Earlier this week while delivering a speech during the 3rd National Treasury Workshop organised by the Office of the Accountant General of the Federation, former CBN Governor, Sanusi Lamido, declared that Nigeria is “bankrupt and the country is heading to bankruptcy”.
As expected, the media space was set agog by Sanusi’s utterance, even as Nigerians reacted with the respective biases.
To say the least, the question on everyone’s lips is if Nigeria is indeed bankrupt or broke? Here are some insights into Sanusi’s claims that may further affirm that Nigeria is on the threshold of bankruptcy.
Nigeria’s rising Debt and Cost: Data obtained from Nigeria’s Debt Management Office (DMO) as at the end of 2018 shows that the country’s public debt (domestic and external) stood at a whopping N24.3 trillion. This is about 19% of the country’s Gross Domestic Product.
- Nigeria’s rising debt has attracted wide criticisms both locally and internationally. For example, earlier this year the International Monetary Fund (IMF) questioned Nigeria’s ability to repay its N24.39 trillion debt.
- The IMF also expressed concern about the rollover risks, arguing Nigeria’s capacity to refinance debt might drop in the future. Meanwhile, the Federal Government has since rebuffed such claims, stating that the nation’s debt burden is sustainable.
However, the cost of servicing such debts has become worrisome in recent years. Analysis of data obtained from the budget office and DMO reveals the following:
- Nigeria spent the sum of N2.16 trillion for service debts in 2018
- The cost of debt service rose by 2.16% between 2017 and 2018
- In the last four years (2015-2018), Nigeria spent a whopping N6.46 trillion to service debt.
Some recent claims: Recently, the African Development Bank (AfBD) revealed that Nigeria spends more than 50% of its revenue on debt servicing. The president of the AfDB, Akinwunmi Adesina, revealed this while speaking at the annual general meeting of AfDB in Malabo, Equatorial Guinea.
While the Accountant General of the Federation, Ahmed Idris recently admitted that Nigeria’s debt servicing is worrisome, he was quick to dismiss the report that servicing the country’s debt at the rate of over 50% of the total national income will destabilize the economy.
Fact check: According to the report from AfDB, the debt service rate of over 50% of Nigeria’s revenue is indeed damaging. A cursory look at Nigeria’s debt and revenue becomes quite fundamental.
- Nigeria’s debt service in 2018 was N2.16 trillion, while Government revenue stood at N3.96 trillion
- Total debt service in four years stood at N6.46 trillion, while the country’s revenue for the same period was estimated at N12.32 trillion.
- Hence, in 2018, Nigeria’s debt service is 54% of the total revenue.
- In the last four years, Nigeria’s debt service gulps 52% of the total country’s revenue.
Based on the foregoing, it is crystal clear that in order to fund Nigeria’s N8.83 trillion budget, the country will have to borrow a lot of money. This only affirms Sanusi’s claims. Just recently, the Former Minister of Budget and National Planning, Senator Udo Udoma, stated that the Federal Government of Nigeria will borrow N1.6 trillion this year to fund the budget.
Subsidy gulps Trillions: Again, the Emir Sanusi was critical of the Buhari Government’s continued payment for fuel subsidy which is gulping trillions of naira. Interestingly, the Buhari camp moved against a similar subsidy payment during the former administration of Goodluck Jonathan.
“What is more life-threatening than the subsidy that we have to sacrifice education, health sector and infrastructure for us to have cheap petroleum? If truly President Buhari is fighting poverty, he should remove the risk on the national financial sector and stop the subsidy regime which is fraudulent.” – Emir Sanusi
To establish Sanusi’s claims, it has been revealed that Nigeria spent N11 trillion on outstanding subsidy claims in the last six years. Recently, the committee headed by Senator Kabir Marafa approved the payment of N129 billion as outstanding subsidy claims to 67 petroleum marketers. It can only get worse if urgent action is not taken.
To say the least, the banking sector is also bearing the brunt. Much has been said of non-performing loans threatening the Nigeria banking sector. However, a look into bank loan data obtained from the Nigeria Bureau of Statistics (NBS) shows that Nigeria government loan portfolio from banks is estimated at a whopping N1.36 trillion as of April 2019. On the chart, the Government loan portfolio ranks third, just after Oil and Gas and Manufacturing sectors.
But is Nigeria Bankrupt? By definition, being bankrupt is a state of being legally unable to pay once debt as and when due. While bankruptcy is the legal process of declaring this debt and how creditors will be paid. Nigeria is nowhere near bankruptcy by this definition.
However, Sanusi is right after all: Without gainsaying the fact, Nigeria is on the verge of bankruptcy if it continues on this economic pathway. The government has not done enough to demonstrate how it intends to grow its revenues enough to cover for its rising debt service. Whilst it focusses on dishing out government handouts, bailouts, and subsidies, it hasn’t presented cogent plant of boosting its revenues.
FG to seek international cooperation to curb illicit financial flows
FG hopes to strengthen international cooperation in curtailing the menace of illicit financial flows.
The Federal Government has said that there is a compelling need to strengthen international cooperation in the global effort to curtail the menace of illicit financial flows, as current international mechanisms are not strong enough.
This was disclosed by President Muhammadu Buhari in a speech delivered on his behalf by Vice President Yemi Osinbajo on Thursday at the Financial Accountability, Transparency and Integrity (FACTI) Panel Video Conference.
Osinbajo’s spokesman, Laolu Akande, in a statement in Abuja, explained that the event was held at the sidelines of the ongoing United Nations General Assembly (UNGA).
The session also featured presentations by the immediate past President of the United Nations General Assembly, Prof. Tijjani Muhammad-Bande, and Amb. Mona Jul of the Economic and Social Council (ECOSOC).
