The Federal Government has reassured that it has no plan to restructure its total debt stock of about N42.8 trillion, exclusive of Ways and Means, which stands at about N20 trillion, as it remains committed to meeting its domestic and external debt obligations.
This was disclosed by the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, on Wednesday, during a public presentation of the N20.5 trillion 2023 budget estimates.
Mrs Ahmed pointed out that the current Government’s borrowing (Ways & Means or overdraft) to fund budget deficit, from the Central Bank of Nigeria (CBN) stands at N20 trillion and that President Muhammadu Buhari has given approval to securitise it.
Speaking on the Federal Government’s Debt Management Strategy, Mrs Ahmed said “Nigeria is not planning on restructuring its debt as it remains committed to meeting its domestic and external debt obligations.
“The FG will continue to utilise appropriate debt management tools to streamline the cost and risk profile in the debt portfolio, including through concessional loans, spreading out of debt maturities to avoid bunching, and re-profiling of the debt maturities by refinancing short-term debt using long-term debt instruments.”
On how much overdraft the Federal Government has taken from the CBN to date, (Ways and Means), the Finance Minister stated, “The total Ways and Means today is N20 trillion and we have the approval to securitise it, then the securitisation will be over a 40-year period with an interest rate of 9 per cent, but over the years we have been paying the interest component at the current rate that is charged on the Ways and Means.”
This action of the Federation Government tends to contravene Section 38 of the CBN Act 2007, which reads in part: “(1) Notwithstanding the provisions of section 34 (d) of this Act, the Bank may grant temporary advances to the Federal Government in respect of temporary deficiency of budget revenue at such rate of interest as the Bank may determine.
“2) The total amount of such advances outstanding shall not at any time exceed five per cent of the previous year’s actual revenue of the Federal Government.
(3) AlI Advances made pursuant to this section shall be repaid-
(a) as soon as possible and shall, in any event, be repayable by the end of the Federal Government financial year in which they are granted and if such advances remain unpaid at the end of the year, the power of the Bank to grant such further advances in any subsequent year shall not be exercisable, unless the outstanding advances have been repaid, and
(b) in such form as the Bank may determine provided that no repayment shall take the form of a promissory note or such other promise to pay at a future date or securitisation by way of issuance of treasury bills, bonds, certificates or other forms of security which are required to be underwritten by the Bank.”
Also, while responding to the question of considering the use of equity, Foreign Direct Investments (FDIs) in funding the budget rather than depending much on borrowing, Mrs Ahmed said the Ministry of Finance Incorporated (MOFI) is being re-engineered currently in order to achieve set goals.
The Finance Minister said: “We have started the process of re-engineering the Ministry of Finance Incorporated (MOFI), saddled with the responsibility of managing the government’s assets.
“MOFI has been existing for many years ago and has gradually become quite inefficient. So, We have got President Muhammadu Buhari’s approval to start the process of re-engineering MOFI, and we are now at the stage where we hope in the next one month or six weeks, we will be able to relaunch MOFI.
“We have been able to take stock of the assets that are in the books of MOFI and even without taking stock of the ones that are not in the books of MOFI, we have about N30 trillion in terms of assets size. So, if we are looking for a debt of N10 trillion, we already have assets of N30 trillion.
“We are going to open these assets for investments, so we will issue different kinds of equities investments into these assets. The government doesn’t have the kind of resources to recapitalise these assets.
“When I talk about assets, I am talking about our investments like the Bank of Industry (BOI), the Development Bank of Nigeria (DBN), Galaxy Backbone and several other agencies of government; Companies that government has set up. A few of them are doing well and delivering the books but our assessment is what they are doing can still be better by incremental adjustments.
“I give you an example, we have the railways in the books of MOFI at something like N20 million as the asset size and we are conducting a re-evaluation. By the time we finish the re-evaluation, the value of the Nigerian Railway Corporations will run into trillions. Also, by the time we finish the re-evaluation of our airports, it will run into trillions.
“There is a process that is ongoing, we’ll have MOFI fully set up a world-class investment company with new management and a new Board to move from the civil service structure where it sits as a unit under the office of the Accountant General of the Federation, and get core professionals that are really focused and specialised in portfolio management and driving investments to run better.
“So we expect to reassess our assets, to amend the books and show the real value. We hope to actually raise equity, to open up investment for Nigerians and non-Nigerians to invest in the assets.”
To make the National Youth Service Corps (NYSC) live up to its billing and meet up the current challenges, Mrs Ahmed said in the next Finance Bill that would be sent to the National Assembly, efforts will be made to tinker with the original Act.
