On Wednesday, the Minister of Finance, Budget and National Planning, Zainab Ahmed, and the Director General of the World Trade Organisation, Dr Ngozi Okonjo-Iweala, differs on experts opinion on the nation’s debt-to-Gross Domestic Product ratio.
Recently, experts have shown continuous concerns on the nation’s endless borrowings and rising debt profile.
The Minister of finance, Ahmed puts the debt-to-GDP ratio at 29 percent, While Okojo-Iweala said it had risen to 35 percent.
Both the minister and the WTO boss spoke at the African Development Bank High-Level Knowledge Event with the theme: ‘From Debt Resolution to Growth: The Road Ahead for Africa’ which held virtually on Wednesday.
Ahmed also disclosed that Nigeria planned to borrow more money to fund its infrastructure capacity.
This is in spite of voices calling on the government to halt borrowing and concentrate on other means of raising funds for the infrastructure needs of the country.
According to the Debt Management Office, Nigeria’s total public debt portfolio rose from N12.12tn in June 2015 to N33.11tn as of March 31.
Ahmed said the government was enforcing fiscal discipline to expand its fiscal space so that it could continue to service its debts and borrow more to build the nation’s infrastructure capacity.
She said, “As of Q1 2021, we have about a 29 percent debt-to-Gross Domestic Product ratio. In terms of the level of debt, we are still very healthy, and sustainable.
“We are struggling with revenues, which is what we need to pay our debts. We have put in place a number of measures to enhance domestic revenue.
“We are cutting costs, we are improving the ease of doing business, trying to leverage private sector resource capacity to invest in infrastructure to reduce government spending.
“We are working on increased transparency in public financial management; we are enforcing fiscal discipline to expand our fiscal space so that we can continue to service our debt and borrow more to build our infrastructure capacity.”
Ahmed also said that the total debt profile did not include that of some states and that the federal government was making moves to correct that.
“In Nigeria, we’ve been making a lot of effort on a quarterly basis to disclose all the debts that we have and to also indicate what the debt service is.
“Currently, we are working on including other state-owned debts that have not been included in public debt for the purpose of transparency. It is important and will help us going forward.”
However, Ngozi Okonjo-Iweala, who also attended the AfDB’s event, differed with Ahmed on the nation’s debt-to-GDP ratio.
The WTO boss who had been Nigeria’s Minister of Finance in the past said the nation’s debt to GDP ratio had risen from 29 percent to 35 percent.
She said, “Middle-income African countries have also seen their debt burdens increase sharply. Amid falling prices and demand for oil worldwide, Nigeria’s debt to GDP ratio rose from 29 to 35 percent; Algeria from 46 to 53 percent, and Egypt from 84 to 90 percent, Angola from 107 to 127 percent.
“Debt to GDP ratios also increased for non-oil exporters including South Africa from 62 to 77 percent. Morocco from 65 to 76 percent.”
Okonjo-Iweala also said that scarce foreign exchange in certain African countries was creating scenarios where the governments were using scarce Forex to fund the fund debt repayment rather than on capital investment.
“Even where debt to GDP or where debt to export ratios was not very high, tighter access to dollar financing because of the COVID-19 crisis means we are already seeing places where scarce foreign exchange is going to fund debt repayment instead of capital investment,” she added.
A professor of economics at the Olabisi Onabanjo University, Ago-Iwoye, Ogun State, Sheriffdeen Tella, described as a cause for worry the amount being spent by the government on debt servicing.
He said, “What is important is not even the debt-to-GDP ratio but the ability to pay, and we are presently in serious problem with payments.
“If they want to borrow money from internal sources, that could be understood. But if they are going international again, I think it is not proper because presently the level of international borrowing is what is giving them problem now.
“We are selling oil and making money but we are using that money to service the debts that we owe, and that is unfortunate.
“So, one cannot but be worry. So, the government should think about creating wealth rather than continue borrowing. If they need money badly, they should borrow domestically.”
Prof. Akpan Ekpo told one of our correspondents that there was an urgent need for the government to be more transparent concerning borrowing.
He said, “There is nothing bad in borrowing but you need to borrow to fund infrastructural projects that will pay their way.
“Looking at debt-to-GDP ratio can be quite misleading because we debased our GDP making the denominator very large compared to the numerator. Instead, we should use debt servicing to GDP ratio and debt to revenue ratio, which at the current rates are disturbing.”
Ekpo added, “FG needs to do more feasibility studies on these infrastructural projects before borrowing to fund them.
“Infrastructural projects like power and others have positive multiplier effects in the long run. For the debt acquisition, they also need to be more transparent on it too.”
President of the AfDB, Akinwumi Adesina, said that cumulative total debt in Africa was higher than cumulative government revenue.
According to him, in 2019, Africa’s total outstanding debt was $841.9bn, while total government annual revenue was $501bn.
Adesina said, “Africa’s GDP declined by 2.1 percent in 2021. Growth is projected to recover to 3.4 percent by 2021 and 2022. Africa’s cumulative GDP declined by $145bn to $190bn.
“Millions fell into extreme poverty on the continent. Thirty-nine million Africans could fall into poverty by the end of 2021.”
