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FG Spent N4.3tn to Service Debt in Three years — Budget Office

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  • FG Spent N4.3tn to Service Debt in Three years — Budget Office

The Federal Government spent a total of N4.3tn to service the country’s debt obligations to local and foreign debtors between January 2015 and September 2017, figures obtained from the Budget Office on Friday showed.

The figures are computed from the quarterly budget implementation report prepared by the Budget Office.

An analysis of the report by our correspondent showed that the sum of N1.06tn was used to service debt in 2015.

The amount rose to N1.31tn in 2016 before hitting N1.54tn in 2017.

A breakdown of the N1.06tn debt service amount for 2015 showed that the sum of N302.1bn was spent in the first quarter made up of N287.5bn for domestic debt and N14.51bn for foreign debt.

In the second quarter of 2015, the report said out of the N239.7bn debt service figure, N218.49bn was spent on domestic debt while N21.2bn went for foreign debt service.

For the 2015 third and fourth quarters, the budget implementation report said that the sums of N305.33bn and N214.24bn were spent, respectively.

Giving a breakdown for 2016, the report said N364.81bn was spent in the first quarter; N233.82bn in the second quarter; while the third and fourth quarters had N468.88bn and N245.95bn, respectively.

For 2017, the report said N624.15bn was used to service the nation’s debt in the first quarter while the second and the third quarters had N303.59bn and N613.21bn, respectively.

Further breakdown of the N1.54tn debt service figure for 2017 showed that domestic debt servicing with a total of N1.48tn accounted for a huge chunk of the debt service obligations. The N1.48tn is about 96.1 per cent of the entire amount spent by the nation on servicing its debt.

Foreign debt servicing obligation followed with the sum of N55.8bn or 3.9 per cent of the entire debt service amount.

The report read in part, “Total debt service in the third quarter of 2017 stood at N613.21bn, signifying a N197.24bn or 47.42 per cent increase above the N415.97bn projected for the quarter.

“A quarterly projection of N372bn was made for domestic debt services but the sum of N613.21bn was actually spent in the third quarter of 2017. This portrayed an increase of N241.21bn or 64.84 per cent above the quarterly estimate.

“The sum of N43.97bn was proposed for the servicing of external debt in the quarter under review. External debt service payment was however not made during the review period.”

Finance and economic experts who spoke on the development on Friday cautioned the Federal Government against further borrowing.

They stated that the country’s debt profile of N19tn was becoming unsustainable as it might be difficult to service it owing to revenue challenges facing the country.

They advised that rather than relying on borrowing to finance its activities, the Federal Government should adopt other sources of funding the infrastructure needs of the country such as concession, privatisation and Public Private Partnership arrangement.

Those that spoke to our correspondent in separate telephone interviews are the President, Institute of Fiscal Studies of Nigeria, Mr. Godwin Ighedosa; and the Director-General, Abuja Chamber of Commerce and Industry, Mr. Chijioke Ekechukwu.

Ekechukwu said, “It is expected that the debt profile of the country would 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 would 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.

In his comment, Ighedosa said 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.”

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.

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Economy

Unemployment To Push More Nigerians Into Poverty – NESG

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Nigerian Economic Summit Group- Investors King

On Friday, The Nigerian Economic Summit Group said that many more Nigerians are expected to fall into the poverty trap amid rising unemployment in the country.

The NESG, a private sector-led think-tank, noted in its economic report for the first quarter of 2021 that the country’s economic growth in the period under review was relatively weak.

It said, “Nigeria’s economic growth trajectory is better described as jobless and less inclusive even in the heydays of high growth regime in the 2000s.

“While the Nigerian economy recovered from the recession in Q4 of 2020, the unemployment rate spiked to its highest level ever at 33.3 percent in the same quarter.

“With the COVID-19 crisis heightening the rate of joblessness, many Nigerians are expected to fall into the poverty trap, going forward.”

The group noted that the World Bank estimated an increase in the number of poor Nigerians to 90 million in 2020 from 83 million in 2019.

“This corresponds to a rise in headcount poverty ratio to 44.1 percent in 2020 from 40.1 percent in 2019. The rising levels of unemployment and poverty are reflected in the persistent insecurity and social vices, with attendant huge economic costs,” it said.

According to the report, huge dependence on proceeds from crude oil, leaving other revenue sources unexplored, indicates that Nigeria is not set to rein in debt accumulation in the short to medium term.

The NESG noted that public debt stock continued to trend upwards, with a jump from N7.6tn ($48.7bn) in 2012 to N32.9tn ($86.8bn) in 2020.

It said public debts grew by 20 percent between 2019 and 2020, adding, “This is partly due to the need for emergency funds to combat the global pandemic and alleviate its adverse economic impacts on households and businesses.”

According to the group, Nigeria needs more than an economic rebound, and there is a need to improve growth inclusiveness.

It said, “Nigeria has struggled to achieve inclusive growth for many decades. Since recovery from the 2016 recession, the economy has been on a fragile growth path until it slipped into another recession in 2020 due to the COVID-19 pandemic.

“This suggests that the country needs to attain high and sustainable economic growth to become strong and resilient.

“The relationship between economic growth and unemployment rate in Nigeria suggests that economic growth has not led to a reduction in the unemployment rate – jobless growth.”

The NESG said to reverse this recurring trend, there was an urgent need for collaborative efforts between the government and relevant stakeholders towards addressing the constraints to value chain development in high-growth and employment-elastic sectors, including manufacturing, construction, trade, education, health and professional services, with ICT and renewable energy sectors as growth enablers.

It noted that despite the re-opening of the land borders that the Nigerian government shut since October 2019, inflation reached a four-year high of 18.1 percent in April 2021.

