The Covid-19 pandemic has sent shock waves to nations across the world, and African economies already neck-deep in debt have been forced to borrow even more. With a 21% Debt-to-Gdp ratio, Nigeria might be well on her way to losing control of her debts; there is an urgent need for reform.
Africa’s debt challenge is a well-known fact. For decades since independence, many African nations – for reasons ranging from surviving recessions to surviving thier bad habits – have borrowed funds from the international community to service infrastructural challenges, amongst others.
From issuing foreign currency denominated Eurobonds, to China’s debt-traps, and even care packages at low costs from international organizations, the continent has perpetually reached out for external help to meets its needs. It is so bad, that analysts at Bloomberg revealed that governments in these nations are now spending more on debt-service costs than on health!
As of 2017, 19 African countries had exceeded the 60% Debt-to-GDP threshold previously put in place by the African Monetary Co-operation Program (AMCP) for developing economies. The World Bank also reveals that 24 countries have surpassed the 56% percent debt-to-GDP ratio put in place by the International Monetary Fund.
If nations had planned to cut down on such borrowings – especially those that came with the additional cost of their souls, or at least unfavorable interest rates – 2020 has proven to not be the year for that. No thanks to the exogenous shock that is Covid-19, African economies, and indeed economies across the world, have been hamstrung, taking only what they can obtain internally and grappling for external support to be able to ramp up their stimulus packages amongst other survival measures. The case isn’t any different for Nigeria.
(READ MORE: A Post-COVID Economy)
In March 2020, the Senate placed Nigeria’s total debt profile at N33 trillion after it approved an additional $22.7 billion foreign loan for the federal government. The implication of this is a 21% Debt-to-GDP ratio – a far cry from the minimum ratio.
In a public lecture organized by the National Institute for Legislative and Democratic Studies (NILDS), themed “Public Debt in Nigeria: Trend Sustainability and Management”, the Director-General of the Debt Management Office, DMO, Mrs. Patience Oniha, had expressed fears about the global economic effects of the Covid-19 pandemic and its ability to frustrate Nigeria’s attempts to service its debts.
She explained that asides the low Debt/GDP ratio, the actual debt service to revenue ratio had stood at over 50% since 2015 – an indicator of lower revenues and higher debt service figures. Despite the magnanimous donations from angel nations, Nigeria has only plunged further into debt.
Even though there have been speculations, so far, no African government has publicly announced its desire to waive payments on Eurobonds or change the terms of its contracts. However, The Group of 20 (G-20) had met weeks prior to this, to suspend $20 billion in bilateral debt payments from the world’s poorest countries, predominantly in Africa, until the end of the year. Very little can be said for the bondholders.
To nip the challenge in the bud, there is a need for restructuring of our debt while the country needs more loans at concessionary rates. Most economist estimate the country needs between N10- N20 trillion in funding if its to get this economy to start growing again and lift millions out of poverty.
Unfortunately, we are not the US and can’t print out way out of an imminent recession. That money will have to be raised via a bouquet of local and foreign debt, donor financing and private sector investment in the economy. It’s funding on the scale never before seen in the entire continent.
If raised and channeled appropriately, the impact could be exponential not just for commerce in Nigeria but for the whole sub-Saharan Africa. Jobs will be created, new trade routes invigorated and tens of millions of people lifted from out of poverty.
But no one will bail out Nigeria with the current string of inefficient government policies. There is so much corruption in the public space there is little confidence that the money will be spent judiciously if every raised. It seems we also need a bailout from bad governance.
Private sector investments also needs to be secured if investors are to be wooed. You can’t have an investor bring in billions of dollars to build roads and have a mad man who just became governor cancel concessions for political reasons. Private property has to be protected and the laws of the land must adapt to the economy of now and the future.
In the light of its looming debt challenges, there is a need for Nigeria to welcome the idea of a reformation and restructuring program. The first reason is to mitigate the downward progression of its debt, and the other is to ensure that it remains attractive to international donor agencies. You have to demonstrate ability and capacity to repay the debts.
The plan will consist of a combination of borrowing, a focus on the service sectors, and stern economic reforms. The tripartite plan will serve as a balanced scorecard of some sort, ensuring that amidst its current and potential borrowings, its earning capacity is diversified as it looks beyond oil as a source of revenue by building up the nation’s service sector.
By encouraging industries, it can then expand its tax collection systems thereby boosting the overall revenue for the state. Whilst this is in no way conclusive, one thing is certain: Our inaction does nothing other than sinking us further into the troubles we created ourselves. There is a need to stop, think, and re-strategize our path from here on out.
FG discusses nation’s carrier, Nigeria Air with US Ambassador
The FG has held a discussion with the US government over the establishment of a national carrier for Nigeria.
The federal government has held a discussion with the government of the United States of America over the establishment of a national carrier for Nigeria.
This was disclosed by the Minister of Aviation, Hadi Sirika via his Twitter handle after he held a discussion with the Ambassador at the United States Embassy in Abuja.
