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Nigeria’s N19tn Debt Portends Danger for Economy – Experts

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  • Nigeria’s N19tn Debt Portends Danger for Economy

Economic experts have cautioned the Federal Government against further borrowing, saying the country’s debt profile of N19tn portends danger for the economy.

They said the country’s debt, which has been increasing in the last few years, was becoming unsustainable as it might be difficult to service it due to the revenue challenges facing the country.

The experts spoke in separate interviews with our correspondent on Friday.

They advised that rather than continue to rely on borrowing to finance its activities, the Federal Government should adopt other sources of funding the infrastructural needs of the country.

These, according to them, include concession, privatisation and public-private partnership arrangements.

Those who spoke on the subject were the President, Institute of Fiscal Studies of Nigeria, Mr. Godwin Ighedosa; a former Acting Managing Director, Unity Bank of Nigeria Plc, Mr. Rislanudeen Muhammed; and Director-General, Abuja Chamber of Commerce and Industry, Mr. Chijioke Ekechukwu.

Ekechukwu said, “It is expected that the debt profile of the country will rise considering the fact that we have a deficit budget and even the deficit side of the budget was not met in the last budget year.

“With the recession of last year, government will need to continue borrowing to meet the increased size of the deficit. Of course, the borrowing portends danger for the economy because our debt profile is rising and we do not know when we are going to scale it down.

“Since we are borrowing to fund the infrastructure deficit of the country, with our rising oil prices and stability in the Niger Delta, we may be out of the woods.”

Muhammed said Nigerians needed to be worried about the country’s debt burden rising at a faster rate than revenue generation.

He stated that if something urgent was not done to shore up revenue, it would be difficult for the government to meet its debt servicing obligation.

He said, “The debt profile is scaring and worrying. It’s not a bad thing to borrow but it is good to be assured of the sustainability of the borrowing. If you go on a borrowing spree, then it will be difficult to service this debt when you don’t have the capacity to pay.

“We are not earning as much as we should, and there is need for the government to focus on bringing in investors into these sectors that funds are being borrowed to finance. We can use the PPP model and allow people to bring their money, while the government provides the conducive atmosphere like tax incentives and others.”

Ighedosa noted that while it was not bad to borrow, there was a need for a reduction in government expenditure.

He said, “We have a high fiscal deficit, which can only be funded through borrowing.

“When you borrow for investment, it improves the position on your balance sheet; and when you borrow for consumption, it can cause problems for the economy as it will affect the level of confidence in the economy from investors, because they will assume we can’t manage our economy.

“We already have a debt overhang, and as it is, we are building that up and so there is a need to reduce the rate of borrowing.”

The Director-General, Budget Office of the Federation, Mr. Ben Akabueze, however, said that the country’s debt profile was sustainable.

He maintained that the country’ debt profile was still within the globally accepted threshold, and argued that rather than worry about the level of borrowing, the priority should be on how to shore up revenue that would enable government finance its programmes.

Akabueze stated that the current level of revenue generation in the country was too small to fund an economy the size of Nigeria, noting the country had one of the lowest tax to Gross Domestic Product ratio in the world.

Akabueze stated, “As regard borrowing and whether our debt is sustainable, the answer is yes. We have to know where the problems is; it is with our revenues.

“Our revenues are way too low for the size and potential of this economy, and that is why we have the lowest tax to GDP ratio in the whole continent.”

He added, “We are right there at the bottom globally simply because people are not paying taxes and we also have to ensure that even what people pay does not leak and it is properly accounted for.

“That’s what we need to deal with; if we pay the revenues and the denominator grows, then the resultant ratio grows; but if we start tackling tax to GDP ratio and we don’t go through a proper diagnosis, we will end up in the wrong direction.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Economy

Onyeama: Qatar To Invest $5bn In Nigeria’s Economy

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The oil-rich state of Qatar is to invest a total of $5 billion in Nigeria’s economy, the Foreign Affairs Minister, Godfrey Onyeama, has disclosed.

Onyeama, who spoke Sunday at a send forth dinner in honour of Nigeria’s Ambassador-designate to the State of Qatar, who is also the outgoing Director of Protocol (DOP) at the State House, Ambassador Yakubu Ahmed, also stated that recent career ambassadorial appointments made by the gederal government was based on merit, experience and professionalism.

The minister further said there had been discussions with Qatar on partnership with Nigeria’s Sovereign Wealth Fund (SWF), for significant investments in the region of $5 billion in the Nigerian economy.

According to him, ‘‘Qatar is a weighty and strategic country and very strategic in that part of the world and we are putting our best feet forward to advance the interest of our country economically and in other areas.”

He recalled that President Muhammadu Buhari had visited the State of Qatar in 2016 and the Emir of Qatar, Tamim Bin Hammad Al-Thani, reciprocated with a State visit in 2019.

Onyeama also explained that only trusted hands with a track record of diligence, experience and professionalism in the Foreign Service were recently appointed career ambassadors by the federal government.

The minister said the appointment of Ahmed and other career ambassadors were predicated on posting dedicated and keen Foreign Service practitioners to serve as image makers of the country.

He said: ‘‘Ambassador Yakubu Ahmed is a dedicated professional with a penchant for rigour and detail. He is very capable and one of the best in the Ministry of Foreign Affairs. He is personable, affable, extremely friendly, dispassionate and objective.

‘‘He is going to head a very important mission, a very important country, reckoned to be one of the richest countries in the world, per capita, and there’s a lot we will be doing with the State of Qatar.”

