Â· Laments budget is too small to deliver essential services
Â· Acting President pledges economic turnaround in 18 months
Â· DMO targets foreign loan debt service of $483m in 10 years
Omololu Ogunmade in Abuja and Obinna Chima in Lagos
The Minister of Finance, Mrs. Kemi Adeosun, Tuesday warned that the country must not borrow more to fund its budget and should instead raise money internally to fund the budget.
This is just as Acting President Yemi Osinbajo also solicited the co-operation of the private sector in the federal governmentâ€™s quest for a better country, assuring it that the government has the will to turn the country around within 18 months.
The remark by the minister was a pointer that the country might shelve its planned $2 billion loans from the World Bank, Reuters reported.
Africaâ€™s largest economy is in its first recession in 25 years, and had planned to borrow extensively from overseas to fund a record budget aimed at helping the country spend its way out of its economic doldrums.
But plans for lenders like the World Bank and African Development Bank (AfDB) to loan at least $2 billion to Nigeria have been stalled for over a year, as international organisationsâ€™ frustrations mounted at the countryâ€™s refusal to impose key fiscal reforms such as allowing its foreign exchange rate to float freely.
Adeosun, who made the comments while speaking at the quarterly business forum held at the Banquet Hall of the Presidential Villa in Abuja, suggested that Nigeria will no longer seek such loans, or an additional $1.5 billion it had planned to raise from international debt markets.
â€œWe cannot borrow anymore, we just have to generate funds domestically to fund our budget. Mobilise revenue to fund the necessary budget increase,â€ she said.
In May, the Director General of the Budget Office of the Federation, Mr. Ben Akabueze, had said the country has a shortfall of $7.5 billion for its 2017 budget expenditure, adding that this would be addressed with $3.5 billion from the aforementioned loans and debt.
The government also planned to raise $4 billion from the local debt market, he said at the time.
But Adeosun said the governmentâ€™s medium-term plan was based strongly on increasing revenue mobilisation.
She stressed that increasing the countryâ€™s revenue was not something that could be attained instantly.
â€œFor example, in some cases like tax collection we needed data, we needed to sign some treaties and we needed tax policy reforms. We have been working hard on these measures.
â€œOur focus on revenue is total. Revenue generation is not as rapid as raising debt but it is permanent. Increased revenue will ensure sustainability, will prevent us from falling into a debt trap and will reduce our debt service to revenue ratio,â€ the minister added.
Adeosun also expressed concern over the governmentâ€™s inability to deliver essential services due to financial constraints, which she blamed on the nationâ€™s small annual budget.
Putting the nationâ€™s annual budget as a percentage of gross domestic product (GDP) at six per cent, she said this was significantly low, adding that it was the lowest in sub-Saharan Africa.
According to her, the situation was so precarious that salary payments take the largest chunk of the annual budget, explaining that the development was largely caused by non-payment of taxes by the Nigerian public.
She said the by-product of tax evasion was the incapacity of the federal government to deliver basic projects aimed at improving the living standards of the people, even as she emphasised the drive of the government to generate more revenue to alter the status quo.
â€œOur budget is significantly lower relative to GDP. We are currently at six per cent. It is lower than all our peers. We are currently at six per cent and that is the lowest in sub-Saharan Africa and one of the lowest in the world.
â€œOur budget size is too small and that means we can only pay salaries in some cases and we donâ€™t have money to deliver essential services.
â€œThere simply isnâ€™t enough money in government to do what government wants to do. I am sure you will say that is because people are stealing or because you are wasting money, but I am saying even if you plug all the stealing and all the waste, the budget size is not big enough and that is because we are not paying enough in terms of taxes, or we are not collecting enough in terms of taxes.
â€œStatistics show our tax to GDP at 6 per cent, while the sub-Saharan Africa average is 17 per cent; Asiaâ€™s is 26 per cent. Most of the emerging markets and advanced countries are at 30-35 per cent.
â€œIt is interesting, if you look at the statistics, there is no poor country that has a high tax to GDP ratio and there is no rich country with a lower one. And so, if we want to move with the prosperous countries, we have to do what they do.
â€œWe will not achieve prosperity in Nigeria if we continue on the tax to GDP ratio that is in the peer group of Afghanistan. Iâ€™m sure none of us aspires for Nigeria to become like Afghanistan.
