Nigeria’s domestic debt went up to N22.57 trillion on Wednesday, when the Federal Government sent in a last-minute supplementary budget for the 2022 fiscal year.
The President, Major General Muhammadu Buhari (ret. ), wants the National Assembly to approve an extra budget of N819.54 billion, which he plans to pay for by borrowing money from within the country.
Buhari sent the N819.5bn supplementary budget for the 2022 fiscal year to the National Assembly on Wednesday for approval. This money will be used to fix infrastructure that was damaged by floods in many states of the country a few months ago.
The supplementary budget is for the capital expenditure part of the 2022 budget, as explained by the President in a letter read in plenary by the President of the Senate, Ahmad Lawan. This means that the deficit will go up to N8.17tn.
The letter said, “In the year 2022, there was the worst flood in recent memory. This caused a lot of damage to farmland when harvest season was already over.
“This could make food security and nutrition in the country even worse. The flood has also destroyed bridges and roads in all 36 states and the Federal Capital Territory (FCT), which are very important for moving goods and services.
“The flood also hurt the water sector, and some important projects that are still going on but are already about 85% done need to be finished.” The nine important projects that have been proposed in this sector include water supply, dam projects, and irrigation projects all over the country.
“I’ve given the go-ahead for a supplementary budget of N819.536bn for 2022, all of which is for capital spending. The extra spending will be paid for by more domestic loans, which will bring the budget deficit for 2022 to N8.17 trillion and the ratio of deficit to GDP to 4.43 percent.
Since it was a proposal that was due 10 days before the New Year, the President of the Senate sent it quickly to the Senate Committees on Appropriations, Finance, Works, Water Resources, and Agriculture so they could look at it as soon as possible.
The Federal Government’s original plan was to borrow N5.01tn (with domestic debt put at N2.51tn) to pay for some of the N6.26tn budget deficit.
With the new proposal of N819.54bn in domestic debt, the Federal Government is expected to borrow N3.33tn in 2022.
As of December 2021, the Federal Government owed N19.24tn in domestic debt, according to data from the Debt Management Office.
By September 2022, the domestic debt stock had grown to N21.55tn, which means that the Federal Government had borrowed N2.31tn so far.
With the new loan of N819.54bn, the Federal Government can still meet its plan of having N1.02tn more domestic debt.
The Federal Government’s domestic debt went from N8.4tn in June 2015 to N21.55tn in September 2022, according to the PUNCH.
Under Buhari, this was an increase of N13.15tn, or 156.55 percent.
According to the proposed budget for 2023, the Federal Government plans to spend N4.5tn on interest charges for domestic debt by 2023. This was recently reported by the PUNCH.
This is more than the N1.31tn that was supposed to be set aside for interest payments on domestic debt in 2016.
In its most recent Africa’s Pulse report, the World Bank said that Nigeria’s growing debt service-to-revenue ratio was a cause for concern.
The bank says that by the end of 2022, the debt service to income ratio could reach 102.3%.
Recently, when President Major General Muhammadu Buhari (ret.) presented the 2023 appropriations bill to a joint session of the National Assembly, he said that even though the country has had trouble getting enough money, it has always met its debt service obligations.
“Even though we have had trouble making money, we have always met our debt service obligations. Staff salaries and transfers required by law have also been paid on time,” Buhari said.
But the Finance Minister, Zainab Ahmed, said at the launch of the World Bank’s Nigeria Development Update, titled “The urgency for business,” which took place recently in Abuja that Nigeria was having trouble paying its debts.
She said, “We are already having trouble paying our debts because, even though our income is going up, our expenses are going up at a much faster rate. It is a very hard situation.”
Buhari restructures debt
In the meantime, President Major General Muhammadu Buhari (ret.) has asked the National Assembly to approve a N23.7tn restructuring of Ways and Means Advances.
On Wednesday, both the President of the Senate, Ahmad Lawan, and the Speaker of the House of Representatives, Femi Gbajabiamila, told the members of their chambers about Buhari’s request.
In the request, titled “Restructuring of Ways and Means Advances,” the President wrote, “The Ways and Means Advances by the Central Bank of Nigeria to the Federal Government have been a way for the Federal Government to get short-term or emergency funding to cover delayed government expected cash receipts of fiscal deficit.
“As of December 19, 2022, there is N23,719,703,774,306.90 in the Ways and Means account. I have given my approval for the securitization of the Ways and Means balances on the following terms: the amount is N23.7tn; the term is 40 years; there is a 3-year grace period for paying back the principal; and the interest rate is 9%. Your agreement and approval are needed to make it possible to carry out the same.”
Gbajabiamila sent the request to the House Committee on Aids, Loans, and Debt Management, and Lawan sent it to the Senate Committee on Finance with a request for a report on Thursday.
The Senate President said that Buhari’s request for a N819.5bn supplementary budget for 2022 would be looked at and passed on Thursday, along with the 2023 Appropriation Bill.
Lawan said, “Today, we will send these letters to our Appropriations, Finance, Works, Water Resources, and Agriculture committees.
“They have to work on it and make sure we do things the right way. In this case, the Minister of Finance, the CBN, and the Ministers of Agriculture, Water Resources, and Works will be asked to take part in this process and make themselves available so that we can get the right information between now and tomorrow.
“By God’s grace, Thursday will be the last day of business for the 9th Senate this year. We will have a lot to do because our Appropriations Committee has to give us a report on the 2023 Appropriations Bill.
In response, Mr. Johnson Chukwu, who is the Managing Director and Chief Executive Officer of Cowry Asset Management Limited, said that budget implementation can be delayed for three months.
He did, however, wonder why the government is paying attention to a crisis that happened more than three months ago.
He said, “The budget can be used until the end of March because budget lines can be extended for up to three months.” If that’s the case, the budget doesn’t end when the fiscal year does. The government is careless enough to let it happen. And if there is a strong reason for the government to make sure an important expense is covered, it can always change the budget timing.
“However, I don’t understand why the flood from three months ago is such a big deal now. Flood is an emergency that needs to be dealt with right away, unless they are saying that the effects of the flood are just now becoming clear.
Prof. Adegbemi Onakoya, a professor of development economics at Babcock University, said that the president’s actions were legal because the law allows for supplementary budgets.
Sheriffdeen Tella, an economics professor at Olabisi Onabanjo University, asked about how the new supplementary budget would be sent and what the last supplementary budget was used for.