Uche Usim, Abuja
Nigeria’s total debt profile as at December 31, 2018 stood at N22.4 trillion. The debt has been on steady rise for some years.
Data from the Debt Management Office (DMO) showed that in 2014, Nigeria’s debt was N11.2 trillion, and grew to N12.12 trillion in 2015. In 2016, the debt climbed higher to N17.5 trillion and in 2017, it stood at N21.7 trillion.
In essence, Nigeria’s debt profile rose by N12.27 trillion between June 2015 and December 31, 2018.
The debt, which rose from N12.12 trillion as of June 30, 2015 when the Buhari administration came onboard, to N24.39 trillion as of December 31, 2018 means that within a period of three and a half years or 42 months, the country’s debt profile rose by 12.27 trillion. This reflects 101.23 per cent increase in the country’s debt profile within the period.
Further analysis shows that much of the debt belongs to the Federal Government whose debt profile as of December 31, 2018, stood at N19.23 trillion. On the other hand, the debt profile of the sub-national governments – the 36 states of the federation and the Federal Capital Territory – stood at N5.15 trillion.
This means that 78.87 per cent of the total public debt as of December 31, 2018, belonged to the Federal Government while the sub-national governments had a proportion of 21.13 per cent.
According to the Director-General of DMO, Patience Oniha, the external debts are usually cheaper funds with low interest rate, but very long gestation period of up to 30 years.
She added that the 2019 Appropriation Act provides for new external borrowing of N824.82 billion (equivalent of USD2.7 billion at USD/N305).
“Consistent with the debt management strategy of reducing debt service cost, the plan for raising the new external borrowing is to first access cheaper funding from multilateral and bilateral lenders as may be available. Thereafter, any balance will be raised from commercial sources which may include securities issuance such as Eurobonds in the international capital market.”
The latest bond issued by the DMO on behalf of Nigeria was N100 billion and was oversubscribed by N60 billion, showing a high level of demand by investors.
The DMO in a statement said that it offered three instruments totalling N100 billion to the investing public at the auction with five, 10 and 30-year tenors.
According to the DMO, subscriptions for the three instruments from competitive bids was slightly above N160 billion, indicating an oversubscription of 60 per cent.
While the government hinges its insatiable appetite for external borrowing on the need to improve capital budget, a clinical analysis of the capital budgets shows that there is still a funding gap of N2.03 trillion in four years (2015-2018) as regards what was earmarked and what was actually released to the ministries, departments and agencies (MDAs).
The MDAs got N5.41 trillion for capital projects in four years (2015-2018) when the allocation for the same was N7.53 trillion.
Experts blame budget delays arising from executive-legislative squabbles for low capital project implementation.
The figures, sourced from the Ministry of Finance to cover various capital projects as approved in the national budget of each of the four years, exclude the trillions of naira spent on recurrent expenditure.
An analysis of the annual budget document and the budget implementation report as obtained from the Budget Office of the federation showed that during the four-year period, the Federal Government allocated a total of N7.53 trillion for capital projects.
A breakdown of this amount showed that the sum of N722.2 billion was allocated for capital projects in the 2015 fiscal period from the total budget of N4.49 trillion for that year. Out of the N722.2 billion, the sum of N557 billion was actually released for implementation of capital projects leaving a funding shortfall of N165.2 billion.
An analysis of the MDAs that received the fund showed that 27 of them had more than the overall average utilization rate of 92.47 per cent in 2015 for the period.
The MDAs include the following ministries, Youth Development, Police Affairs, Agriculture, Water Resources, Education, Trade and Investment, Communication Technology, Interior, Transport, Works, Mines and Steel, Aviation, Environment, Niger Delta, Labour and Employment and National Sports Commission, among others.
Further analysis showed that agencies such as the Federal Capital Territory Administration, Auditor-General, Independent Corrupt Practices and Other Related Offences Commission, National Wages and Salaries, Office of the National Security Adviser, Code of Conduct Tribunal and Police Service Commission had 100 per cent of their respective cash-backed funds utilized.