â€œWe are trying to benchmark ourselves against more developed countries and we must address these problems in a more fundamental sense,â€ she submitted.
In his remarks at the business forum, Osinbajo solicited the co-operation of the private sector in the federal governmentâ€™s quest for a better country, assuring it that the government has the will to turn the country around within 18 months.
â€œDay after day, night after night, we are working on these things. Practically every night we work on these issues. I believe very strongly that Nigeria will turn around.
â€œI have no doubt in my mind that if we are focused, even in the next 12 to 18 months, if we are focused, we will certainly see a turn around. And I really would â€Žwant you to join us in being able to ensure that this happens to the Nigerian economy,â€ he said.
The acting president, who reiterated the necessity for active private sector involvement in the development of the nation, recalled that 40 per cent of Indian companies generate their own power and thus help the country to make progress in the face of its challenges.
He insisted that the government has the requisite discipline and enabling environment to build a stable and dynamic economy, pointing out that the Economic Recovery and Growth Plan (EGRP) recently launched by President Muhammadu Buhari was an attestation to governmentâ€™s commitment to build a vibrant and productive economy.
â€œWhen Mr. President launched the Economic Recovery and Growth Plan (EGRP) â€Žsometime in April, one of the things that he emphasised was the fact that we have made up our minds as to where we are going.
â€œAnd I think that we have the discipline to be able to do so, but this is a complex environment. It is a complex economy. And I have said this repeatedly, that in some sense, we are fortunate to have a leader like the president who at least we know is straightforward and honest, and committed to ensuring that government expenditure is spent the way it should be spent, and that people donâ€™t do what they like.
â€œTo that extent, I think we have the right environment, at least in terms of government discipline and all of that, to be able to deliver on the promises that we have made.
â€œAnd all I will just want to say to the private sector is be sure that we have enough willing and able partners. There is no way we can ever be perfect.
â€œGovernment is a behemoth, where there are so many problems and issues. But do not doubt for one moment our commitment to â€Žensure that we are able to deliver on the promises that we have made,â€ Osinbajo stressed.
The Minister of Power, Works and Housing, Mr. Babatunde Fashola, while answering questions from journalists at the end of the meeting, said the federal governmentâ€™s roadmap on electricity supply was predicated on â€œincremental powerâ€ as well as stable and uninterrupted power supply.
â€œBut we are focusing on incremental power. Just yesterday, as one of our incremental power initiatives, we commissioned the Kukoba power substation to increase electricity supply to Abuja by another 120 megawatts (MW) carrying capacity.
â€œSo, it involves not only transmission but also involves generation work, distribution work, enabling the distribution companies (DISCOs) to perform better; for the generation companies (GENCOs) to perform better and carrying out our own responsibility which is transmission.
â€œIt is an ongoing undertaking, and as I said, you must measure what we have done from where we started.
â€œOn May 29, 2015, the power from the grid was 2,690MW and we have kept it now relatively stable at about 4,000Mw. With that, itâ€™s going to be the minimum except for occasions when we have mechanical and electrical outages and we fix them,â€ he explained.
On his face-off with the National Assembly, Fashola said it was wrong to view the development as a feud, describing it as a mere disagreement between himself and the lawmakers over project priorities in the 2017 budget.
â€œThere is no problem between me as an individual and the National Assembly. And let me make that very clear, many of the senators and honourable members are my personal friends, and so you donâ€™t fight your friends.
â€œBut we have a disagreement. And the context of that disagreement is as follows: You will remember when President Muhammadu Buhari launched the Economic Recovery and Growth Plan, he had enormous support from the leadership of the National Assembly.
â€œSo it means that we all agreed that there is a problem. Then there is also a disagreement which I donâ€™t think should make us disagreeable about the best way to implement that plan and I think that is all there is to it,â€ he said.
$483m for Debt Service
Meanwhile, the Debt Management Office (DMO) has said it plans to use $483.4 million to service the nationâ€™s foreign debt over a 10-year period and make repayments starting from next year as its dollar debts begin to mature.
The DMO, in its annual report, projected debt service payments to amount to a total of $4.47 billion to be made in 2018, 2021 and 2023.
Nigeria issued a debut Eurobond in 2011 with a follow up tranche in 2013. Between February and March the country also issued $1.5 billion due in 2032.
The DMO report said Nigeriaâ€™s debut $500 million bond will mature in 2021, while a $1 billion issue will be due next year.