Nigeria’s debt of N31tn unsustainable, says LCCI – Newstrends
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Nigeria’s debt of N31tn unsustainable, says LCCI

Published

4 years ago

on

Toki Mabogunje
  • Backs increase in electricity tariff, fuel price
  • Seeks more mass transit buses, rail system
  • Urges reopening of borders

The Lagos Chamber of Commerce and Industry has expressed worry about the nation’s state of economy, particularly the rising debt profile, currently put at N31tn, without corresponding output growth and economic development.

According to the LCCI, the growing level of the country’s debt is fast becoming unsustainable in the light of dwindling oil prices and production.

President of the LCCI, Toki Mabogunje, gave this position at a press conference on the state of the economy on Tuesday in Lagos.

She said the high level of debt servicing had continued to hinder robust investment in hard and soft infrastructure, described as key to stimulating productivity and improving living standards.

She said, “We note the increase in public debt stock was fueled by fresh domestic and external borrowing required to plug the wider fiscal deficit in the revised 2020 budget, given the impact of the pandemic on oil and non-oil sources of revenue.

“We also note the impact of recent exchange rate depreciation on the country’s level of external indebtedness.

“At the peak of the pandemic in the second quarter, the Federal Government received financial support worth $3.4 billion and $288.5 million from the International Monetary Fund (IMF) and African Development Bank (AfDB) respectively, while negotiations are also on-going for a cumulative $1.8 billion credit support from the World Bank, African Development Bank (second tranche) and Islamic Development Bank.

“Adding this to prospective domestic issuances could possibly push the country’s public debt stock to around N34 trillion by year-end, equivalent to 23 per cent of the GDP.”

On the nation’s accelerated inflation rate, Mabogunje said the persistent pressure on consumer prices stemmed largely from the sustained uptrend in food inflation.

She said the recent incidents of flooding in key food-producing states in the North had wiped off food and cash crops on a large scale and disrupted output projections in agriculture.

Mabogunje said that the situation, if not urgently addressed, would escalate the pressure on food prices, thereby putting the country on the verge of a food crisis.

She noted, “According to local media reports, over two million tons of rice were lost to flood; other crops such as sorghum, corn and millet were also affected.

“Rising inflation trajectory has serious implications for businesses regarding production cost, investment real return rate, and overall economic performance.

“Looking forward, the Chamber expects inflation to sustain its upward trajectory for the rest of the year.

“The Lagos Chamber calls on the fiscal and monetary authorities on the need to synergise to moderate domestic prices to a level conducive for sustainable and inclusive economic growth.

“The Federal Government might need to reopen the land borders to give succour to food prices in the light of lower domestic food supply amid huge demand for food.

“Similarly, both the federal and state governments also need to promptly address the issue of food wastage, majorly responsible for the food supply gap being experienced in the country.”

The LCCI president also advised policymakers on the formulation and implementation of policies to facilitate sustainability as business operators grapple with the devastating impact of the COVID-19 pandemic.

Mabogunje said such policies must support businesses, protect jobs, preserve investment and foster economic competitiveness at both national and subnational levels.

She said the chamber endorsed the adoption of the cost-reflective tariff regime in the power sector.

The LCCI president said the new tariff would attract investment and improve power supply, even as she noted that safeguards were needed to protect consumers from exploitation.

She said, “If the economics of the investment is not right, investors will not inject capital into the sector. However, there should be safeguards to protect consumers from exploitation.

“There should comprehensive metering of consumers and there should be value for money. We believe that policy should be given a chance.”

The LCCI president said the Solar Home Initiative, aimed at expanding energy access to 25 million individuals through the provision of solar home systems or connection to a mini grid was a step in the right direction.

She said the initiative would stimulate growth and productivity in the country’s rural economy.

Mabogunje also commended government on the recent reforms implemented in the downstream segment of the oil sector.

She said the removal of petrol subsidy and the proposal by the Nigerian National Petroleum Corporation to give up majority stakes in the four local refineries were laudable.

Mabogunje, however, appealed for the provision of mass transit buses, development of rail system for intra city and intercity transportation, and the acceleration of the auto gas programme so that more vehicles could be powered by gas.

She said, “We believe these measures are steps in the right direction in rescuing the economy from deepening fiscal crisis.

“We note that the subsidy regime had for long constituted a huge burden on public finances, encouraged corruption, inefficiencies, deterred investment flows, and weakened the earnings performance of oil refining and marketing companies.

“We acknowledge the effect of the price hike on the vulnerable segments of the society. Accordingly, we request that palliatives be provided in form of mass transit buses among other initiatives to ease the burden on consumers.”