According to her, “The initial adjustment we are trying to achieve is for Diaspora. Currently, the National Youth Service Corps (NYSC) Act has a provision that says you must serve within three years of graduation. We have people that are in the diaspora that go beyond three years. The immediate past Director General of the NYSC began a process that was indicating that they have gone against the law and actually wanted to take people up on that and our view is that, that is discouraging those in the Diaspora from coming back home and bringing investment.”
The Minister noted that although it was desirable to review the current salary structure, the exercise requires a huge financial outlay and a lot of work in terms of negotiations.
She disclosed the resources needed to meet up were enormous as the Federal Government’s wage bill from 2015 has risen to about 250 per cent at present.
On the current debt service to revenue ratio, Mrs Ahmed said: “As of 31st August the debt service to revenue ratio was 83 per cent, and that is why I said what we have is on revenue issue and we have to do everything we can to increase our revenue. Our policy target is to keep it at no more than 50 per cent over the medium-term period and ultimately reduce it down to 30 per cent, but we are currently over 50 per cent debt service to revenue.”
Speaking on why and how to grow revenue in the informal sector, she said it entails getting the sector formalised first and that “one of the reasons why we make provisions for free registration and online registration, you can actually go the CAC website and register if you have all the document within 48 hrs you get your certificate. So, once you register, the process of registration includes: you’ll provide your TIN, you’ll provide your account number and BVN also. Once you …. Registration then its easier to track those companies and since that provision was given, the Ministry of Industry Trade and Investment is reporting that there are more of these informal sector operators that are not formalised.
“Remember that I said we granted tax rebate for small businesses but the businesses were still expected to file in returns to show that their turnover is below those thresh hold that either entitled to zero CIT or 20 per cent CIT so, gradually the tax net is able to include some of these informal sector place. More currently the JTB is chaired by the chairman FIRS is working with each state chair of FIRS as a member, they are currently working at upgrading the process of TIN to include NIN and you know that there is a lot of progress that has been made in the NIN registration process, the NIMC reports that the numbers are now at up to 84 million Nigerians that have been registered on the data base.
“So, there will be a link between the NIN and the TIN, that’s another way that we are going to be able to use to track taxpayers’ registration as well as tax compliance and it gradually expanding the tax net as well. we are able to check where a company has paid its tax, to look behind the company to the directors of the company also look at the tax compliant of the directors of the companies”.
In his welcome address, Mr Ben Akabueze, Director General, Budget Office of the Federation enumerated some of the improvements made in the FGN budget process over the past six years.
He said the Federal Government has significantly enhanced use of technology in the budget process, including service-wide implementation of the GIFMIS Budget Preparation System.
“This has minimised errors in the budget and facilitated timely passage of the budget thus enabling a sustainable return to a predictable January-December fiscal year,” Mr Akabueze explained.
According to him, “Creation of a Budget Office Help Desk to provide guidance/support to MDAs throughout the budget process. The BOF Help Desk functions physically as well as on virtual platforms, and has also contributed to improved efficiency of the budget process.”
He noted that in a bid to enhance budget comprehensiveness and transparency, the FGN’s budget now includes all projects funded by bilateral/multilateral loans, donor-funded programmes/projects as well as the revenues and expenditures of 63 major Government Owned Enterprises /regulatory agencies.
“Enhanced and timely availability of budget-related information to the public through the Budget Office website, as well as responsiveness to Freedom of Information, requests. This has facilitated greater public participation in the budget process.
“Strategic refocusing of the budget to the revenue side thereof rather than a mere statement of expenditure proposals. This led to a redesign of the Appropriation Bill to include both revenue and expenditure estimates and has contributed to the substantial growth in non-oil revenue performance recorded. A new Performance Management Framework was introduced to support this process.”
He added that three years ago, the government reintroduced the enactment of annual Finance Acts to keep the fiscal policies/laws up to date and support the implementation of the annual budgets. This was the first since the return to democratic governance.
These improvements, he noted have been “validated by the significant improvements in FGN’s Public Expenditure & Fiscal Accountability Review ratings by the World Bank.”
He averred that Nigeria’s 2021 Open Budget Index scores on fiscal transparency and accountability also reflected significant improvements, with Nigeria ranked among the top two reformers.
“We nevertheless keep striving for continuous improvements in the FGN budget process. For instance, we will shortly be launching the National Budget Portal that will be a one-stop access point for information about the budgets of the federal, state and local governments. This will enable more accurate reports about Nigeria’s national expenditure on key sectors like health and education,” Akabueze further stated.
ALSO READ FROM NIGERIAN TRIBUNE
and then