The directive of Nigerian President Muhammadu Buhari to compel government Ministries, Departments and Agencies to maintain the Single Treasury Account (TSA) at the Central Bank, could whittle down the appetite for the issuance of FGN Sovereign bonds, according to bankers and economists.
“On the one hand, there is little question that a TSA will help to reduce the overall level of government borrowing over time.If all government agencies pool their revenue into a single account, not only is there more transparency, but this should also reduce the amount that needs to be borrowed, because of the balances available to government agencies,” Razia Khan, Managing Director, Chief Economist, Africa Global Research at Standard Chartered Bank, London, said in a response to questions.
“Near term however, lower oil prices and the discovery of substantial arrears will push Nigeria’s borrowing requirement higher.”
Nigeria, Africa’s largest crude producer, relies on oil revenues to fund about 70 percent of the Federal Budget and 95 percent of exports income.
As the price of oil plunged 50 percent in the past 12 months, the government has had to run a large deficit this year, with revenues getting squeezed.
Nigeria’s 2015 budget that proposes to spend N4.358 trillion on recurrent and capital projects has an embedded deficit of N755 billion which will be 75 percent financed by domestic borrowing.