He tweeted, “We took the opportunity to discuss investments and opportunities in the aviation sector, including national carrier. The partnership looks promising. USA is the only country we have open skies with. Thanks, Ambassador Mary and the team.”
What you should know
In July 2018, the Federal Government unveiled the branding and livery for the new airline, Nigeria Air, and stated that the carrier would be inaugurated at the end of that year.
Sirika unveiled the carrier at a press conference during the Farnborough Air Show in London that year.
“I am very pleased to tell you that we are finally on track to launching a new national flag carrier for our country, Nigeria Air. We are all fully committed to fulfilling the campaign promise made by our President, Muhammadu Buhari, in 2015. We are aiming to launch Nigeria Air by the end of this year,” the minister had said.
He also stated that the government had obtained the Certificate of Compliance from the Nigerian Infrastructure Concession Regulatory Commission and would go into investor search.
SERAP asks Buhari to probe N39.5 billion duplicated, mysterious projects
SERAP has asked President Muhammadu Buhari to probe the reported N39.5 billion duplicated and mysterious projects inserted in the 2021 budget.
Socio-Economic Rights and Accountability Project (SERAP) has asked President Muhammadu Buhari to probe the reported N39.5 billion duplicated and mysterious projects inserted in the 2021 budget.
This is to know if public funds have been diverted in the guise of implementing the projects and prosecute those allegedly involved including those from the executive and the National Assembly.
The request from SERAP follows a report from BudgiT last week, where they alleged that there are 316 duplicated capital projects worth N139.5 billion in the 2021 budget.
This disclosure is contained in a public statement issued by SERAP on Sunday, May 9, 2021, and can be seen on its website.
SERAP said that the investigation of the alleged duplicated and mysterious projects, which are part of the 2021 appropriation bill of N13.588 trillion, should establish whether public funds have been mismanaged, diverted or stolen in the guise of implementing these projects.
What SERAP is saying in its letter
In the letter dated 8th May 2021 and signed by SERAP, Deputy Director, Kolawole Oluwadare said: “The misallocation of public funds for duplicated and mysterious projects has seriously undermined the ability of the indicted MDAs, and the government to ensure respect for Nigerians’ human rights through developing and implementing well-thought-out policies, plans, and budgets.”
The letter from SERAP partly reads, “BudgIT had in a report last week stated that there are 316 duplicated capital projects worth N39.5 billion in the 2021 budget. The duplicated and mysterious projects are contained in the 2021 appropriation bill of N13.588 trillion signed into law in December 2020.”
These damning revelations suggest a grave violation of the public trust, and Nigerians’ rights to education, health, water, sanitation, and clean and satisfactory environment because the indicted MDAs have misallocated public funds at the expense of the people’s access to basic public services, and enjoyment of rights.”
SERAP urges you to ask the heads of the MDAs involved to explain why they allegedly failed to ensure strict compliance with constitutional and international standards of transparency and accountability in the preparation, processes and decisions on their budgets, and to return any misallocated public funds to the public treasury.”
Investigating and prosecuting any allegations of mismanagement, diversion and stealing of public funds budgeted for the 316 duplicated and mysterious projects would allow your government to use the budget to effectively promote Nigerians’ access to essential public goods and services.”
Publishing the ‘implementation status’ of the duplicated and mysterious projects would allow Nigerians to hold their government to account in the spending of public funds. This is particularly true for marginalized and excluded groups, such as people living in poverty, women, children, and persons with disabilities, as the budget has a disproportionate impact on their welfare.”
We would be grateful if the recommended measures are taken within 14 days of the receipt and/or publication of this letter. If we have not heard from you by then, the Incorporated Trustees of SERAP shall take all appropriate legal actions to compel your government to comply with our request in the public interest.”
SERAP also urges you to direct Mrs Zainab Ahmed, Minister of Finance Budget and National Planning to publish full details of current ‘implementation status’ of the duplicated and mysterious projects, and any spending on the projects to date, including the 115 projects inserted in the budget of the Ministry of Health; the 23 projects inserted in the budget of the Ministry of Education, and 10 projects inserted in the budget of the Ministry of Water Resources.
The following ministries are reportedly involved in the duplicated and mysterious projects: Ministry of Health with 115 projects; Ministry of Information and Culture with 40 projects; Ministry of Agriculture and Rural Development with 25 projects; Ministry of Education with 23 projects; Ministry of Transportation with 17 projects; and Ministry of Science and Technology with 17 projects.”
Others are the Ministry of Environment with 13 projects; Ministry of Power with 11 projects; Ministry of Labour and Employment with 11 projects, and Ministry of Water Resources with 10 projects.”
The letter was copied to Mr Malami; Professor Bolaji Owasanoye, Chairman Independent Corrupt Practices and Other Related Offences Commission (ICPC); Mr Abdulrasheed Bawa, Chairman, Economic and Financial Crimes Commission (EFCC); and Mrs Ahmed, the Finance Minister.
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