He said, “The current international mechanisms for asset recovery are not good enough as can be seen in the amount lost to illicit financial flows and the length of time taken before the repatriation of just a small fraction is made.
“The FACTI Panel report can play an important role in bridging the expectations of source and destination countries as well as in harmonising the process of assets recovery and return. We agree with the Panel on the importance of having a balanced approach that reflects the situation in different regions and the priorities of different stakeholders. I believe that for the global aspiration to recover better from the impact of the pandemics and to yield any inclusive result, we must comprehensively address existing structures that make it impossible for countries to generate and retain a sizeable chunk of their resources. The success of the FACTI panel’s final report will be measured by the clarity of its recommendations in support of global governance reforms.”
According to the President, evidence suggested that the contemporary international tax system used a taxing rights regime that was not fit for purpose.
He added that the system makes combating tax abuses, especially by multinational corporations, difficult for most developing countries.
“It is my hope that the final report of the FACTI Panel would introduce proposals that would lead us towards a fairer international tax regime .I also hope that the report would contain proposals that would address the continuing advocacy for country-by-country reporting, open disclosure and automatic exchange of information on beneficial ownership, as well as eliminate financial secrecy jurisdictions and tax havens that facilitate base erosion and profit shifting. Profit shifting, harmful tax competition–the so-called “race to the bottom–and the taxation of the digital economy should also receive adequate attention and focus in the report of the Panel. FACTI Panel’s report should assess how effectively we are meeting our commitments to combating the scourge and strengthening cooperation in dispute settlement and peer learning, particularly in assets recovery and return,” he said.
Other leaders who spoke at the forum included the Prime Minister of Norway, Erna Solberg, the Prime Minister of Pakistan, Imran Niazi and Former President of Lithuania, and FACTI Panel Co-Chair, Dalia Grybauskaite.
Ibrahim Mayaki, former Prime Minister of Niger and FACTI Panel Co-Chair, also spoke at the event.
N4.16 billion unpaid lottery revenue recovered by EFCC
The EFCC has made a recovery of the sum of N4.16 billion for the government from lottery companies.
The Economic and Financial Crimes Commission (EFCC) has announced that it recovered over N4.16 billion for the government from lottery companies which they had refused to remit.
This was disclosed by the Acting Chairman. Mohammed Umar Abbah on Thursday evening, at the EFCC Headquarters during a meeting with Williams Alo of the Ministerial Task Force for recovery of unpaid revenues from lottery businesses.
The EFCC acting chairman said that the lottery companies were not forthcoming with remitting the revenue which had forced the anti-graft agency to intervene.
“We mapped out strategies which resulted in the recovery of over N1.16 billion from lottery companies, operating in Abuja with over N3 billion from their counterparts, operating in Lagos State,” he said.
He added that the EFCC would continue with its cooperation with the Federal Government to ensure lottery companies owing the Federal Government are made to cough out revenues they owe the government, which has already been handed over to the lottery trust fund.
“Let me acknowledge the efforts of this Commission for the assistance it has rendered not only to the Federal Government of Nigeria but specifically to the lottery industry in Nigeria. It is in our record that the EFCC has assisted the lottery business in no small way, because a lot of recoveries have been made for us by the EFCC and the money recovered has always been handed over to the lottery trust fund,” Mr. Alo said.
Presidency denies building rail line from Nigeria to Niger Republic
The Federal Government has denied plans to construct a rail line stretching from the country into the Niger Republic.
The Presidency has disclosed that the Federal Government is not constructing a rail line from Nigeria linking Kano-Dutse-Maradi into the Niger Republic, as it will only stop at the designated border point.
This follows the public outcry that greeted the Federal Government’s announcement of the rail project.
The disclosure was made by the Senior Special Assistant to the President on Media and Publicity, Garba Shehu, through a thread of tweets on his official Twitter handle on Thursday, September 24, 2020.
Nigeria isn't building rail line into Niger but, only to the designated Border point.
— Garba Shehu (@GarShehu) September 24, 2020
He revealed that, based on the agreement reached between Nigeria and Niger in 2015 for the Kano-Katsina-Maradi corridor masterplan, the 2 countries agreed to build a rail line to the border town of Maradi.
In his statement, Garba Shehu said, “Nigeria isn’t building rail line into Niger, but only to the designated Border point. An agreement between Nigeria and Niger in 2015, coordinated by the Nigeria-Niger Joint Commission for Cooperation has a plan for ‘Kano-Katsina-Maradi Corridor Master Plan, (K2M)’ as it is called.
“Going by this, the two nations would each build a rail track to meet at the border town of Maradi. Nigerian delegates to that meeting comprised officials from the Ministry of Foreign Affairs, National Boundaries Commission, Federal Ministry of Industry, Trade & Investment, Ministry of Agriculture and Rural Development, Water Resources as well as those of Kano & Katsina states.”
Going further he said, “The objective of the rail is the harnessing of raw materials, mineral resources, and agricultural produce. When completed, it will serve domestic industries, and play the role of a viable transportation backbone to the West African subregion, starting with the neighboring Niger Republic, for their export and import logistic chain.”
Nairametrics had earlier reported that the Minister for Transportation, Rotimi Amaechi, after the Federal Executive Council (FEC) meeting presided over by President Muhammadu Buhari, announced the approval of the total sum of about $1.9 billion, for the rail line contract and development of Kano-Katsina-Jibia that will terminate at Maradi rail line in the Niger Republic.
According to a media aide to the president, Ajuri Ngelale, the rail line is expected to connect the 3 states of Kano, Katsina, and Jigawa. It moves from Kano to Dambata, Kazaure, Daura, Mashi, Katsina, and terminating in Maradi, Niger Republic.