Nigeria’s foreign debt is expected to rise further to about $51 billion, following President Bola Tinubu’s request to the Senate, seeking approval to borrow additional $7.8 billion and €100million, as part of his 2022-2024 borrowing plan.
Some financial analysts have debunked the official reasons given for the borrowing, claiming it was rather meant as a bridging loan to cushion the country’s current balance of payment crisis.
Nigeria’s foreign debt as at June 2023, was put at $43.2 billion, while domestic debt is put at N54.1 trillion, bringing public debt to N113.4 trillion.
With the presidential request for new borrowing, coupled with the depreciation of the naira, the total public debt is forecast to reach N130 trillion.
The President in a letter addressed to the Senate yesterday, explained that the request was anchored on an approval given by President Muhammadu Buhari-led administration, after a Federal Executive Council, FEC, meeting early in May 2023.
Senate President Godswill Akpabio, read Tinubu’s request during plenary.
Tinubu’s letter reads: “The Senate may wish to note that the past administration approved the 2022 – 2024 borrowing plan at the Federal Executive Council which was held on the 15th day of May 2023.
“The projects cut across all sectors with specific emphasis on infrastructure, agriculture, health, education, water supply, security and employment as well as financial management reforms, among others.
“The facility of the projects and programmes under the borrowing plan is $7,864,508,559 dollars and then in Euro 100 million euros respectively.
“The Senate is invited to note that following the removal of fuel subsidy and its impact on the economy in the country, African Development Bank, AfDB, and the World Bank Group, WBG, have indicated interest to assist the country in mitigating the economic shores and recent reforms with a sum of $1 billion and $2 billion respectively, in addition to the Federal Executive Council approved 2022-2024 external borrowing plan.
“Consequently, the required approval is in the sum of $7,864,508,559 dollars and in terms of euro, 100 million euros.
“I would like to underscore the fact that the projects and programmes borrowing plans were selected based on positive technical economic evaluations as well as the expected contribution to the social economic development of the country, including employment generation, skills acquisitions , supporting the emergence of more entrepreneurs, poverty reduction and food security to improve the livelihood of an average Nigerian.
“The projects and programmes will be implemented in all the 36 states of the federation and the federal capital territory “In view of the present economic realities facing the country, it has become imperative that the resolve to using the external borrowing to breach the financing gap which will be applied to key infrastructure projects including power, railway, health, among others.
“Given the nature of this facilities and the need to consolidate the country to normalcy, it has become exigent to request the Senate’s consideration and approval of the 2022-2024 external borrowing plan to enable the government deliver its responsibilities to Nigerians through expeditious disbursement and efficient projects implementation.”
World Bank commits $11bn to Nigeria in 3yrs
Meanwhile, the World Bank Country Director for Nigeria, Shubham Chaudhuri, yesterday, said the bank has committed over $11 billion in the past three years to Nigeria’s governments at both the federal and the sub-national levels.
Chaudhuri stated this while giving his goodwill message at the opening of a three-day cabinet retreat for ministers, presidential aides, permanent secretaries and top government functionaries, at the State House Conference Centre, Abuja.
Chaudhuri, assured President Tinubu of the bank’s support in his administration’s challenging task of lifting millions of Nigerians out of poverty and making lives better for everyone.
He said Nigeria is at a critical juncture to either continue muddling through business as usual with the risk of things falling apart or have the courage to chart a new course, to take bold steps to finally see Nigeria rise to its true potential.
He said, “I hope that through what we’ve been able to do that we will be able to continue supporting you, as you realise this enormously important task.
“Although we are at the World Bank, we’re a development organisation and over the last three and a half, four years that I’ve been here, our board has committed over $11 billion in financing for the government, and our financing is meant to go to governments at both the federal and at the sub national levels. So we’re here to support your programmes, we take guidance from you.
“But even though we have the World Bank in our name, I hope you will think of us as more than a bank. I mean, I really hope that we will be able to earn your trust that we have something more to offer in the nature of solutions to help you think through and then implement the priorities, the focus areas that you’ve laid out by bringing in ideas and experience.
“Financing is only part of the solution. It’s really the ideas and the vision. So you have my commitment. I and the team, the entire World Bank across the globe, we’re here to support you on that. And I would also like to say that I feel particularly privileged to have been here in Nigeria these last four years, especially in the last few months at this critical juncture where Nigeria faced critical choice whether to continue muddling through business as usual with the risk of things falling apart growing by the day or have the courage to chart a new course, to take bold steps to really finally see Nigeria rise to its true potential.”
Chaudhuri, who commended President Tinubu’s bold steps since assumption of office, said: “Mr President from inaugural address, you made it very clear what your choice was. You’ve taken some incredibly bold steps, ones that very few leaders, if any, would have had the courage to chart this new course for Nigeria to provide that renewed hope. I think we all recognise how truly kind and remarkable that has been and that it has not been easy.
“In these last few months, the economy, society, Nigerians have had to live through hard times. And Nigeria continues to be in a tender spot, but you stopped the hemorrhage. But now comes the time to rebuild and recover. Please count on us, there will still be some incredibly hard choices and decisions that you and your cabinet will need to make. Count on us to be there to help support you.”
The British High Commissioner, Richard Montgomery, on his part noted that Nigeria faces big security, economic and social challenges.
Montgomery said: “In a global context, the big challenges are difficult global economy, shifting geopolitical and foreign policy pressures. And as I said in public before, I applaud the big and bold economic reforms that you are taking forward. I admire your leadership of ECOWAS (Economic Community of West African States), your strong voice on democracy, and your G-20 international engagement, all of which have thrust Nigeria back onto the international stage.”
He affirmed the United Kingdom’s renewed partnership with Nigeria, with President Tinubu’s cabinet and with the Nigerian people.