Mabogunje also called for the expeditious passage of the Petroleum Industry Bill to consolidate recent reforms in the sector.

On the various fiscal and monetary interventions by the government, Mabogunje said the schemes would help with fulfilling payroll obligations and protect the jobs within the SMEs sector.

She said, “The Lagos Chamber acknowledges the various interventions of the fiscal and monetary sides of authorities in mitigating the adverse impact of the pandemic on economic and business environment.

“The federal and state governments need to expeditiously redirect attention to these sectors, including aviation, hospitality, entertainment, and manufacturing.

“This has become necessary to protect jobs, preserve investments and provide the much-needed liquidity required to revive these sectors.”

The LCCI president said the chamber noted the weak performance of the economy at the sectoral level, particularly among key sectors with potential to drive economic diversification.

Mabogunje said the 6.1 per cent contraction of the Gross Domestic Product in the second quarter reflected the profound impact of the pandemic on the economy.

She said the Chamber anticipated a marginal improvement in the GDP growth performance by the third quarter.

She attributed the anticipated improvement to the declining trend in the rate of confirmed cases of COVID-19, relaxation of various containment measures and the increasing tempo of economic activities.

On foreign exchange, the LCCI President said inappropriate forex policies could discourage fresh capital inflows on foreign direct investment, portfolio investment, remittances, and non-oil export proceeds into the economy.

Mabogunje said this was evidenced by the sharp plunge in the level of capital imported into Nigeria from $5.9 billion in the first quarter to $1.2 billion in the second quarter, partly caused by the capital control policy of the Central Bank of Nigeria.

She said, “The Chamber notes the various policy measures taken by the Central Bank of Nigeria to conserve the country’s foreign exchange resources in the light of weakening dollar inflows precipitated by the global pandemic.

“While the Lagos Chamber appreciates the efforts of the apex bank in preserving the scarce foreign exchange resources at a time the economy is confronted with the twin challenge of lower oil price and production, we believe demand management strategies alone are not sustainable solutions to the recurring foreign exchange crises.”

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Business

Fuel distribution delay from PH refinery due to bad road – PETROAN

Published

3 days ago

on

January 10, 2025

By

Port Harcourt refinery

Fuel distribution delay from PH refinery due to bad road – PETROAN

The Petroleum Retail Outlets Owners Association of Nigeria (PETROAN) has expressed concern over the slow pace of work by Reynolds Construction Company (RCC) on the Eleme East-West Road project, Port Harcourt axis.

The National President of PETROAN, Dr Billy Harry, in a statement on Thursday, said the slow pace of the project is affecting the distribution of fuel from Port Harcourt Refinery.

He said the delay was happening in spite of the N33 billion said to have been released by the Federal Ministry of Works, for the project.

Harry decried the challenges the deplorable road posed, saying that it was sabotaging President Bola Tinubu’s efforts to ensure the smooth distribution of petroleum products from the renovated Port Harcourt Refinery.

“Thousands of petroleum trucks will be using the road to convey products from the renovated Port Harcourt refinery, so, further delay is detrimental.

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“The Eleme East-West Road is a critical route for the transportation of petroleum products, and its safety is paramount.
“The road’s deplorable condition poses a significant risk to trucks carrying petroleum products, which could lead to catastrophic accidents and environmental disasters.

“PETROAN is calling on the President to evaluate the ongoing contract by RCC in line with the contract timeline.

“This move will consolidate his renewed hope agenda by ensuring the timely completion of the Eleme East-West Road project.”

Harry said that about 60 retail outlets were negatively impacted by the road construction, and requested adequate compensation for owners of the fuel stations.

He recalled that the Minister of Works, David Umahi, in a press conference, had also complained about the slow approach of RCC, leading to the issuance of a seven-day ultimatum by the Minister.

“Furthermore, PETROAN is calling on the Minister of Works, David Umahi, to fast-track the contract evaluation process and take decisive action to address the slow pace of work by RCC.

 

Fuel distribution delay from PH refinery due to bad road – PETROAN

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Aviation

New national carrier likely as FG/Ethiopian Airlines pact crumbles

Published

4 days ago

on

January 9, 2025

By

New national carrier likely as FG/Ethiopian Airlines pact crumbles

The Federal Government may soon unveil a new national carrier following the suspension of the Nigeria Air project.

Permanent Secretary in the Ministry of Aviation and Aerospace Development, Dr. Ibrahim Abubakar Kana, gave the hint while clarifying an earlier comment attributed to him that he had the mandate of President Bola Ahmed Tinubu to deliver a new national carrier.

Daily Trust reported Kana as denying ever saying the suspended Nigeria Air project with the Ethiopian Airlines providing the technical support would be revived.