“While we expect improved agricultural production in coming months to partially ease inflationary pressures, this positive impact could be suppressed by recurring key structural bottlenecks including insecurity in the food-producing regions, electricity tariff hike, fuel price increase and hike in transport and logistic costs,” it added.

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IMF Queries FG Strategies On Fuel Subsidy, Unemployment, Inflation

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The International Monetary Fund has raised the red flag over Nigeria’s resumption of petrol subsidy payments, describing it as injurious to the economy.

It also reiterated the importance of introducing a market-based fuel pricing mechanism and deployment of well-targeted social safety nets to cushion any adverse impact on the poor.

In a report produced after a virtual meeting with Nigerian authorities from June 1 to 8, the IMF also expressed concerns over the rising unemployment and inflation rates, even as it admitted that real Gross Domestic Product was recovering.

The IMF team, led by Jesmin Rahman, further hailed the Central Bank of Nigeria for its efforts at unifying the exchange rate by embracing needed reforms.

The Fund said: “Recent exchange rate measures are encouraging, and further reforms are needed to achieve a fully unified and market-clearing exchange rate.

“The resurfacing of fuel subsidies is concerning, particularly in the context of low revenue mobilisation.

“The Nigerian economy has started to gradually recover from the negative effects of the COVID-19 global pandemic. Following sharp output contractions in the second and third quarters, GDP growth turned positive in Q4 2020 and growth reached 0.5 percent (y/y) in Q1 2021, supported by agriculture and services sectors.

“Nevertheless, the employment level continues to fall dramatically and, together with other socio-economic indicators, is far below pre-pandemic levels. Inflation slightly decelerated in May but remained elevated at 17.9 percent, owing to high food price inflation. With the recovery in oil prices and remittance flows, the strong pressures on the balance of payments have somewhat abated, although imports are rebounding faster than exports and foreign investor appetite remains subdued resulting in continued FX shortage.

“The incipient recovery in economic activity is projected to take root and broaden among sectors, with GDP growth expected to reach 2.5 percent in 2021. Inflation is expected to remain elevated in 2021, but likely to decelerate in the second half of the year to reach about 15.5 percent, following the removal of border controls and the elimination of base effects from elevated food price levels.”

The IMF also recognised that tax revenue collections were gradually recovering but noted that with fuel subsidies resurfacing, additional spending for COVID-19 vaccines and to address security challenges, the fiscal deficit of the Consolidated Government is expected to remain elevated at 5.5 percent of GDP.

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Nigeria-South Africa Trade Hits $2.9bn

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Shipowners

The volume of trade between Nigeria and South Africa hit $2.9 billion last year with expectation of it rising further with the African Continental Free Trade Area (AfCFTA) agreement.

Nigeria’s Consul General, Malik Abdul, in a statement noted that Nigeria accounts for 64 per cent of South Africa’s trade in West Africa and is one of his country’s top three sources of crude oil.

He further added that in 2020, South Africa imported R35 billion ($2.48 billion) worth of goods, predominantly crude oil from Nigeria and exported R6 billion ($425milion) to Nigeria.

He stated: “South Africa is currently among the top 10 per cent of investors in Nigeria, globally and Nigeria is South Africa’s 10th biggest export market in Africa and thirty-second globally. Nigeria accounts for 64 per cent of South Africa’s trade with West Africa and is one of South Africa’s top three sources of crude oil.

“Also, Nigeria in 2020 was South Africa’s top import market in Africa and sixth globally, after China, Germany, USA, India and Saudi Arabia. Over the past year, South Africa imported $2.48 billion worth of goods predominantly crude oil from Nigeria and exported $425 million worth to Nigeria.”

Also, the consulate said his embassy issued a total of 10,341 passports to Nigerian citizens in South Africa between March 2020 and May 2021.

The consul general further said the Mission had 404 unclaimed passports, and advised all those whose passports were processed and pending from August 2020 to come for collection.

Abdul added that the consulate was working to clear all COVID-19 lockdown backlog of applications, urging members of the public to exercise patience while the mission was resolving the backlogs.

On the re-introduction of administrative fees and charges for lost passports, Abdul said that the step was taken to harmonise and standardise consular services following approval from the Ministry of Foreign Affairs, Abuja.

The Mission had increased the fees for lost passports from R1,500 to R2,000, and admin charges of R120 for data capturing.

“On this issue, the Mission could not unilaterally impose any charges without headquarters’ approval or consent.

“The admin fees of R120 pertains to all services rendered by the two Missions,” he said.
According to the Nigerian envoy, the decision was taken to remove disparities in all consular services, noting that visa fees have also been harmonised.

On penalty for lost passports, Abdul disclosed that 484 Nigerian passports were reported missing at the mission between August 2020 and May 2021 with request for re-issue.

Abdul said it was discovered that there were criminal undertones and immigration rules infractions associated with the ‘so-called’ lost passport declarations.

“In line with practice in other Missions, there was a need to impose fines to deter people from engaging in such infractions.

“At such an astronomical rate of loss declarations, the option will be to refer such losses to Nigeria for processing.

“This will save the booklet for genuine requests of re-issue and thereby reducing the backlog and pressure on the Mission,” the envoy said.

Abdul disclosed that the consulate had received a directive to embargo processing of lost passports pending further instructions from the headquarters.

The consul general then accused some Nigerian groups in South Africa of, “peddling lies and outright falsehoods” against the Mission and his person.

“These disgruntled elements have gone ahead to incite fellow Nigerians with intent to sabotage the Mission.

“Moreover, a lie and falsehoods often repeated amounts to a propaganda which can be misinterpreted by the gullible and undiscerning as truth,” he said.

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