Also speaking, the Deputy Chief of Staff, Adeola Rahman Ipaye, described the honoree as a ‘‘perfect gentleman, very even-natured and always well turned out’’.

Ipaye said he had no doubt that the newly appointed ambassador would serve the country well in Qatar, adding that: ‘‘We are further encouraged that when he completes this assignment, he would return to serve Nigeria in a higher capacity.’’

In his remarks, the Permanent Secretary, State House, Tijjani Umar, while congratulating the outgoing DOP on his appointment, lauded Ahmed for excellent service to the State House and the nation.

‘‘He served this institution and the nation with the deepest sense of responsibility and it is very important that we establish a tradition where the system appreciates those who have served it well and those who will continue to serve it well,’’ he said.

Umar urged the new envoy to keep very fond memories of his time at the Presidential Villa, assuring him of the prayers and goodwill of all the staff.

Responding, Ahmed thanked President Buhari for the great honour and privilege of making him his principal representative in Doha, Qatar.

The Ambassador-designate pledged to deplore his energy and skill to the promotion of the existing cordial relationship between Nigeria and Qatar, particularly in the areas of economic, political, cultural and consular affairs as well as other key areas.

Ahmed, who joined Nigeria’s Foreign Service in 1993, said during his years in public service he had learnt that ‘‘patriotism, selfless service, diligence, determination and perseverance will always result in the achievement of the desired objective’’.

According to him, these virtues would be his ‘‘watchword’’ in the pursuit of Nigeria’s foreign policy objectives and the attainment of national interests.

The Ambassador-designate singled out for appreciation the Chief of Staff to the President, Prof. Ibrahim Gambari, and the state Chief of Protocol, Ambassador Lawal Kazaure, saying he had learnt a lot working under their mentorship.

He expressed gratitude to the Minister of Foreign Affairs and the Permanent Secretary, State House for giving him the opportunity of a memorable work experience in the State House.

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Economy

France, Nigeria to Build New Partnership

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France is currently aiming at building a new partnership with Nigeria, with the dispatching of its Minister in charge of Foreign Trade and Attractiveness, Franck Riester, to Nigeria.

Riester, who was expected at the time of filing this report on Monday, is scheduled to visit Nigeria from 12-14 April, 2021.

A statement from the French Embassy in Nigeria said: “Franck Riester is visiting Nigeria from 12 to 14 April, a visit that follows up on the priorities set by French President Emmanuel Macron during his official visit to Nigeria in July 2018 and his desire to build a new partnership between Africa and France.

“As the largest economy in Africa and the economic engine of West Africa, Nigeria is indeed a major partner for France, the first in sub-Saharan Africa with bilateral trade amounting to a total of 4.5 billion USD in 2019 (2.3 billion USD in 2020, due to the Covid-19 pandemic).”

It disclosed that the minister will have several official meetings in Abuja and Lagos, in order to underline the importance of the bilateral economic relationship and to prepare the summit on the financing of African economies in Paris on 18 May.

It revealed that the objective of the mission is also to further strengthen the links between the French and Nigerian private sectors, and “in this regard, the minister will have in-depth discussions with the main Nigerian economic actors to strengthen bilateral cooperation and investments, both in Nigeria and in France, particularly in the logistics sector”.

It said while in the country, the minister would meet with young Nigerian entrepreneurs in the cultural and creative industries sector, to discuss the major role of their country in African creativity and the development of the African entrepreneurial ecosystem, with the support of France.

It further said: “The minister will also open the ‘Choose Africa’ conference, a €3.5 billion initiative by President Emmanuel Macron dedicated to supporting the development of start-ups and SMEs in Africa to enable the continent to benefit fully from the opportunities of the digital revolution.”

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Economy

COVID-19: USAID to Provide $3m Grant, Technical Assistance to Combat Food Insecurity in Nigeria

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The United States Agency for International Development (USAID) is providing financial grant and technical assistance worth $3 million to combat food insecurity in Nigeria compounded by COVID-19 pandemic.

A statement by the agency on Monday said: “On April 12, 2021, the U.S. Agency for International Development (USAID) in Nigeria launched a COVID-19 Food Security Challenge that will provide $3 million in grant funding and technical assistance to youth-led and mid-stage companies working in food value chains in Nigeria.”

The statement lamented that Nigeria is experiencing food insecurity compounded by the COVID-19 global pandemic and its effects on the food value chain in the country.

It stated that the pandemic has disrupted the already fragile agricultural value chains, especially smallholder farmers’ ability to produce, process and distribute food, which has disrupted agricultural productivity and markets, and negatively impacted livelihoods, especially among vulnerable households, women and youth.

The USAID Mission Director, Anne Patterson, said: “We are launching the COVID-19 Food Security Challenge to help innovative Nigerians alleviate food insecurity.

“This assistance encourages private sector-led solutions to boost food production, processing and create market linkage along the agriculture value chain in a sustainable way across Nigeria.”

The statement revealed that in launching the challenge, USAID seeks commercially viable youth-led and mid-stage companies already working in food production, processing, and distribution, noting that successful applicants will present ideas that demonstrably help farmers and other stakeholders in the agricultural value chain increase, agricultural productivity and food security within the next six months.

According to the statement, the challenge will award 15 to 25 youth-led companies up to $75,000 each and award 10 to 15 mid-stage companies up to $150,000 each.

Winners will receive funding and technical assistance to rapidly expand their activities to mitigate the effect of COVID-19 on Nigeria’s food value chain and improve the resilience of vulnerable households to the negative impacts of the pandemic.

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