If the National Assembly adopts the President’s request to restructure the Ways and Means Advances, Nigeria’s public debt load might reach N77 trillion.
The Central Bank of Nigeria uses the Ways and Means Advances loan facility to finance budget gaps in the government.
In 2022, the Federal Government spent N5.24 trillion paying debts.
Patience Oniha, Director-General of the Debt Management Office, revealed this on Wednesday at the public presentation of the 2023 budget by Dr Zainab Ahmed, Minister of Finance, Budget, and National Planning.
She did, however, point out that without N5tn in additional borrowing and N2tn in promissory notes, the debt would be N70tn.
“The DMO provided the figure for the country’s debt stock as of September; you don’t anticipate it to be considerably different from December,” Oniha explained. Second, there are several disputes over the Ways and Means. In addition to the huge cost savings in debt service that securitization would provide.
“There is some openness in that it is now reflected in the public debt stock. If it is approved by the National Assembly, the number will be added to the national debt. The public debt will rise significantly to N77tn.”
She stated that while debt is increasing due to additional borrowing, revenue is becoming increasingly important.
“You can’t talk about debt without talking about revenue,” DMO usually emphasizes. “We need the two to collaborate,” she continued.
Under the current administration, the FG’s tremendous thirst for borrowing has deteriorated the country’s debt position, with the country’s debt stock rising to N44.06tn as of September last year.
Experts and important stakeholders in the economy had attacked the DMO and the government over the country’s soaring debt levels.
Meanwhile, the President, Major General Muhammadu Buhari (retd. ), has transmitted to the National Assembly a request for approval of N23.7 trillion in Ways and Means Advances restructuring.
On December 21, the Senate President, Ahmad Lawan, and the Speaker of the House of Representatives, Femi Gbajabiamila, read out Buhari’s appeal to members of the respective chambers.
In the request titled ‘Restructuring of Ways and Means Advances,’ the President wrote, “The Ways and Means Advances by the Central Bank of Nigeria to the Federal Government has been a funding option to the Federal Government to cater for short-term or emergency finance to fund delayed government expected cash receipt of fiscal deficit.
“As of December 19, 2022, the Ways and Means balance is N23,719,703,774,306.90. I have approved the securitisation of the Ways and Means balances on the following terms: N23.7tn; tenure, 40 years; three-year moratorium on principal payments; and a 9% pricing interest rate. Your consent and approval are required in order for the same to be implemented.”
The Senate, however, rejected the President’s request to rearrange the N23.7tn Ways and Means advances.
In 2022, the FG would spend N5.24 trillion repaying debts.
According to the finance minister, the Federal Government spent N5.24 trillion on debt servicing alone between January and November 2022, out of a total of N12.87 trillion spent over the same time.
Domestic debt used N2.51 trillion, international debt consumed N1.08 trillion, and interest on ways and means consumed N1.64 trillion, according to her.
Despite the restructuring plan, the World Bank forecasted in its December 2022 edition of the Nigeria Development Update that interest payments on the federal government’s borrowing from the CBN would consume almost 62% of government revenue by 2027.
“Despite the restructuring of the Ways and Means stock in 2023, interest payments are predicted to progressively climb by 2.4 percentage points of GDP between 2018 and 2027, and by 2027, interest payments will account for more than 62 percent of revenues,” according to the paper.
In 10 months, the FG borrowed N6.31 trillion from the CBN via Ways and Means Advances.
The government’s borrowing from the CBN increased from N17.46tn in December 2021 to N23.77tn in October 2022 as a result.
According to the Debt Management Office, the N23.77tn due to the apex bank by the FG is not part of the country’s total public debt stock, which stood at N44.06tn in the third quarter of 2022.
She stated that while debt is increasing due to additional borrowing, revenue is becoming increasingly important.
“You can’t talk about debt without talking about revenue,” DMO usually emphasizes. “We need the two to collaborate,” she continued.
Under the current administration, the FG’s tremendous thirst for borrowing has deteriorated the country’s debt position, with the country’s debt stock rising to N44.06tn as of September last year.
Experts and important stakeholders in the economy had attacked the DMO and the government over the country’s soaring debt levels.
Meanwhile, the President, Major General Muhammadu Buhari (retd. ), has transmitted to the National Assembly a request for approval of N23.7 trillion in Ways and Means Advances restructuring.
Cowry Asset Management Limited’s Managing Director/Chief Executive Officer, Mr Johnson Chukwu, recently stated that the central bank’s lending to the government was putting pressure on the exchange rate and inflation rate, with “liquidity that has no productivity attached to it coming into the system.”
