By Nkiruka Nnorom
The Federal Government recently revealed plans to borrow N1.884 trillion from both local and international debt markets to fund the 2016 budget deficit which is put at N2.24 trillion. According to the government, N900 billion will be borrowed externally, while the remaining N984 billion will be borrowed from domestic debt market to provide infrastructure needed to boost productivity and create jobs. The borrowed funds, according to the FG, would be deployed to fund only capital projects.
In demonstration of the government’s commitment to capital projects development, President Muhammadu Buhari assured at the signing of 2016 budget of immediate release of N350 billion capital projects development funds into the economy. Buhari revealed that N200 billion has been mapped for development of road network, saying that it is just a figment of other capital projects which cut across health, railway, energy, sports , hospitality, education, security and aviation among others.
The Vice president, Professor Yemi Osinbajo, as well as Zainab Ahmed, Minister of State for Budget and National Planning, had earlier stressed the federal government’s commitment to ensure that 2016 budget is fully implemented while funds meant for capital projects are affectively directed to the projects.
Osinbajo disclosed in a paper entitled: ‘The economy – Where we are today’, delivered at a presidential retreat organised by the Office of the Secretary to the GoverAnment of the Federation for ministers-designate, that the government was working towards pegging capital expenditure in the 2016 budget at N2 trillion, about 30 per cent of the budget sum. This, he said, was against the N1.31 trillion allocated to capital expenditure in 2015 budget.
He further said that while the percentage of capital expenditure to recurrent expenditure in the 2015 budget was 19.4, the government tinkered with 40 per cent for 2016 budget. Osinbajo said: “The budget process will be zero based, a method of budgeting by which all expenses must be justified for each new budget year.
DMO’s efforts
To ensure efficient utilisation of the borrowed funds, the Debt Management Office, DMO, recently organised a one-day workshop tagged “Public Debt and the Challenge for Financing Nigeria’s Economic Recovery”. The workshop provided the Agency the opportunity to give further impetus to steps being taken by the Federal Government, FG, to finance 2016 budget deficit. It also served as an avenue for the Agency to give an update on it is doing to ensure that the funds are efficiently utilised.
Mr. Abraham Nwankwo, Director General, DMO, re-echoed that the federal government is focused on ensuring that the funds to be borrowed for 2016 budget financing would be committed to financing capital projects. He assured that the DMO is committed to raising capital to fund the 2016 budget deficit. Such funds, he said, are to be raised from appropriate sources and through suitable mix during the 2016 fiscal year to make sure that capital projects are adequately funded.
“The DMO is committed to making sure that we raise money to fund the 2016 budget deficit from appropriate sources and through appropriate mix during the fiscal year to make sure that capital projects are funded,” he said. Nkwnkwo said that Nigeria is rightly positioned to borrow more hence the country’s debt to GDP ratio is 13 per cent. “The debt to GDP ratio is 13 per cent, compared to the 56 per cent of peer group. So in that essence, our debt is still very sustainable” the DMO DG said.
He urged Nigerians to boost contribution to nation building by ensuring sustenance of payment of taxes and other duties to beef up the country’s tax revenue which he said had remained relatively low. Nigeria comparative tax revenue to GDP ratio of less than 7.0 per cent, against a ratio of 18 per cent by its peer group, reinforces the need to widen the tax net for the government to generate to generate more tax revenue.
“As our economy grows, as our GDP grows, as we are collecting enough in taxes from individuals and corporate bodies to be able to fund capital projects, our economy will continue to grow” Nwankwo said. The DMO boss emphasized that the Nigerian debt level is vastly sustainable, as the country still has potential that could be harnessed. These potentials he said, the federal government is presently working to exploit for efficient growth of the economy.
He said the debt sustainability and overall economic sustainability can be significantly influence by individuals and corporate bodies paying taxes fully.
Commenting on the impact of decline in global oil price, Nwakwo said Nigerian government is confronting the challenge through diversified, self-sustaining growth in agriculture and agro processing, solid minerals, manufacturing and ICT. In the medium to long term, debt sustainability in Nigeria hinges on the overall sustainability of the economic, and the overall economic sustainability hinges on diversifying the economy in a sustainable manner, he had said.
“That is what the government is doing in agriculture, solid minerals, ICT and manufacturing. And to do that, we need a strong infrastructure base and that is why government is spending what is borrowing on capital projects,” Nwankwo said.
With funding from the debt market, greater opportunity would be provided to Nigerians and corporate to contribute to governance and infrastructural development by lending to the government and receiving guaranteed earnings from their investments. It would also help to create the much needed employment opportunities to millions of Nigerians; hence the capital projects to be executed with the funds would serve as elixir for greater employment.
Also, such capital projects such as roads, rails, hospitals among others would be the much needed infrastructures to boost economic advancement as well as reduction of abject poverty in the society, Nwankwo enthused.