The Minister of Aviation and Aerospace Development, Festus Keyamo, on assumption of office in 2023 suspended the project.

He also declared that the Ethiopian Airlines deal on Nigeria Air was for Nigeria.

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Keyamo had said, “This is the Ethiopian Air agreement here. And you’ll be shocked if you look at this. What it simply says is that a foreign government should come and take over our national carrier.

“That is the long and short of the story, because Ethiopian Air was a single major shareholder in that deal.

“Ethiopian Air is owned by another government in Africa. It’s the same thing they have done to Togo. Togo is a small country. They have done it with Asky owned by Ethiopian Air. We cannot be Togo. I apologise, whoever I’m talking to but we cannot be Togo.

“We are big; we are big; we are ambitious. We cannot give up our entire ecosystem to another entity. Because what would have happened in that case is that the Ethiopian government would now be a complete beneficiary of all our BASA (Bilateral Air Service Agreement) routes.”

Stakeholders, industry players and analysts have expressed concerns over the failure of all the attempts at bringing back the national carrier since the demise of Nigeria Airways in 2004 despite millions of dollars and billions of naira sunk into it.

Former Minister Hadi Sirika in response to a report that N85bn was expended on the Nigeria Air project stated that only N3bn was spent on the project.

The former minister said: “Between the years 2016-2023, all the money budgeted for Nigeria Air, was about N5 billion but not all of it was released. Perhaps about N3 billion was released.

“Part of the N3 billion has so far been spent on the acquisition of offices, payments of consultancy fees, workers’ salaries and processing of Air Operators ‘Certificate (AOC).”

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In a statement yesterday, Kana confirmed that he had been inundated with inquiries about his reference to the revival of the National Carrier Project and needed to clarify the issue.

He said, “For the avoidance of doubt, I never said that there is a mandate to revive the botched Nigeria Air deal with Ethiopian airline. I received no such instruction.

“I was only referring to the general vision of the administration to still consider a National Carrier Project if it is favourable to the country and under the guidance and directives of Mr. President and the Honourable Minister of Aviation. I hope this clarifies all the ambiguities surrounding my earlier statement on this issue.”

From 2003 till date, virtually all the ministers of aviation that have served made attempts to bring back the national carrier with billions of naira spent on the various projects without giving an account of the money.

Daily Trust reported an aviation analyst, Group Capt. John Ojikutu, as saying instead of floating one national carrier, government should set up two flag carriers instead; one regional and continental and the other intercontinental.

He said, “This is what our contemporaries in the early times were doing. I will recommend Arik-Aero for the Regional-Continental and Air Peace-Ibom for the Intercontinental. Both would need foreign technical partners and investors but not from any of our competitors on the BASA Routes.

“First is to assess the local and foreign debts and assets of the airlines to the foreign investors and the domestic investors.”

He stated that both foreign and local investors should not have more than 30 per cent making 30 per cent in total while FG and the states or the six geographical areas should have 12% and the public through the Nigerian Stock Market 28% and the 40% balance should be for the airlines.

“Anything different from that cannot work and may not last,” he added.

New national carrier likely as FG/Ethiopian Airlines pact crumbles

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Business

Costs of calls, data to go up, FG confirms

Published

5 days ago

on

January 8, 2025

By

Costs of calls, data to go up, FG confirms

Users of telecommunication services in Nigeria will pay higher costs as the Federal Government has agreed to the demand of industry operators for a tariff hike.

But the hike will be below the 100 per cent increase requested by service providers, the government has said.

Minister of Communications, Innovation, and Digital Economy, Bosun Tijani, disclosed this during an industry stakeholders forum in Abuja on Wednesday.

“The essence of this gathering is recognizing the critical role the telecom sector plays in driving Nigeria’s economic development,” Tijani said.

“Tariff will go up. That’s the verdict. But it won’t be by 100%.

“We need to ensure that as a sector, we put the right regulations in place that can ensure the growth of this sector, continue to contribute to job creation, but also enable other key sectors in the country as well.”

This implies that prices of calls, data and SMS will go up for the average Nigerian.

Executive Vice Chairman, Nigerian Telecommunications commission (NCC), Aminu Maida, also said that tariff adjustments would be accompanied by measures to simplify billing systems and increase transparency.

He said, “We’ve revised our quality of service regulations, bringing the entire value chain into scope for compliance, from MNOs to tower codes and transmission companies.

“So when we do see these tariff modifications, it’s also going to come with simplification.

“So every MNO or every service provider must comply with a simplified template; to show Nigerians what you are charging per minute, per voice, per SMS, and per megabyte of data.”

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