18 days to Buhari’s handover: Budget Office raises alarm over $800m loan request
…Tells Lawmakers about Nigeria’s limited borrowing space
Amidst the fear of Nigeria being trapped in debt ,President Muhammadu Buhari has again raised letter of request for approval to the Senate to obtain another $800 million loan from the World Bank.
This request made 18 days to end the tenure of President Muhammadu Buhari-led Federal Government according to analyst will worsen Nigeria’s debt profile which has constitently maintained an upward trend.
The request for the loan, said to be for financing the National Social Safety Network Programme, was contained in a letter read by the President of the Senate, Ahmad Lawan, to lawmakers on the floor of the Senate on Wednesday.
The letter of President Buhari partly read, “Please note that the Federal Executive Council approved an additional loan facility to the tune of $800 million to be secured from the World Bank, for the National Social Safety Net Programme and the need to request for your consideration and approval to ensure early implementation.
“The Senate may wish to note that the programme is intended to expand coverage of shock responsive safety net support among the poor and vulnerable Nigerians. This will assist them in coping with the costs of meeting basic needs.
“You may wish to note that, the Federal Government of Nigeria under the conditional cash transfer window of the programme will transfer the sum of N5,000 per month to 10.2 million poor and low-income households for a period of six months, with a multiplier effect on about 60 million individuals. In order to guarantee the credibility of the process, digital transfers will be made directly to beneficiaries’ accounts and mobile wallets.
“The NASSP being a social intervention programme will stimulate activities in the informal sector, improve nutrition, health, education and human capital development of beneficiary households.
“Given the above, I wish to invite the Senate to kindly approve an additional loan facility to the tune of USD8OO million to be secured from the World Bank for the National Social Safety Net Programme.”
He expressed hope that the request will “receive expeditious consideration by the Senate.”
Nigeria’s borrowing from the World Bank had reached $14.34billion as of March 31, 2023, with a debt of $488.66million from IBRD and $13.85billion from IDA as of March 31, 2023.
…Much trouble, we are pushing towards 100 per cent revenue-to-debt ratio’ — Budget Office warns
Meanwhile, the Budget Office of the Federation has said trouble looms for the Country, pointing to a “limited borrowing space” amidst poor debt-to-revenue ratio.
The Director-General, Budget Office, Ben Akabueze, while addressing members-elect of the 10th National Assembly at their week-long induction ceremony in Abuja on Wednesday, pointed out that while Nigeria remains healthy with its debt-to-GDP ratio, the Country is not healthy with its debt-to-revenue ratio.
Akabueze whose address to the newly elected and returning members of the National Assembly, who upon inauguration will be responsible for the consideration, amendment and passage of annual budgets of the Federal Government as well as approval of loan request, coincided with the time the Buhari’s loan request was read on the floor of the Assembly on Wednesday, said, “You may have heard that we have one of the lowest Gross Domestic Products-to-debt ratios in the world. While the size of the FG budget for 2023 created some excitement, the aggregate budget of all the governments in the country amounted to about N30trillion. That is less than 15 per cent in terms of ratio to GDP.
“Even on the African continent, the ratio of spending is about 20 per cent. South Africa is about 30 per cent; Morocco is about 40 per cent. And at 15 per cent, that is too small for our needs. That is why there is fierce competition for the limited resources.
“That can determine how much we can relatively borrow. We now have very limited borrowing space; not because our debt to GDP is high, but because our revenue is too small to sustain the size of our debt. That explains our high debt service ratio. Once a country’s debt service ratio exceeds 30 per cent, that country is in trouble and we are pushing towards 100 per cent, and that tells you how much trouble we are in.
“We have limited space to borrow. When you take how much you can generate in terms of revenue and what you can reasonably borrow, that establishes the size of the budget. The next thing would be to pay attention to the government’s priority regarding what project gets what.
“We are not even an oil-rich economy. To classify oil-rich economies, you talk of countries like Saudi Arabia where there are 34 million of them and pump 10 million barrels of crude per day, or Kuwait where there are 3 million of them and pump 3 million barrels per day.”
He noted that for Nigeria, while she has a population of over 200 million, she is currently pumping about 1.9 million barrels per day.
“So, we are not a rich economy and must resist the temptation we are an oil-rich economy. Let me make it clear that we are potentially rich countries, but we are not,” he argued.
Recall the duo of the Senate and House of Representatives had respectively on Wednesday and Thursday last week, approved the President Buhari Ways and Means N22.7 trillion loan request to be sourced from the Central Bank of Nigeria (CBN).
The N22.7 trillion Ways and Means credit facility which authorises the Federal Government to borrow money from the (CBN), would be adding to the huge debt profile of the Country which has become a burden with lamentations from stakeholders who fear the Country may become trapped in debt with the risk of using 100 percent of its revenue to service debt.