Prof Olufemi Saibu, a Professor of Development Macroeconomics at the University of Lagos, has criticized the administration for excessive borrowing.
“I think we’re overborrowing,” he remarked. We continue to rely on international benchmarks, which causes us to be sluggish when it comes to revenue growth.”
Saibu asked the government to reduce its massive expenditures and redirect funds to more productive sectors of the economy.
“With our current significant infrastructure debt financing and low productivity in the local economy, the government needs to find a means to reduce its expenditures,” he stated. We need to shift government funds to more productive uses and borrow less for consumption.”
In 2023, the government would spend N3.36 trillion on fuel subsidies.
The finance minister also stated that N3.36 trillion has been set aside in Nigeria’s 2023 budget for fuel subsidies.
Based on the 18-month extension announced in early 2022, Ahmed claimed that fuel subsidy payments would continue until mid-2023.
This indicates that fuel subsidies will be phased away in June 2023, after a new administration is installed as a result of the results of the general elections in February 2023.
“The estimated fiscal outcome in the 2023 Budget is based on the PMS subsidy reform scenario,” she explained. Based on the 18-month extension announced in early 2022, the 2023 Budget framework assumes that the gasoline subsidy would continue until mid-2023.
“In this context, only N3.36 trillion has been allocated for the PMS subsidy. The performance management framework for Government-Owned Enterprises will be strictly enforced, which will significantly boost operational surplus/dividend remittances in 2023.”
The minister stated that the Federal Government’s revenue was N6.50 trillion as of November 2022.
This, she added, is around 87% of the prorated objective of N7.48tn.
She estimated that the Federal Government’s share of oil income was N586.71 billion, marking a performance of 35.7 percent, while non-oil tax collections totaled N2.09 trillion, showing a performance of 123.3 percent.
She noted that the companies’ income tax and VAT revenues were N1.08 trillion and N295.2 billion, respectively, reflecting 158.6 percent and 124.3 percent of their respective targets.
Customs collections, which include import duties, excise, fees, and special levies, exceeded the target by N15.42 billion, according to Ahmed.
She stated that as of November 30, the actual spending from the 2022 budget was N12.87 trillion.
N5.24 trillion was spent on debt service, N3.94 trillion on staff costs, including pensions and statutory transfers, and N8.1 trillion on overhead and service-wide vote expenditures.
She also stated that the economy was no longer reliant on oil.
“We can no longer be described as a mono-economy. “The Nigerian economy has suddenly become more diverse,” she asserted.
Ahmed ascribed the shift to an increase in earnings from non-oil businesses.
“The non-oil sector is currently generating more revenue for the nation, while the oil, gas, and mining industries are pushing the economy back,” she added. Agriculture and financial services are the two largest non-oil revenue generators in the country.”
The finance minister also claimed that the president would sign the Finance Bill 2022 “in a few of days”.
She attributed the delay to the president’s insistence on having legal experts review the Bill.
omitted stamp
The finance minister further stated that the National Assembly and security services are presently investigating the claim of missing stamp duty money.
Ahmed stated that if the claim is proven accurate and funds are recovered, it will assist the government in financing its massive budget deficit.
Muhammed Kazaure, a member of the House of Representatives, has accused the CBN Governor, Godwin Emefiele, of stealing N89.1 trillion in stamp duty proceeds.
According to the minister, both the oil and mining sectors are dragging the national economy down. She also cited the pricey fuel subsidy regime as a big economic drain.
According to the minister, the oil sector would contribute only 22% of the economy in 2022, indicating that “the economy is truly, truly diversified.”
According to Ahmed, the non-oil industry, led by communications and agriculture, has greatly boosted the economy.
In the 2022 budget execution, the government recorded N18.14tn aggregate expenditure, including the supplementary budget, according to Ahmed.
N6tn was lost.
The finance minister also stated that the FG would be removing several industries off the pioneer tax incentive list, albeit acknowledging that this would be an unpopular move that would likely elicit public criticism.
She did, however, clarify that infant businesses would be put on the list to benefit from tax breaks to ensure their survival.
Regarding tax waivers, she claimed that a total of N6tn had been foregone between 2021 and the present under the tax waiver program, and she insisted that phasing out the tax waivers will assist improve the government’s revenue.
Between 2019 and 2021, the Federal Government provided tax breaks and concessions of N16.76 trillion to major corporations.
As of the end of 2021, 46 companies had benefited from various tax breaks and tariff exemptions, while 186 companies’ claims were still waiting.
As the FG intends to phase out tax waivers effective 2022, at least 172 enterprises may lose out on approximately N2.4tn in tax waivers under the Pioneer Status Incentive and other tax exemptions.
