The Senate yesterday disclosed that Nigeria’s total debt now stands at a whopping US$39.72 billion (N6.02 trillion of which external and domestic debts are US$5.398 billion and N5.210 trillion respectively) barely five years after the full repayment of the country’s foreign debt. These figures were disclosed at the inauguration of Senate Committee on Foreign and Local Debts by its Chairman, Senator Ehigie Uzamere (ACN, Edo).
The Senator said: “This amount is unsettling and called for concern”.
A worried Deputy Senate President, Ike Ekweremadu, however, berated past regimes (especially the military) for reckless borrowing and abandoning the projects for which the loans were taken.
He said: “There is need for the executive to focus more on borrowing for projects with self-repaying and job generation capacity rather than borrowing to finance gaps in budgets that are largely recurrent”.? He noted that while the total debt of N6.02 trillion is more than the federal government annual budget, its external component translates to 2.76% of our gross domestic product and its domestic component translates to 17.53% of the GDP.
Senator Ehigie further explained that with the 20.29% of the GDP that the total debt constitutes in Nigeria’s economy compared to “global limit of 40%, the country is on safe ground” but noted that “more hard work and a serious approach” was needed “to translate our debt into asset to accelerate our infrastructural development and boost the economy.
He was however not comfortable with the Debt Sustainability Analysis (DSA) supplied by the Debt Management Bureau asserting, “there are other Debt Sustainability Indices (DSI) that are more realistic and revealing than the Debt/GDP ratio.
“Do we have the capacity to repay this money considering our yearly revenue profile? What is the future value of the total debt in 10 years’ time?” Ehigie asked rhetorically, and promised to engage the executive to generate good quality data for its DSA.
“Needless to say that proper DSA reveals a country’s susceptibility to debt distress; the committee will align its energy with the executive to review the country’s debt policy and thereto, redefine its debt strategy”, he continued.
More so, Sen. Uzamere enjoined the government to wholly embrace Public Private Partnership (PPP) through adequate legal framework to safeguard workability of the scheme as it is a sure way to hasten the provision of infrastructure with less financial burden to the government.
Also, the Senate yesterday raised an alarm over an imminent collapse of some states, saying the 36 states may cave-in to the overweight of overhead cost.
Consequently, they advised the federal government to expeditiously review the revenue sharing formula in favour of states and local governments in the spirit of true federalism. To give effect to the resolution, the senators directed its committees on National Planning; States and Local Governments and Finance to study the situation and submit remedial measures to avoid total collapse of the economies of the affected states.
The resolutions were sequel to a motion sponsored by Senator Olubunmi Adetumbi, (ACN, Ekiti) on the ‘Looming Danger of Bankruptcy in States: the Need for Fiscal Evaluation’.
Leading the debate, he alerted the Senate to the great fiscal challenge and looming danger of insolvency as well as bankruptcy facing the states as a result of growing wage bill associated with the implementation of the minimum wage and other recurrent responsibilities.
Citing a statistical data indicating the overall revenue profile of each state which was sourced from the Nigerian Governors Forum, Adetumbi noted that in most states, the private sector is weak and unable to generate economic growth and jobs that are required, thereby making the states and local governments the largest employers of labour with attendant fiscal imbalance.
He further noted that most state governments now rush to the capital market to raise long term bonds to finance development projects, which if misused, will spell doom for their future and that the financial quagmire of states further highlights the urgency of a review of the revenue sharing structure between the federal government, states and the local government areas.
He said: “The bulk of revenue of these states is currently financing the payroll of the civil service which constitutes less than 4 percent of the total population in all states. Under this development, 6 states are approaching distress.
Kano will spend 127 %, Sokoto 62 %, Niger 56 %, Zamfara 54%, Katsina 50%, Osun 50% of their gross annual revenue on civil service personnel costs.“14 states will deploy 30-49% of their total revenue on personnel; 6 states will deploy 20-29%, 5 states will deploy 15-19%, while only Abia, Akwa Ibom, Anambra and
Jigawa will spend less than 15% of total state revenue on personnel.
“If this trend continues, many of the states would become financially insolvent and increasingly handicapped to finance real sectors and drive the economic growth, jobs and improved livelihoods.“Most state governments now rush to the capital market to raise long term bonds to finance development projects. Without an appropriate frame work, misuse of such funds could spell doom for the future of the states.
“Some of the states governments that have taken this route funding between 2002 – 2011 are Lagos (series1-N50bn; series II- N57.5bn; Imo (N18.5bn); Kwara (N17bn); Niger (N6bn); Bayelsa (N50bn); Kaduna (N8.5bn); Ebonyi (N16.5bn); Ogun (N50bn); Delta (N5bn) in 2007; Kebbi (N3.5bn) in 2006; Lagos (N15bn) in 2002 and Yobe (N2.5bn) in 2002.
In a related development, the House of Representatives yesterday summoned the minister of finance, Dr Ngozi Okonjo-Iweala, to appear on Monday next week to defend the 2012 – 2015 Medium Term Expenditure Framework which was recently presented to the House by President Goodluck Jonathan.
Chairman of the House committee on appropriations, Hon John Enoh, said that the minister is expected to also explain the status of capital releases to ministries, departments and agencies of government as part of the implementation of the 2011 budget.
The decision of the committee was premised on a presentation by the minister of State for Finance, Dr. Yerima Lawal Ngama, on the utilisation of the capital funds, which the committee described as unsatisfactory.
Ngama had informed the committee that the ministry has released 61 percent of the capital allocations to ministries, departments and agencies (MDAs) though actual utilisation stood at 57.03 percent and that a total of N850 billion was needed to complete 100 percent releases, as the ministry had only disbursed N705 billion so far, leaving a balance of N441 billion.
But the committee expressed dissatisfaction with the state of releases, however and asked that Okonjo-Iweala appears to provide more information on the matter.
Meanwhile, in a bid to ensure that budgets are implemented on time, the House of Representatives has moved to make it compulsory for the president to present the nation’s annual budget estimates to the National Assembly on or before September 30th .
Expressing dissatisfaction with the poor level of implementation of the 2011 budget, the committee on Appropriation insisted if the minister fails to honour the invitation of the committee, it will not act on the 2012 Appropriation bill.
Leading the debate on the general principles of the bill, which was passed through second reading yesterday, the minority leader, Hon Mr Femi Gbajabiamila, said the amendment was necessary to correct the practice of sending estimates to the legislature in December for a fiscal year that begins in January and inadvertently creating room for late passage of the budget.
?
“The amendment is to give a definite date for the presentation of the budget estimates, so that the National Assembly can have enough time to do proper analysis,” he said.
He also added that if passed, the new law would enable the House consider, amend and pass the budget before the next fiscal year begins, thereby eliminating the impression that the National Assembly delays the budget.
The bill was subsequently referred to the committee on Constitution Review for further legislative scrutiny.