the aforementioned alternatives to borrowing.

    Uwaleke said it was important for governments at all levels to effectively channel the loans obtained to improve the productive sectors of the economy.