Barely 24 hours after International Monetary Fund advised Nigeria to increase tax to raise more revenue, Federal Government on Thursday said its low revenue was affecting its ability  to service debts and fund day-to-day recurrent expenditure.

Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, during an interview with journalists on the sidelines of World Bank/International Monetary Fund meetings in Washington DC, United States, noted that although Nigeria did not have a debt problem, she said, “underperformance of our revenue is causing a significant strain in our ability to service debt.”

She also justified the $3bn loan the country was seeking from World Bank, saying the money would be used to finance the power sector.

A quarter (N2.5trn) of N10.3trn budget President Muhammadu Buhari presented to the National Assembly on October 8 would be spent on debt servicing.

While Federal Government voted N4.88trn for non-debt recurrent expenditure, only N2.14trn was allocated to capital projects in spite of the huge infrastructural deficit in the country.

The finance minister, Ahmed, however, said the fresh $3bn loan Nigeria was seeking from World Bank would be spent on reforms in the power sector.

Debt Management Office had said that the nation’s total public debt rose by N3.32tn in one year to N25.7tn as of the end of June 2019.

Federal Government owed N20.42tn as of June 30, 2019 while the 36 states and Federal Capital Territory had a total debt portfolio of N5.28tn.

In 2017, the revenue target was N5.08tn out of which N2.7tn was realised. Federal Government’s revenue projection  for 2018 was N7.16tn out of which only N3.96tn was achieved. In 2019, Federal Government’s projected revenue was put at N6.98tn. As of June this year, about N2.04tn had been realised.

Deputy Chief, Monetary and Capital Markets Department, Evan Papageorgiou, had at a press conference  during the meeting in the United States  on Wednesday said, “While Nigeria has a large exposure to domestic debt, it is important to effectively manage those risks associated with debts incurred in local currency.

He said, “Local currency borrowing could be preferred in some cases but it is not a panacea. The guiding principle is prudent debt management. Local currency flows have been more volatile in Nigeria was not an exception to that. Nigeria has a large exposure to domestic debt particularly from Central Bank bills.

“And then as we understand the Central Bank bills, there are a lot of higher redemption and more roll-overs going forward. So managing those risks, particularly with respect to local currency debt managing debts and behaviour of non-resident debt is very important.”

Also at the press  conference, Assistant Director, Fiscal Affairs Department, IMF, Mrs Cathy Pattillo, had said Nigeria needed a comprehensive reform to increase non-oil tax  so as to get funds  to build infrastructure and human development.

Justifying the $3bn loan from the World Bank, Ahmed who is leading the Federal Government’s delegation to the meeting, said she would be holding further discussions with the management of the bank to present how the fund would be disbursed for the power project.

World Bank had in September disclosed that the Federal Government of Nigeria was seeking a loan in the region of $2.5bn.

Vice President for Africa, Mr Hafez Ghanem, disclosed this in an interview with Bloomberg in Abuja. He added that in the past year, Nigeria received $2.4 bn.

On Thursday, the minister  said based on the plan of the Federal Government for the power sector, the loan would be used for the development of transmission and distribution networks to enhance delivery of electricity.

 

Punch