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.
Nigeria to begin gold production in 2021 with the Segilola Gold Project
The gold produced is expected to become a part of Nigeria’s external reserve.
Nigeria is set to commence gold production in 2021 after the launch of the Segilola Gold Project in Osun state. This was disclosed by the Honourable Minister of Mines and Steel Development, Olamilekan Adegbite, while taking stock of his first year in office as Minister.
In a statement signed by his Special Adviser on Media, Ayodeji Adeyemi, Adegbite said that the project is expected to create about direct 400 direct jobs and 1000 indirect jobs along the gold value chain.
He added that once the project takes off, Nigeria would become a major gold producing country, a move that would hasten the diversification of the economy and reduce unemployment among the youth populace.
He noted that the government was creating an enabling environment across the gold value chain. According to him, “the international roadshows we have had in the past have borne fruits. Today we have Thor exploration in Osun State through the Segilola Gold project, which is projected to start producing in the first half of next year.”
The minister also noted that the government has licenced two gold refineries to refine gold to the London Bullion Market Association, LBMA, standard.
About the Ajaokuta Steel Plant, Adegbite explained that the global travel restriction caused by the pandemic had prevented the technical experts from Russia from coming over to the plant to conduct an audit of the steel plant. He assured that this would be done as soon as the flight restriction was over, and there are hopes to revive the plant before the expiration of President Buhari’s tenure.
Why it matters
The take-off of gold production in Nigeria is expected to open up an industry centred around gold production, from equipment leasing and repairs, logistic and transport. Note that gold requires a specialized means of transport, security, insurance, aggregators among others. These, according to Adegbite, would ultimately create tens of thousands of jobs across the gold value chain.
The minister further stated that Nigeria has mined, processed, and refined gold under the Presidential Artisanal Gold Mining Development Initiative, PAGMI. The first batch of PAGMI gold was unveiled at a presentation ceremony to President Buhari on July 16, 2020.
The gold produced is expected to become a part of Nigeria’s external reserve after being purchased by the Central Bank.
“PAGMI will result in the creation of thousands of new mining and formalized jobs, leading to poverty alleviation for many households. Under the scheme, artisanal and small scale gold miners will earn more from higher productivity, better recovery rates through mechanization of operations, and better access to reliable geological information,” he said.
AGF launches Committee on Financial Transparency Guidelines and Open Treasury Portal
This initiative will provide the public with financial information of all MDAs.
Office of the Accountant-General of the Federation has launched a Committee on Federal Government Financial Transparency Guidelines and Open Treasury Portal to enable Transparency on economic governance policy.
Speaking during the launch today in Abuja, the Accountant-General of the Federation, Ahmed Idris, FCNA, said the committee would provide the public with financial information of all MDAs to promote accountability and anti-corruption campaign.
The AGF said that the Honourable Minister of Finance and National Planning (HMFBNP) had in July 2018, presented a memo to the Federal Executive Council (FEC) for the approval to establish the Financial Transparency Guidelines and Open Treasury Portal.
“The approved Transparency Policy provides for Transparency requirements, thresholds and responsibilities as part of Government Policy on accountability in line with Freedom of Information Act 2014.
“The HMFBNP, then constituted the composition of the Quality Assurance and Compliance Committee which membership were drawn from MDAs,” he said.
Idris said that the Committee would implement transparent governance and improve the FG’s whistleblowing programme, which would help Nigerians report financial crimes in the MDAs.
He disclosed that the operations of the committee would be accounted through the Office of the Accountant-General of the Federation which will offer its secretariat services to the committee, and enable the committee request information and clarification.
Idris added that the Committee would report to the Accountant General and the Minister of Finance, Zainab Ahmed monthly, citing that the Committee would work transparently “without fear or favour”.
FG meets group to access AfCFTA’s $650 billion market
AfCFTA is aligned to the ministry’s twin national objectives of industrialization and export based diversification.
The Ministry of Industry, Trade and Investment has met with executives of the Nigerian Agribusiness Group (NABG) on the implementation of the African Continental Free Trade Area (AfCFTA) and access the continent’s market worth $659 billion, in mostly manufacturing goods and services.
This was disclosed by the Minister of Industry, Trade and Investment, Otunba Niyi Adebayo during the meeting on Monday.
The minister emphasized on the importance of AfCFTA, as it is aligned to the ministry’s twin national objectives of industrialization and export based diversification. It provides us with a preferential access to African market worth over $650bn, in mostly manufactured goods .
Back story: Nairametrics had reported when Aissata Koffi Yameogo, ECOWAS’ Programmes Officer in charge of implementing AfCFTA rules of origin in the continent, said that the implementation will expand market for the manufacturing industry to 1.3 billion West African citizens, without additional duties and fees.
“It will build production capacity in the region and develop the value chain, and increased export to other African states” she added.
The benefits would also encourage member states to specialise in the production of a certain good where they have a comparative advantage, thus enhancing the quality and quantity of local production and creating more jobs.
He said, “This would improve our competitiveness and the perception of our products and services in the African market. Intra-African trade in Agro products and services will develop our local value chain, create jobs and increase our GDP.”
Today, the Honourable Minister @NiyiAdebayo_ , had a meeting with executives of the Nigerian Agribusiness Group(NABG), on the implementation of the African Continental Free Trade Area (AfCFTA) Agreement. pic.twitter.com/GOhVzLVJb2
— FMITI Nigeria (@TradeInvestNG) August 10, 2020
According to International Monetary Fund (IMF), the elimination of tariffs could boost trade in Africa by 15-25% in the medium term, and once fully implemented, is expected to cover all 55 African countries, with a combined GDP of about US$2.2 trillion.