Stop amassing debts in the name of infrastructural provisions, NECA tells FG

The umbrella body of employers in the country, the Nigeria Employers Consultative Association (NECA) is very much concerned about the country’s growing debt profile as  no economy can survive and provide adequately and achieve its developmental programmes by servicing debt with almost 98% of its revenue.

 Because, in such a situation, NECA said,  “there is always a heavy burden on business that lays the golden egg as every agencies of government will demand its pounds of flesh, therefore, wears it out,” even as it suggests a halt to amassing debts in the name of infrastructural provisions, while  evaluating previous borrowings,

The association has consistently called for caution on the country’s growing debt profile, urging the Federal Government to take urgent steps to end the unsustainable subsidy regime and rising debt profile.

 A release by the Debt Management Office (DMO) on  the country’s Public Debt Stock as at March 31, 2021, showed that the Total Public Debt Stock which comprises of the Debt Stock of the Federal Government of Nigeria (FGN), thirty-six (36) State Governments and the Federal Capital Territory (FCT) stood at N33.107 trillion or USD87.239 billion.

According to DMO, the Debt Stock also includes Promissory Notes in the sum of N940.220 billion issued to settle the inherited arrears of the FGN to State Governments, Oil Marketing Companies, Exporters and Local Contractors. Compared to the Total Public Debt Stock of N32.916 trillion as at December 31, 2020, the increase in the Debt Stock was marginal at 0.58%.

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Further analysis of the Public Debt Stock, shows that the increase was in the Domestic Debt Stock which grew by 2.11% from N20.21 trillion in December 2020 to N20.637 trillion as at March 31, 2021.

“The FGN’s share of the Domestic Debt includes FGN Bonds, Sukuk and Green Bonds used to finance infrastructure and other capital projects as well as the N940.220 billion Promissory Notes. External Debt Stock declined from USD33.348 billion as at December 31, 2020 to USD32.86 billion due to the redemption by Nigeria of the USD500 million Eurobond in January 2021.”

Early in the month, the World Bank had stated that Nigeria is among a list of top 10 countries with high debt risk exposure.

 This is contained in the financial statement for International Development Association (IDA), which was among the World Bank FY21 audited financial statements. The financial statement said, “IDA faces two types of credit risk: country credit risk and counterparty credit risk.

“Country credit risk is the risk of loss due to a country not meeting its contractual obligations; and counterparty credit risk is the risk of loss attributable to a counterparty not honouring its contractual obligations.

“IDA is exposed to commercial as well as non-commercial counterparty credit risk.”

 “As of June 30, 2021, the 10 countries with the highest exposures accounted for 66 per cent of IDA’s total exposure.”

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According to the Punch report, Nigeria was rated fifth on the list with $11.7billion IDA debt stock, while India led the list with $22billion IDA debt stock, followed by Bangladesh with $18.1billion IDA debt stock, Pakistan with $16.4billion IDA debt stock, and Vietnam with $14.1billion IDA debt stock.

Other countries on the list in order of appearance included Ethiopia with $11.2billion IDA debt stock, Kenya with $10.2billion IDA debt stock, Tanzania with $8.3billion IDA debt stock, Ghana with $5.6billion IDA debt stock, and Uganda with $4.4billion IDA debt stock.

It added that there was a Single Borrower Limit for IDA, which for FY22, had been set at $45billion (25 per cent of $180.9billion of equity as of June 30, 2021).

It was further discovered that Nigeria’s undisbursed balance with the World Bank is about $8.656billion as at June 30, 2021.

But DMO debunked the report, saying that it does not represent the true position of the World Bank on Nigeria’s debt profile. 

Besides, the Federal Government has always argued that the conditions were not a debt problem, but a revenue challenge, a position which the organised private sector has rejected, saying  that debt becomes a problem if the revenue base is not strong enough to service the debt sustainably as it invariably becomes a debt problem.

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As a way forward, NECA is clamouring   for a policy rejuvenation to salvage a situation like this, by diversifying the revenue away from oil sales, while enhancing the promotion of processed agriculture exports, extractive industries among others.

Furthermore, “we will suggest a halt to amassing debts in the name of infrastructural provisions, while we evaluating previous borrowings. More so, Government at all levels should review its recurrent expenditure profiles, as the growth of external debt stock and debt service repayment is becoming a clog to development in the country.”

“Also, Federal Government should consider expansion of its revenue base, reduce the size of government to curtail recurrent expenditure, and ensure proper deployment of borrowed funds.

“We, therefore, urge that the current administration should  muscle the strength and ensure a drastic cut in the cost of governance. Far-reaching and meaningful actions should be taken in blocking the leakages in governance.”

NECA is the umbrella organization of employers in the Organised Private Sector of Nigeria. It was formed in 1957 to provide the forum for the Government to consult with private sector employers on socio-economic and labour policy issues.

It provides a platform for private sector employers to interact with the government, labour, communities and other relevant institutions in and outside Nigeria for the purpose of promoting harmonious business environment that will engender productivity and prosperity for the benefit of all.

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