By Obinna Chima
The federal government has started renegotiating the repayment terms for the countries debts with its lenders.
The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, disclosed this yesterday while speaking on a television programme, monitored in Lagos.
The minister said part of the debt renegotiation discussions with Nigeria’s creditors included seeking a stay on the debt service of some of the debts.
“We are also looking at our debt service obligations and we are talking to our lenders to renegotiate the repayment terms or even seek a stay on the debt service, to preserve some of our revenue, so that we can use it to meet the current national emergency demand.
“We also have been able to access funding that is available from the World Bank that had already been signed and effective, which is about $90 million. We have just made a request for extension of that by another $100 million. We have been trying to raise funding to make sure we quickly respond to the health emergency. But while we are doing that, we are also making an assessment of the impact on the economy,” the minister disclosed.
Despite the threat to the health of the Nigerian economy due to the dire economic conditions, Ahmed reiterated that the economy was not broke, saying, “we have resources to manage, but we have been able to find new sources of funds that we were able to realise very quickly to keep Nigeria stable. What we want to make sure is that our growth doesn’t decline so badly that we would have to struggle after this health crisis.”
She further pointed out that the federal government was also prioritising its spending by making sure that it selects carefully where the limited resources would be deployed, as well as adopting some cost-cutting measures.
“For example, we have stopped all employment so that we don’t grow our wage bill,” she said.
According to Ahmed, the Nigerian economy, just like every other economy in the world, has suffered significantly from the COVID-19 pandemic and the subsequent crash in crude oil price for oil producing countries.
This, according to her, meant that the country’s revenue has been threatened and the ability to implement the 2020 budget both at the states and the federal levels have been severely hampered.
“So, what we did when the president put together the crisis management committee, was to take stock and assess how these would affect us. Globally, with all the impact of the Coronavirus, it is clear that global growth is going to decline significantly and may even go into recession. So, Nigeria is not insulated from that.
“We did a review of the situation and decided to scale back on our plans and to bring our plans to current realities. For example, the crude oil price that we planned in the 2020 budget was $57 per barrel. So, we had to scale it down to $30 per barrel. But, last week we even saw oil prices dropping as low as $22 per barrel.
“So, we are still assessing to see whether we would stop at $30 per barrel or we would go to sub-$30 per barrel. But that means we would also need to reduce our expenditure. But the president has directed that key infrastructure projects such as power, railway, major roads that are critical to growth and development are protected,” Ahmed added.
Owing to the ravaging impact of the COVID-19, she disclosed that the federal government had designed a number of fiscal incentives, “but because of our fragile fiscal situation we don’t want to rush to make announcement of tax cut or tax holidays, without looking at a full picture of how it is going to affect the federal and state governments.”
She added: “We are working with the National Social Investment Programme to see how to design an intervention programme that would have an impact on the poor and vulnerable. The government is looking at the possibility of giving out stipends and also to increase the stipend it is also giving to the category of Nigerians that are classified as the poor and vulnerable.
“We are also looking at categories of citizens whose jobs are affected by this crisis. For example, the airports are closed, so the taxi drivers, food sellers that depend on the airports have nothing to fall back on. So, we have to carefully identify these kind of persons carefully to have the best impact.”
Commenting on her outlook on the economy, Ahmed said: “We are going to struggle in terms of revenue. As long as crude oil price is low as $30 per barrel, the federal and the state governments are going to struggle and that is why we are looking for alternative sources of funding in form of budget support, to support the economy. We hope that this pandemic doesn’t exceed three months. But if it goes longer than that – six months, one year – we may go into a recession.”