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Spotlight on Nigeria’s Public Debt Stock – Coronation Merchant Bank

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Muhammadu Buhari

According to Nigeria’s Debt Management Office (DMO), Nigeria’s total public debt rose by 4.1% or N1.5trn from N38trn at end-September ‘21 to N39.5trn at end-December 2021. The total public debt increased by 20.2% or N6.6trn when compared to the corresponding period in 2020. As at end-2021, public debt is equivalent to 22.5% of 2021 nominal GDP.

This is in line with the DMO’s debt management target of a debt-to-GDP ratio of 40% of GDP for the period 2020-2023 and below the limit of 55% set by the World Bank for countries within Nigeria’s peer group. It is also below the 70% set by the Economic Community of West African States. According to the DMO, disbursements by multilateral
and bilateral creditors account for a significant portion of the increase in the debt stock.

Total domestic debt increased by 17.3% y/y from N20.2trn in 2020 to N23.7trn at end2021. This constitutes 59.9% of total public debt. On a q/q basis, it increased by 5.7%, on the back of increased issuances of FGN bond and Nigerian treasury bills (NTBs) in Q4 ’21.

In terms of composition, FGN domestic debt constitutes 81.2% of total domestic debt, while states and FCT make up the remaining 18.8%. Bonds and NTBs make up 92.2% of total FGN domestic debt while FGN sukuk, treasury bond, savings bond, green bond, and promissory notes make up the remaining 7.8%.

The share of states and the FCT’s domestic debt increased by 6.2% q/q to N4.5trn from N4.2trn at end-September ‘21. On a y/y basis, it increased by 6.5%. The most indebted states were Lagos (N658bn), Ogun (N232bn) and Rivers (N225bn).

Coronation Merchant Bank notes that with the securitisation of the ways and means advances from the CBN and the addition of AMCON debt, the domestic debt stock is likely to increase. As at end-2021, the stock of CBN’s ways and means advances stood at N13.3trn.

External debt stock stood at USD38.3bn (N15.8trn) at end-2021. This points towards increases of 1.8% q/q and 24.7% y/y. The rise was largely due to the USD4bn Eurobonds issued by the FGN in September ’21, as part of new external borrowing in the 2021 appropriation act.

The external debt stock accounts for 40.1% of total public debt. Multilateral and bilateral loans account for the bulk of the external debt at 60.2%, while commercial loans and promissory notes represent the remaining 39.8%.
Insufficient revenue continues to hamper Nigeria’s fiscal landscape, resulting in one of the highest debt-service-to-revenue ratio among African economies.

Nigeria spent N2.9trn on servicing domestic debts, and N877.5bn on external debt servicing. As at November ’21, the FGN’s debt service to revenue ratio was 76%.

The FGN’s 2022 aggregate expenditure is estimated at N17.1trn. Revenue is expected to be N10.7trn, and the deficit of N6.4trn is expected to be financed by foreign borrowings of N2.57trn, domestic borrowings of N2.57trn, privatisation proceeds of N90.7bn, and multi-lateral /bi-lateral loan drawdowns of N1.16trn. We note that the 2022 FGN budget contains a provision of N443bn for subsidy for January-June. President Buhari is seeking approval of an additional N2.5trn supplementary budget to cater for fuel subsidy.

Last week, The DMO announced that Nigeria raised USD1.25bn (N520bn) through Eurobonds. This makes Nigeria the first African country to access the international capital market (ICM) in 2022. The order book reached USD3.7bn. It included quality investors across the United States, Europe, and Asia. According to the DMO, the proceeds of the Eurobond will be used to finance critical capital projects in the budget. Additionally, it would
contribute directly to external reserves.

Despite the increase in the total public debt stock, as a percentage of GDP (22.5%), this is relatively low when compared with other African economies such as Ghana (81%), Kenya (65%), South Africa (80%) and Egypt (90%). The onus is on the FGN to ensure that borrowed funds are used productively.

Coronation Merchant Bank notes the FGN’s strategic revenue growth initiatives such as the Finance Act and other measures aimed at leveraging technology and automation in improving tax administration, as well as the introduction of a pro-health tax (excise duty on carbonated drinks). These among others are geared towards improving government revenue.

Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

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Gov Aiyedatiwa Signs ₦96 Billion Supplementary Budget Into Law, Hails Ondo House of Assembly For Swift Passage

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Lucky Aiyedatiwa

The Governor of Ondo State, Lucky Aiyedatiwa, has expressed gratitude to the State House of Assembly for the swift passage of the Supplementary Budget as he signs the ₦96 billion budget into law.

