Nigeria spent N664.73bn on domestic debt servicing in Q2 2022 — LCCI
By Agunsoye Adenike
The Lagos Chamber of Commerce and Industry has said Nigeria spent a whopping sum of N664.73billon on domestic debt servicing in second quarter of 2022.
The President, LCCI, who said this at the LCCI 134th Annual General Meeting (AGM) on Thursday in Lagos said that Nigeria’s debt-servicing bill has increased by 1.8 per cent from N896.56bn in 2022 Q1 to N912.71bn in Q2 2022, while it spent $597.95m (N247.98bn) on external debt servicing, giving a total of N912.71bn.
He said, The borrowings are significantly increasing, and Nigeria is struggling to service these debts due to revenue mobilisation challenges and an increased fuel subsidy burden.
“The International Monetary Fund (IMF) has warned that debt servicing may gulp 100 per cent of the Federal Government’s revenue by 2026 if the government fails to implement adequate measures to improve revenue generation.”
On the Fiscal development, the President said that the record 20.5 trillion Naira (or $47.3 billion) proposed expenditure by the Federal Government to run the economy in 2023 reflects the huge needs that exist in critical sectors of the economy.
The proposed budget, which is 19 per cent higher than the 2022 budget is expected to take effect from January 2023 to address economic growth, fiscal sustainability, and security.
“We are of the view that while nothing is wrong with the N10.78 trillion deficit, everything is wrong with the plan to issue N10.57 trillion (N8.8 trillion in new commercial loans and N1.77 trillion drawdown on bilateral and multilateral loans) new loans to finance the deficit, at a time that we are already placed on the watchlists of some of our foreign bondholders, and the world was a bit confused at our president’s well-publicized call for debt cancelation at the last united nations general assembly.
“The protracted challenges for the Naira exchange rate are deep-rooted in the weak productive base of the country. In the course of the year and recently too, the CBN announced the naira redesign project which drove some speculative spending that helped the naira to appreciate but that was short-lived because of lack of fundamentals to sustain such appreciation.
“The real solution to our forex scarcity crises is to boost production and expand exports. We must also resolve the crises around oil production as 80 per cent of forex earnings come from the oil and gas exports. The naira witnessed has recorded a continuous fall from N415/USD early in the first quarter to about N443/USD as at mid-November.”
The President of the Chamber proposed that the nation’s foreign trade in goods rose quarter-on-quarter, QoQ, by 1.23 percent in the second quarter of 2022 to N12.84 trillion from N13.0 trillion in the first quarter of 2022.
According to the NBS, the value of exports rose QoQ by 4.31 per cent to N7.41 trillion in Q2, 2022 from N7.10 trillion in Q1, 2022.
However, the value of imports declined QoQ by 7.89 per cent to N5.44 trillion in Q2, 2022 from N5.90 trillion in Q1, 2022.
The trade balance stood at a surplus of N1.97trillion in the second quarter of 2022.
He ascertained that the total value of capital importation into Nigeria in the second quarter of 2022 stood at $1,535.35 million from $875.62 million in the corresponding quarter of 2021, showing an increase of 75.34 per cent. When compared to the preceding quarter, capital importation decreased by 2.40 per cent from $1,573.14 million.
“The largest amount of capital importation was received through portfolio investment, which accounted for 49.33 per cent ($757.32 million).
“This was followed by other investment with 41.09 per cent ($630.87 million) and Foreign Direct Investment (FDI) accounted for 9.58 per cent ($147.16 million) of total capital imported in Q2 2022.
“The concern here is that FDI’s (at a low of 9.58 per cent) are more valuable than the other types of investment inflows. We need more FDI’s to create jobs and increase output in the economy. To achieve this, we must tackle the worsening insecurity in many parts of the country and implement investment-friendly policies to create an enabling investment and regulatory environment,” he said.
He confirmed that the National Bureau Of Statistics released the 2022 Multidimensional Poverty Index (MPI) with five components of health, living standard, education, security, and unemployment.
The report revealed that about 133 million people (63 per cent of total population) are poor in many areas of human life in Nigeria.
He recalled that last year, the national poverty reduction with growth strategy was developed by the presidential economic advisory council to actualise President Buhari’s aspiration of lifting 100 million Nigerians out of poverty by 2030.
“The total cost of implementing the proposed initiatives was estimated at $1.6 trillion over 10 years between 2021 and 2031. Similarly, the report proposed the creation of a nigerian investment and growth fund to mobilise funds for the implementation.
“During the period, the annual average reduction in poverty is projected to be around 11.2 million per annum, 80 per cent of which will be self-employment, and 20 per cent in wage-paying jobs. Unfortunately, most of these provisions have not been implemented due to weak finance base and uncoordinated policy mix.
“The national grid collapsed for the 7th time in September 2022 on September 26. It is evident that the national grid cannot supply sufficient power to meet the electricity demand of nigerians.
“There have been issues with the vandalisation of power installations, a disrupted gas supply, distribution companies (DisCos) lacking the capacity to take up power generated by the power generating companies (GenCos), and the challenges of achieving 100 per cent metering for power consumers.
“With the cost of diesel at record levels and persisting poor power supply, businesses are running on unsustainable costs and producing at uncompetitive prices.
“This can lead to job losses if the output is constrained due to the unbearable cost of production. If not quickly tackled, these challenges will likely subdue the GDP growth potentials and projections for 2022.
“The most sustainable solution to Nigeria’s power shortages is the transition to renewable energy and the decentralization of the national grid.”
Speaking on the activities of service committees and sectoral groups, the President said that the activities of LCCI service committees and sectoral groups were sustained during the year despite the numerous challenges of the business environment.
He stated that the council, Executive Committee, service committees, boards, sectoral groups held their meetings as scheduled and organised several seminars, lectures, and symposia in a continued effort to educate members and influence public policy.
He confirmed that all the committees and sectoral groups performed very well and the achievements recorded could not have been possible without the support and cooperation of chairmen, and members of the sectoral groups and board committees.
Dr Micheal expressed his sincere appreciation for the huge cooperation and commitment to the promotion of the noble cause of the chamber.
He concluded that LCCI had an eventful year in 2022.
