Business
FG service domestic debt with N5.24tn in 30 months
Nigeria’s domestic debt service rose to N5.24 trillion in 30 months, data on the Debt Management Office (DMO) website has revealed.
The domestic debt was put at N20.95 trillion as of June 2022.
The latest report by the DMO revealed that domestic debt service in the first quarter of 2022 was at N664.73 billion, representing 0.6 per cent decline from N668.69 billion in the second quarter of 2022.
This implies that the Federal Government has serviced domestic debt with N1.33 trillion in the first half of 2022, a 43 per cent Year-on-Year (YoY) increase from N935.46 billion reported in first half of 2021.
Further breakdown revealed that the government domestic debt service was at N2.05 trillion in 2021, a 10.8 per cent increase from N1.85 trillion in 2020.
Following massive budget deficit, the FG of recent has borrowed aggressively through treasury bills, bonds, savings bonds and Sukuk to support infrastructure development across the country.
Experts have raised concerns as the government continues to obtain new loans from both local and external sources, despite growing debt profile and servicing cost.
The International Monetary Fund (IMF) has predicted that Nigeria’s debt service-to-revenue ratio would jump to 92 per cent in 2022 from 76 per cent in 2021.
Speaking with THISDAY, the CEO, Wyoming Capital & Partners, Mr Tajudeen Olayinka stated that the debt servicing by the federal government over the years has encouraged investors to provide additional support to the government with respect to further investment in government securities.
According to him, “It presents government in good light, with the opportunity to fund developmental projects across the country.
“The negative aspect of debt servicing in Nigeria is the sustainability problem that has now greeted the current administration of President Muhammadu Buhari, whereby, more than 100per cent of revenue is now being expended on debt servicing, giving room for possible default and failure of government in no distant future, especially with respect to foreign debt component.
“The fact that government spends its entire revenue to service debts, despite introducing new taxes and raising rates in some others, is an indication that economic agents are not generating enough outputs, sufficient to put Nigeria’s economy in the positive territory. It is actually a sign of declining output. It is simply a failure of fiscal policy.”
He hinted that the only way to cut the debt service figure down is for government to shift away from its current public sector dominance, and allow private sector businesses to occupy the driver’s seat, so as to consistently put the economy in the positive territory.
“Government should begin to consider removing subsidies in phases, in a manner that will not add more to the hardship on the ground. It also presents an opportunity to allow the economy to run a normal course of adjustment,” he added.
The CEO, Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf commenting on raising debt profile noted that, “When we take account of borrowings from the CBN and the stock of AMCON debt, the debt profile would be in excess of N60 trillion.
“Although government tends to argue that the conditions was not a debt problem, but a revenue challenge. But debt becomes a problem if the revenue base is not strong enough to service the debt sustainably. It invariably becomes a debt problem and possibly a debt crisis. Government actual revenue can hardly cover the debt service obligations.
“Which implies that the entire capital budget and the recurrent expenditure may have to be funded from borrowing. This is surely not sustainable. The finance minister reported recently that in the first four months of this year, debt service to revenue ratio was over 100per cent.”
According to him, “What is needed is the political will to cut expenditure and undertake reforms that could scale down the size of government, reduce governance cost and ease the fiscal burden on the government.
“It is imperative for the country to operate as a true federation which it claims to be. The unitary character of the country is making it difficult to unlock the economic potentials of the sub nationals. It is perpetuating the culture of dependence on the federal government.
It is necessary to scale down the size of government and cost of governance. Fiscal sustainability is driven by both cost and revenue. Therefore, managing the major drivers of cost and revenue is imperative.
“As far as possible, the government should push back in sectors or activity areas where the private sector has the capacity to deliver desired outcomes. We should see more privatization at all levels of government.
“This would allow for the infusion of more private capital into the infrastructure space. We need to address the fuel subsidy conundrum at some point as it clearly not sustainable.”
– Thisday
Business
Reversing electricity tariff hike will cost us N3.2 trillion – FG
Reversing electricity tariff hike will cost us N3.2 trillion – FG
The Federal Government has said the reversal of the current increment in electricity tarrif will put more financial pressure on it.
The government said it would need about N3.2 trillion to subsidise and shoulder the cost of electricity this year should the recent hike be canceled.
Sanusi Garba, the chairman, Nigeria Electricity Regulatory Commission (NERC), made this known at a stakeholders’ meeting organised by the House of Representatives committee on power in Abuja on Thursday.
He said that the current investments in the power sector were not enough to guarantee a stable electricity supply nationwide.
He added that if nothing was done to tackle foreign exchange instability and non-payment for gas, the sector would collapse.