In the 2016 budget, the sum of N1.58 trillion was allocated for capital projects out of the total annual budget of N6.06 trillion. From the N1.58 trillion, the sum of N1.21 trillion was released for capital projects execution, leaving a funding shortfall of N368 billion. Data from the Budget Office showed that MDAs such as Water Resources, Agriculture, Women Affairs, Youth Development, Communication Technology, Interior, Mines and Steel, among others recorded average utilization rate of 97.75 per cent of the amount released.
In the same vein, 16 MDAs which include the Presidency, Defence, Education, Finance, Health, Trade and Investment, Information, Head of Service, Labour and Employment, among others utilized below the average utilization rate of 97.75 per cent of their cash-backed funds
For the 2017 fiscal period, the sum of N2.36 trillion was allocated for capital projects out of the total annual budget of N7.44 trillion. From the N2.36 trillion allocated for capital project in that year, N1.56 trillion was released leaving a funding gap of about N800 billion. For the 2018 budget, further analysis showed that the sum of N2.87 trillion was budgeted for capital projects out of which N2.07 trillion had been released as at May 14.
A breakdown of the amount released for capital projects showed that the Ministry of Power Works and Housing got the highest amount of N347.52 billion. This is about 42.95 per cent of the N809.05 billion which was allocated to the ministry in the 2018 budget. This was followed by Defence and security, which got N205.89 billion. The amount received by the sector was about 66.85 per cent of its N308 billion allocation in 2018.
The document put the amount released to the Agriculture and Water Resources sector at N152.5 billion, which was about 51.45 per cent of its N296.39 billion allocation
In the same vein, out of the N251.42 billion allocated to the transportation sector in the 2018 budget, about N127.68bn representing 50.79 per cent of the sector’s budget was released.
For the Health and Education sector, the document stated that N115.43bn had been released out of the N189.39 billion allocated to the sector in the 2018 budget.
It said the sum of N186.05 billion out of N323.3 billion allocated to other sectors had been released by the Ministry of Finance.
Further analysis of the document showed that about N70 billion out of the N100 billion allocated for zonal intervention projects had been released by the Ministry of Finance.
In the same vein, N456.5 billion, which is 86.07 per cent of the N530.42 billion allocated for statutory transfers had been released by the government.
The document also stated that the sum of N254.27 billion had been released for capital supplementation. This is about 33.54 per cent of the N758.12bn allocated for the expenditure sub-head in the 2018 budget.
To avoid poor budget performances, the first Professor of the capital markets, Prof Uche Uwaleke advocated for early budget passage and releases to MDAs to ensure greater performance.
As a result of the power tussle between the executive and the legislature, the budget implementation had always commenced very late into the year.
For instance, the 2011 budget was passed on March 25, 2011, while that of 2012 was passed on March 14 of that same year.
For the 2013 budget, it was passed by the lawmakers on December 20, 2012 and signed into law by former President Goodluck Jonathan in February 2013 while the 2014, 2015 and 2016 budgets were also signed in the month of May of each year.
The 2017 budget, which was submitted to the lawmakers in December 2016 was not passed and assented to until June 2017. The 2018 budget, which was designed to consolidate on the Economic Recovery and Growth Plan was presented to the National Assembly on November 7, 2017.
It was passed by the lawmakers on May 16, transmitted to Buhari on May 25 and assented by him on June 20. The Lead Director, Centre for Social Justice, Eze Onyekpere, expressed concern that the late passage of the annual budget has negative implications for the economy.
He said: “We note the late approval and signing, coming in the last days of the fifth month of the year for a budget which should have started running in January. This definitely has implications for the economy considering that the budget plays a signaling role in identifying the priorities and policy direction of a government.
“For a country going through a period of economic stagnation marked by growth figures which are outpaced by population growth figures, a little more sense of timeliness and urgency on the path of the executive and legislature would have done the country a lot of good.
“The executive while moving expeditiously to start disbursing the funds for the implementation of the 2019 budget should consider commencing the 2020 budget process through the preparation of the Medium Term Expenditure Framework document and take all steps to break the cycle of late budget preparation, presentation and approval by getting the 2020 estimates to the National Assembly on or before September 2019.”