Amid increased borrowings, senate urges Tinubu to fix Nigeria’s soaring debt profile

[By VICTOR NZE]

Senate has urged President Bola Ahmed Tinubu to reduce the country’s high debt profile, amid more requests for external loans by his administration.

Senate President Godswill Akpabio, who made the appeal, Wednesday during the presentation of the 2024 budget by President Tinubu before a joint session of the National Assembly in Abuja, described Nigeria’s current debt profile as ‘worrisome.’

According to Akpabio, the National Assembly was aware that President Tinubu inherited a heavy burden from the last administration, adding; ‘Nevertheless, the mark of a great leader is that he fixes the problems wherever they exist.’

According to the National Bureau of Statistics (NBS), Nigeria’s public debt stock which includes external and domestic debt stood at N87.38 trillion (representing US$113.42 billion) in Q2 2023 from the N49. 85 trillion (representing US$ 108.30 billion) incurred in Q1 2023, indicating a growth rate of 75.27 per cent on a quarter-on-quarter basis.

It would be recalled that in June 2023, barely one month after inauguration, Tinubu took out a $449 million from the International Bank for Reconstruction and Development (IBRD) Flexible Loan (IFL) and another $301 million International Development Association (IDA) credit, totalling $750 million.

This was followed by another $800 million pre-approved loan from the World Bank to help cushion the impact of high fuel prices in July.

Under three months, the Tinubu administration had taken a total of $1.95 billion World Bank loans since his May 29 inauguration as president.

Earlier in Tuesday, November 28, Tinubu wrote to the House of Representatives, seeking approval of the lawmakers, to obtain an external loan of $US8, 699, 168, 559 and another €100 million.

Tinubu, in a letter addressed to the speaker, Tajudeen Abbas, and read by him at Tuesday’s plenary, said the loans are part of the 2022-2024 External Borrowing plan of the federal government.

President Tinubu explained that the fresh loans, part of which would be sourced from the World Bank and the African Development Bank (AfDB), would be deployed towards the funding of critical infrastructural projects in power, railway, health, among others.

“Following the removal of the fuel subsidy and its attendant impact on our economy, African Development Bank and the World bank group have indicated interest in assisting the country to mitigate the impact with the sum of one billion USD and 1.5 billion USD respectively. In addition to the FEC approved 2022-2024 external abridged borrowing plan.

“Consequently, the required approval is in the sum of 8, 699, 168, 559 USD, and 100 million euros.

“I would like to underscore the fact that the projects and programmes in the borrowing plan were selected based on positive technical economic evaluation; as well as the expected contribution to the socio-economic development of the country including employment generation, skills acquisition, support towards the emergence of young entrepreneurs, poverty reduction and food security to improve the livelihood in all 36 states and the FCT.

“Considering the huge infrastructure deficit in the country and the enormous financial resources required to bridge the gap in funding infrastructure in the face of dwindling financial resources, it has become imperative that we resort to prudent external borrowing to bridge the financial gap; which will be largely applied to key infrastructure projects including power, railway, health among others.

“Given the nature of these facilities and the need to return the country to normalcy, it has become necessary to request the House of Representatives to consider and approve the 2022-2024 external abridged borrowing plan, to enable the government deliver its responsibilities to Nigerians, through expedient disbursement and efficient project implementation,” the letter read.

Interestingly, Tinubu while presenting his 2024 Appropriation Bill before NASS, had disclosed that Nigeria remains committed to meeting its debt obligations and that projected debt service is 45 per cent of the expected total revenue.

”Budget deficit is projected at 9.18 trillion naira in 2024 or 3.88 percent of GDP. This is lower than the 13.78 trillion naira deficit recorded in 2023 which represents 6.11 percent of GDP. 

“The deficit will be financed by new borrowings totalling N7.83 trillion, N298.49 billion from Privatization Proceeds and N1.05 trillion drawdown on multilateral and bilateral loans secured for specific development projects”, Tinubu said.

Meanwhile, responding after the presentation of the 2024 Appropriation Bill by the President, Akpabio appealed to Tinubu administration to ‘do all within its powers to reduce our high debt profile.’

“However, we hope these budgetary estimates contain provisions to ameliorate the sufferings that the economic measures have exacted on our fellow citizens whom we represent here.

“We deem it necessary for our country to go back to agriculture as a way of stopping the overdependence on crude oil. A mono-economy is putting all our eggs in one basket. It is a risk we have taken for too long and we cannot continue to tempt providence.

“We also want to plead with the government to do all within its powers to reduce our high debt profile.

“We know that Mr President inherited this worrisome burden. But then the mark of a great leader is that he fixes the problems wherever they exist,” said the Senate president.

It would be recalled that Tinubu, last Wednesday, presented the 2024 Appropriation Bill of a record N27.5 trillion to the joint session of the National Assembly.

The president said the ‘Budget of Renewed Hope’ will ensure micro-economic stability, poverty reduction, and greater access to social security, amongst others.

It is President Tinubu’s first budget presentation before the joint session of the National Assembly since he assumed office on May 29, 2023.

The President had also disclosed that his administration saved N1 trillion from imported petroleum products subsidy removal in June, 2023, as many economic analysts noted that going by Tinubu’s own disclosure, the country should have pocketed N6 trillion so far in the six months that the subsidy regime was suspended by his government since May 29, 2023.

This figure sums up to N12 trillion by H1, 2024 which should significantly cut the budget deficit in the proposed 2024 Appropriation Bill and by extension fund more capital projects to reduce or cushion the economic hardship experienced by Nigerians.

Last July, 2023, Tinubu during a nationwide broadcast, disclosed that Nigeria saved over N1 trillion (representing $1.32 billion) in just over two months of scrapping the imported petroleum products subsidy regime.

In the live television broadcast, Tinubu defended his decision to scrap the petrol subsidy, which he said benefited a few elites and that the reforms would help boost the economy.

“In a little over two months, we have saved over a trillion naira that would have been squandered on the unproductive fuel subsidy which only benefited smugglers and fraudsters,” Tinubu said.

The president said he was aware of the hardship caused by removing the subsidy and was “monitoring the effects of the exchange rate and inflation on gasoline prices,” adding that he would intervene if and when necessary.