Governor Aiyedatiwa spoke on Tuesday, November 15, during the signing of the supplementary budget in Akure.

The governor explained that the supplementary budget is necessary to help his administration address the economic challenges in the state.

According to him, the new budget signed into law is also essential for the state government to implement the new ₦73,000 minimum wage for civil servants and new employees, as well as for the recruitment of workers in the state.

Aiyedatiwa said, “The supplementary budget is necessary because of the time we are in and the trends of what is happening in the state and country in general; the new minimum wage, subsidy removal, and the recent recruitment of workers.”

Aiyedatiwa stated that his administration was grateful to the leadership and members of the House of Assembly for passing the bill.

He highlighted the harmonious relations between the two arms of the state and reaffirmed that his administration will continue to work with the House of Assembly for the betterment of the Ondo people.

The Speaker of the House of Assembly, Olamide Oladiji, thanked the Governor, stating that the steps taken by his administration have not only transformed the state but also proven the governor’s ability and capacity to deliver on the job ahead.

He expressed optimism that the bill signed into law would positively impact the lives of the citizens.

“These giant strides have not only transformed the state in all facets but have clearly demonstrated your vision, capacity, intellectual ability, zeal, passion, direction, and a clear understanding of the enormous job ahead.

“It is therefore hoped that the implementation of these laws will meaningfully impact the lives of the good people of the state.”

Oladiji pledged the continuous support of the House to Aiyedatiwa’s administration, saying, “I want to, on behalf of my colleagues, assure you, Mr. Governor, of our continuous support and cooperation to ensure the success of this administration.”

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MEND Tackles Ex-Agitators For Threatening To Bomb Oil Installations In Rivers 

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pipleline vandalisation

A war of words has ensued between a militant group, the Movement for the Emancipation of the Niger Delta (MEND) and a coalition of ex-agitators over alleged plan to attack oil installations in the region by the latter group.

Following the political crisis rocking Rivers State, a coalition of ex-agitators and fighters in the region under the aegis of Niger Delta Development Force had last week threatened to blow-up oil facilities in the region over what it termed a plot to seize financial allocations meant for local government areas in Rivers State through the courts.

The former warlords dared the Federal Government and the Central Bank of Nigeria, saying if they proceeded in withholding the funds for the state, it would have grave consequences.

Kicking against the threat, MEND’s spokesman, Jomo Gbomo, in a statement on Friday, said it will support security operatives in safeguarding crude oil installations from any attack.

Gbomo also said MEND is not in support of the violence that Rivers State has been experiencing due to the lingering feud between the Minister of the Federal Capital Territory, Nyesom Wike, and his successor and estranged political godson, Siminalayi Fubara.

Describing the attack plan as threat to the economy of the country, Gbomo said it would be most unfortunate for a political dispute between two politicians to cost the state and Nigeria assets that are pivotal to nation’s survival.

Noting that the both feuding political gladiators are sons of the Niger Delta, the spokesman asked those making the threats not to allow themselves be tricked using the present circumstance into carrying arms against the Nigerian state on behalf of any of them, not even for any price.

He said as an Ijaw son, he knows the gains of having an Ijaw man as governor in Rivers, adding that it is an achievement which would not have been possible but for the collaboration of other ethnic groups.

According to him, the current healthy collaboration from the various ethnic groups which produced an Ijaw son as governor was spearheaded by the FCT Minister.

The statement said not only would MEND back the Federal Government in protecting oil facilities, but it would also ensure that the masterminds of the threats to attack oil installations are fished out and meant to face justice.

The MEND spokesman, however, urged the elders and traditional institutions in the region to intervene in the face-off between Governor Fubara and the FCT Minister.

He also urged parties in the festering political crisis to seek judicial redress if peaceful dialogue fails.

 

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Northern Governors Oppose New VAT Model as FG Defends Tax Reform Bills

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Value added tax - Investors King

The Federal Government has addressed concerns raised by the Northern Governors’ Forum regarding the proposed tax reform bills before the National Assembly.

Investors King gathered that Governors of 19 Northern States of Nigeria, under the platform of the Northern Governors’ Forum met with the traditional rulers from the region to agree to disagree with the Federal Government’s new value-added tax model.