Adesina said debt-to-GDP ratios on the continent were expected to rise to 10 to 15 percentage points, rising from 60 percent in 2020 to 75 percent in 2021.
He added that as of 2021, 17 out of 38 African countries for which debt sustainability was available were in dire distress.
Twelve countries were at moderate risk of debt distress, while six were already in dire distress, and one country had a low risk of debt distress, he added.
Nigeria’s Presidential CNG Initiative Allocates N100bn for CNG Buses and EV Adoption
The Presidential Compressed Natural Gas (CNG) Initiative has allocated N100 billion to expedite the deployment of CNG buses nationwide, according to a statement released on Wednesday.
The initiative, designed to catalyze an Auto-gas and Electric Vehicle (EV) revolution in mass transit and transportation, aims to enhance sustainability and cost-effectiveness.
The statement revealed that the fund would be instrumental in supporting the adoption of auto-gas and electric vehicles, signaling a commitment to a more sustainable and economical future in the transportation sector.
The Presidential CNG Initiative plans to leverage over 11,500 CNG and electric-fueled vehicles, along with the deployment of 55,000 conversion kits.
This strategic approach is intended to reduce transportation costs for Nigerians and mitigate the challenges posed by the rising cost of living.
Under the Renewed Hope Agenda, the Presidential CNG Initiative is dedicated to realizing the President’s vision, guided by its steering committee led by FIRS Chairman Zacch Adedeji.
The statement highlighted recent achievements, including strategic technical partnerships and the ongoing commissioning of CNG Conversion centers in key states such as Lagos, Abuja, Kaduna, Ogun, and Rivers.
Several more centers are slated for commissioning in the coming weeks, reflecting the initiative’s momentum and commitment to achieving its objectives.
Nigeria’s Power Transformation: 53 Projects Worth N122bn on Track for May 2024 Completion
The Central Bank of Nigeria (CBN), in collaboration with the Transmission Company of Nigeria (TCN) and power distribution companies, is set to complete 53 power projects by May next year.
Valued at N122 billion, these projects aim to add over 1,000 megawatts to TCN’s wheeling capacity.
During a recent tour of three ongoing projects in Lagos, TCN’s Programme Coordinator, Mathew Ajibade, assured that the projects were not abandoned, refuting speculations.
He confirmed that work is progressing smoothly and is expected to be completed by May 2024, as initially planned.
Assistant Director/Head of Infrastructure Finance Office at the CBN, Tumba Tijani, highlighted the CBN’s support for the power sector, revealing that the bank released a loan at a 9% interest rate in August last year for the projects.
The funding, part of the Nigeria Electricity Market Stabilisation Facility-3, amounts to N122,289,344 and aims to address transmission/distribution bottlenecks, enhance supply to end-users, and unlock unutilized generation capacity.
Tijani disclosed that N85.43 billion has been disbursed into the Advance Payment Guarantee account of the 53 contractors responsible for executing the projects.
The comprehensive project list includes the delivery of power transformers, re-conductoring existing transmission lines, upgrading existing substations, and constructing 33KV line bays.
The initiative reflects a concerted effort to enhance Nigeria’s power infrastructure and meet growing energy demands.
Nigeria’s Untapped Coffee Sector Holds the Key to $2 Billion Annual Revenue
Amidst declining foreign reserves and the need for alternative revenue streams, Nigeria’s overlooked coffee industry emerges as a potential powerhouse capable of contributing over $2 billion annually to foreign exchange earnings.
Industry experts emphasize the necessity for strategic investments and modernized farming practices to unlock the full economic potential of the coffee sector.
While Nigeria is not among the top 10 coffee producers in Africa, the country’s untapped coffee industry holds the promise of significant financial gains, job creation, and sustainable agricultural development.
The urgency for revitalization comes as Nigeria grapples with a decline in foreign reserves, dropping from $38.25 billion in September 2022 to $33.23 billion in the third quarter of 2023.
Salihu Imam, Chairman of the National Coffee and Tea Association of Nigeria, Oyo State, highlighted the global significance of coffee, stating, “Coffee is the second most traded/valuable of all commodities and first in Agricultural commodities in the world.”
The potential economic impact extends beyond immediate financial gains, with Nigeria positioning itself as a key player in the global coffee trade.
Despite its potential, Nigeria’s coffee exports remain modest, producing less than one million bags annually.
In contrast, Ethiopia, the largest coffee exporter in Africa, is projected to produce 8.25 million bags. Experts suggest that Nigeria, with its unique coffee varieties, could generate $2 billion annually.
Segun Lary-Lean, President of the West Africa Specialty Coffee Association, emphasized the robust global demand for coffee, comparing it to water in Western countries.
He noted the significant earnings of coffee-producing nations like Brazil, Colombia, Vietnam, and Kenya, which experienced a 17% increase in coffee earnings.
In a call to action, industry players urge the Federal Government to prioritize strategic investments, modernized farming practices, and value-added processing to harness the coffee sector’s full economic benefits.
Unlocking the potential of Nigeria’s coffee industry stands not only as a financial opportunity but as a catalyst for broader economic growth and diversification.
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