According to him, “Nigeria really matters to the UK. We share history, we share a commitment to democratic politics, we share interests in defence and security and trade and investment, which has strong people to people needs. The Nigerian diaspora creative industries, the sports stars are increasingly central to the UK national culture and life. And we also have strong mutual accountability, development agreements at the federal and the state level, on health, on education on job creation, and on government effectiveness.”
The British envoy noted that the High Commission has since 2019 had an excellent partnership with the Office of the Secretary to the Government of the Federation. This is called the partnership to engage, reform and learn. The programme, he said largely handled by Nigerian experts have supported the impressive central coordinating and delivery unit for presidential priorities.
Providing clarity of purpose
“We can only support the process, not the content that is your sovereign decision of government. But your eight priorities area under the renewed hope agenda, Mr President, you provide a clarity of purpose.
“Your policy advisory committees have identified plans, milestones and performance indicators that will be discussed at this retreat. And this cabinet retreat can start to use the SGS tracking system for good effect over the coming years to drive delivery to learn from challenges, and to move Nigeria forward.
“Mr President, no doubt there are challenges ahead. This government has inherited big problems and a tough global context. These are difficult times and people are hurting. Expectations are high. Better delivery is desperately needed. But over my long association with Nigeria, and wherever I go in this great country, I have seen the resilience of Nigerians by their creative and can do attitude and by their entrepreneurial spirit. And I’m optimistic that your Government, Mr President, with ambition and clear plans, can remove the constraints on this entrepreneurial spirit and give a helping hand to those people that need it and help move Nigeria forward.
“So Mr President, I’d like to recognise Nigeria as a growing regional and global powerhouse. You are likely to become the third largest country in the world by 2050. I applaud your plans to stabilise the economy and put it on a higher growth path to prosperity, on which so much else depends.
“The UK stands ready to support in the spirit of mutual respect. The UK stands ready to stand up on our partnerships across a range of areas. And I wish you and your government all best wishes and goodwill in your work ahead.”
Experts worried over debt profile
Meanwhile some financial experts have expressed worry over the latest borrowing round the FG plans to execute.
Speaking to the media on President Tinubu’s request for approval of additional loan from the Senate, David Adonri, analyst and Executive Vice Chairman at Highcap Securities Limited, said: “FGN has over-borrowed and it is also in a debt trap. This means that FGN requires new debt to finance government and meet debt repayment obligations. The situation is even more complicated now that Nigerian Letters of Credit are no longer honoured. This means that the economy requires an immediate bridging loan to address current balance of payment crisis. I don’t think the new borrowing is related to FGN’S 2022-2024 borrowing plan. It is to bridge current FX deficit and keep external credit lines open. This panic measure will only give temporary relief. What is needed urgently is for FGN to negotiate with creditors and reschedule outstanding trade and multilateral debts.”
Economy is seriously challenged on all fronts – Olayinka
In his reaction, Tajudeen Olayinka, analyst and CEO, Wyoming Capital and Partners, said: “If we accept the fact that Nigeria’s economy is seriously challenged on all fronts and in a state of disequilibrium, then every effort by government to restore equilibrium at this time should be seen as a reactionary emergency. I think government is trying to improve dollar liquidity in the foreign exchange market, the same way they are trying to deal with myriad of economic problems left behind by former President Muhammadu Buhari: inadequate foreign reserves, humongous stock of public debt, extremely low oil revenue, unsustainable level of revenue to debt service ratio, poor purchasing power and mounting inflationary pressure, etc. So, in a way, additional borrowings to improve confidence in the economy might just be inevitable at this time.”
Continuing, he said: “My advice to government is to ensure they run a comprehensive adjustment programme that can restore equilibrium to the economy, using the right set of people with good knowledge of adjustment programme. I believe the current economic problem is temporary.”
Govt should rely on non-debt financing sources – Prof Uwaleke
Commenting, Prof Uche Uwaleke, said: “What is the purpose of the loan? What are the terms? What is the source of repayment? These are some relevant questions the lawmakers should ask Mr President.
“The government should stick to its promise of relying more on non-debt financing sources given the fact that the country is already in debt crisis.”
It will stabilise exchange rate, reduce further devaluation of naira – Kurfi
Mallam Garba Kurfi, Managing Director/CEO, APT Securities and Fund, observed that the planned borrowing is good as it will stabilise the exchange rate market and reduce further devaluation of the Naira.
He opined that it is needed in order to meet the huge demand for FX.
His words: “It is better late than never. This borrowing should be done before the unification into single exchange rate. This will stabilise the exchange market and reduce the devaluation of naira.
“We have no choice than to borrow in foreign exchange to meet up the huge demand of FX.”
He added there’s the need for government to ensure that more cruide oil is exported in order to earn more dollars. “There is need to look for other means to export other minerals and agricultural produce in order to earn more foreign exchange.
“We also need to do those things that will attract more remittances from diaspora. Last year, diaspora remittances contributed more than $20 billion to the economy,” he said.
FG should discontinue plans to borrow- Ubaka
Also commenting, Johnny Ubaka, Secretary of Association of Concerned Freight Forwarders and Transporters, ACFF&T said: “The Federal Government has been charged to discontinue plans to borrow $7.8 billion and 100 million Euros but instead it should concentrate on improving the nation’s export volume as well as production capacity.”
Speaking on the issue, Secretary of the association, Ubaka, said: “improving the nation’s export volume as well as production capacity, if sustained would help increase the country’s Gross Domestic Product, GDP.”
On what alternative source of funds government can consider, Ubaka said that the government income has improved greatly since it started double taxation, especially in the maritime sector.
He said before now, import duty was N4 million but it has been hiked to N8 million. He further stated that with the volume of import that comes through the nation’s seaports, the revenue accruable would have also doubled.