Garba disclosed that prior to the tariff review, Electricity Distribution Companies (DisCos) were only obligated to pay 10 per cent of their energy invoices, adding that lack of cash backing for subsidy had created liquidity challenges for the sector.
He added that the inability of the government to pay subsidy led to continuous decline in gas supply and power generation.
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He said that the continued decline in the generation and system collapse were largely linked to liquidity challenges.
He said from January 2020 to 2023, the tariff was increased from 55 per cent to 94 per cent of cost recovery.
He added that “the unification of FX and current inflationary pressures were pushing cost reflective tariff to N184/kWh”
“If sitting back and doing nothing is the way to go, it will mean that the National Assembly and the Executive would have to provide about N3.2 trillion to pay for subsidy in 2024,” he said.
Mr Garba said that only N185 billion out of the N645 billion subsidy in 2023 was cash-backed, leaving a funding gap of N459.5 billion.
The vice-chairman of NERC, Musiliu Oseni, also justified the recent tariff increase, saying the increment was needed to save the sector from total collapse.
Rep. Victor Nwokolo, the chairman of the committee, said the goal of the meeting was to address the increase in tariff and the issue of band A and others.
Mr Nwokolo said the officials of NERC and DISCOS had provided useful Information to the committee.
“We have not concluded with them because the Transmission Company of Nigeria is not here and the Generation Companies too.
“From what they have said which is true, is that without the change in tarrif, which was due since 2022, the industry lacks the capital to bring the needed change.
“Of course, the population explosion in Nigeria, is beyond what they have estimated in the past and because they need to expand their own network, they also needed more money, ” he said
Reversing electricity tariff hike will cost us N3.2 trillion – FG
Business
Naira loses N81 to dollar in one day
Naira loses N81 to dollar in one day
The naira lost N81.34 against the US dollar at the foreign exchange market on Thursday
FMDQ data showed that the naira fell to N1,154.08 per dollar on Thursday from N1,072.74 on Wednesday.
This represents a 7.04 per cent loss against the dollar compared to N1,072.74 per dollar traded the previous day.
At the parallel market, the naira also depreciated N1,100 per dollar on Thursday from N1, 040 on Wednesday.
This is the second time the naira would be depreciating against the dollar in three days amid fears of depleting foreign exchange reserves.
Nigeria’s foreign reserves dropped to $32.29 billion as of April 15.
Business
Govt paying N600bn for fuel subsidy monthly — Rainoil CEO
Govt paying N600bn for fuel subsidy monthly — Rainoil CEO
The CEO of Rainoil Limited, Gabriel Ogbechie, has claimed that the federal government resumed the payment of the controversial fuel subsidy following the devaluation of the Naira in the foreign exchange market.
Ogbechie made this statement on Tuesday during the Stanbic IBTC Energy and Infrastructure Breakfast Session held in Lagos.
He pointed out that with Nigeria’s daily fuel usage at 40 million liters and the foreign exchange rate at N1,300, the government’s subsidy per liter of fuel falls between N400 and N500, culminating in a monthly total of approximately N600 billion.
He said; “When Mr. President came in May last year, one of the things he said was that Subsidy is gone. And truly, the subsidy was gone, because immediately the price of fuel moved from 200 to 500 per liter. At that point truly, subsidy was gone.
“During that period, Dollar was exchanging for N460, but a few weeks later, the government devalued the exchange rate. And Dollar moved to about N750. At that point, subsidy was beginning to come back.
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“The moment the two markets officially closed, officially the market went to about N1,300. At that point, that conversation was out of the window. Subsidy was fully back on petrol. If you want to know where petrol should be, just look at where diesel is. Diesel is about N1,300 and petrol is still selling for N600.
Furthermore, he said that NNPC being the only petrol importer in the country implies that there is an ongoing subsidy, as prices had to be fixed.
Earlier yesterday, the former governor of Kaduna State, Nasir El Rufai, said the federal government is spending more on petrol subsidy than before.
In addition, the Special Adviser to the President on Energy, Mrs. Olu Veŕheijen, said that the Federal Government reserves the right to pay fuel subsidy intermittently to cushion hardship in the country.
“The subsidy was removed on May 29. However, the government has the prerogative to maintain price stability to address social unrest. They reserve the right to intervene.
“If the government feels that it cannot continue to allow prices to fluctuate due to high inflation and exchange rates, the government reserves the right to intervene intermittently and that does not negate the fact that subsidy has been removed,” she said.
Govt paying N600bn for fuel subsidy monthly — Rainoil CEO
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