In a communiqué read by the chairman of the forum, Governor Muhammed Yahaya of Gombe State, the governors strongly opposed the new derivation-based model for Value-Added Tax (VAT) distribution in the new tax reform bills proposed by President Tinubu’s government.

Addressing the governors’ concern, the FG in a statement on Thursday by the President’s Special Adviser on Information and Strategy, Bayo Onanuga stated that the proposed bills will streamline Nigeria’s tax administration processes, enhance efficiency and eliminate redundancies across the country’s tax operations.

According to Onanuga, the bills which is currently before the National Assembly for consideration emerged after extensive review of existing tax laws.

The statement reads, “While we commend the Governors and traditional rulers for supporting President Bola Tinubu over the success recorded in addressing the country’s security challenges, we consider it necessary to address the misunderstandings and misgivings around the tax reform already embarked upon by the administration.

“President Tinubu and the Federal Executive Council recently endorsed new policy initiatives aimed at streamlining Nigeria’s tax administration processes, enhancing efficiency and eliminating redundancies across the nation’s tax operations.

“These reforms emerged after an extensive review of existing tax laws. The National Assembly is considering four executive bills designed to transform and modernise Nigeria’s tax landscape.

“First is the Nigeria Tax Bill, which aims to eliminate unintended multiple taxation and make Nigeria’s economy more competitive by simplifying tax obligations for businesses and individuals nationwide.

“Second, the Nigeria Tax Administration Bill (NTAB) proposes new rules governing the administration of all taxes in the country. Its objective is to harmonise tax administrative processes across federal, state and local jurisdictions for ease of compliance for taxpayers in all parts of the country.

“Third, the Nigeria Revenue Service (Establishment) Bill seeks to rename the Federal Inland Revenue Service (FIRS) as the Nigeria Revenue Service (NRS) to better reflect the mandate of the Service as the revenue agency for the entire federation, not just the Federal Government.

“Fourth, the Joint Revenue Board Establishment Bill proposes the creation of a Joint Revenue Board to replace the Joint Tax Board, covering federal and all states’ tax authorities.

“The fourth bill also suggests establishing the Office of Tax Ombudsman under the Joint Revenue Board, which would serve as a complaint resolution body for taxpayers.

“It is instructive to note that these proposed laws will not increase the number of taxes currently in operation. Instead, they are designed to optimise and simplify existing tax frameworks.

“The tax rates or percentages will remain the same under these reforms, as they focus on ensuring a more equitable distribution of tax obligations without adding to the burden on Nigerians.

“The reforms will not lead to job losses. On the contrary, they are structured to stimulate new avenues for job creation by supporting a dynamic, growth-oriented economy.

“Importantly, these laws will not absorb or eliminate the duties of any existing department, agency, or ministry. Instead, they aim to harmonise revenue collection and administration across the federation to ensure efficiency and cooperation.

“At the moment, tax administration lacks coordination among federal, state, and local tax authorities, often resulting in overlapping responsibilities, confusion, and inefficiency. Without reform, this inefficiency will persist.

“The proposed laws aim to coordinate efforts between different tiers of government, resulting in better tax resource management and greater clarity for taxpayers.

“Under existing laws, taxes like Company Income Tax (CIT), Personal Income Tax (PIT), Capital Gains Tax (CGT), Petroleum Profits Tax (PPT), Tertiary Education Tax (TET), Value-Added Tax (VAT), and other taxing provisions in numerous laws are administered separately, with individual legislative frameworks.

“The proposed reforms seek to consolidate these multiple taxes, integrating CIT, PIT, CGT, VAT, PPT, and excise duties into a unified structure to reduce administrative fragmentation.

“On the proposed derivation-based VAT distribution model, which the Northern Governors oppose, it must be stressed that the new proposal, as enunciated in the Bill, is designed to create a fairer system.

“The current model for distributing VAT is based on where the tax is remitted rather than where goods and services are supplied or consumed. The ongoing tax reform seeks to correct the inherent inequity in the current derivation model as a basis for distributing VAT revenue.

“The new proposal before the National Assembly outlines a different form of derivation which considers the place of supply or consumption for relevant goods and services. This means that states in the Northern region that produce the food we eat should not lose out just because their products are VAT-exempt or consumed in other states.

“These reforms are critical to improving the lives of Nigerians and were not put forward by President Tinubu to undermine any part of the country. There is no better time than now for the National Assembly to give due consideration to these bills that will overhaul our tax systems and create the revenue all the tiers of government require to fund the development our country and people urgently need.”

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