The World Bank Group has denied that it disagreed with the Minister of Finance, Mrs. Kemi Adeosun, over the federal government’s external borrowing plan aimed at stimulating the economy and funding infrastructure projects in the country. According to a statement issued by the media aide to the minister, Mr. Oluyinka Akintunde, the World Bank in a mail to Adeosun by the Senior Communications Officer of the Bank, Mr. Rachid Benmessaoud, “averred that the media misrepresented and quoted out of context the comments made by its Senior Economist for Nigeria, Gloria Joseph-Raji, at an event in Abuja”.
Benmessaoud was quoted as stating in the mail: “On October 11th, during the launch of Africa’’s Pulse, the World Bank’s biannual analysis of African economies, World Bank Senior Economist for Nigeria, Gloria Joseph-Raji, was asked by a reporter to share her views on the federal government’s plan to increase external borrowing. “At no point did she mention that the World Bank and the Federal Government of Nigeria (FGN) disagree on the need to rebalance the country’s debt portfolio. Where expenditure exceeds revenue, governments will need to borrow. “In doing so, the federal government is trying to rebalance its portfolio towards more external borrowing with lower interest rates and longer maturities.”
It added that the World Bank Senior Economist was quoted by Benmessaoud to have commended the Nigerian government’s effort to rebalance its portfolio in order to lower the cost of its borrowing, as outlined in its 2016-2019 medium-term debt management strategy released last year. “The use of IDA concessional financing, among others, is supportive of the FGN’s effort in this regard, with the added focus on poverty alleviation and building shared prosperity in Nigeria. “The latest issue of Africa’s Pulse points out that growth in Nigeria is projected to pick up from 1.0 per cent in 2017 to 2.5 per cent in 2018 and 2.8 per cent in 2019. While government debt in 2017 is projected to rise, it remains low in Nigeria,” Joseph-Raji was further quoted to have stated.
According to Akintunde, the World Bank spokesman expressed the Bank’s full commitment to help the Nigerian government restore macroeconomic resilience as well as strengthen the ongoing economic recovery and achieve sustainable inclusive growth.
Adeosun had at the Annual Meetings of the International Monetary Fund and the World Bank Group held in Washington D.C., said that the federal government would be prudent in the management of its foreign borrowings.
She noted that the government adopted an expansionary fiscal policy with an enlarged budget in order to deliver a fundamental structural change to the economy, thereby reducing the country’s exposure to crude oil. “Why are we borrowing? Mobilising revenue aggressively was not advisable, nor indeed possible, in a recessed economy. But as Nigeria now reverts to growth, our revenue strategy will be accelerated. “This is being complemented by a medium-term debt strategy that is focusing more on external borrowings to avoid crowding out the private sector. “This would also reduce the cost of debt servicing and shift the balance of our debt portfolio from short-term to longer-term instruments. This government will be very prudent around debt. We won’t borrow irresponsibly,” Adeosun had explained.
The foreign borrowings, which are at lower interest rates, according to her, will also prevent job losses.
“With Nigeria’s source of revenue dropping by nearly 85 per cent, the country had no option but to borrow. The option before the country was to either cut public services massively, which would have led to massive job losses, or borrow in the short-term until it begins to generate sufficient revenues,” she had added.
N2.7bn Debt Service
But as the foreign borrowing strategy of the federal government rages, it came to light Wednesday that the 36 states of the federation spent N2.67 billion to service external debt last month.
The amount was contained in a report obtained by the News Agency of Nigeria (NAN) from the Office of the Accountant-General of the Federation.
Figures from the Debt Management Office (DMO) also showed that as of June 30, the 36 state governments and the Federal Capital Territory (FCT) had a debt stock of about $3.94 billion (N1.2 trillion).
According to the DMO, the states and the FCT are currently servicing loans with multilateral agencies like the World Bank and Agence Française de Développement (AFD).
The breakdown of the debt service by states showed that the top 10 external debt paying states were: Lagos – N802.8 million, Cross River – N232 million, Kaduna – N180.6 million, Oyo – N115.2 million, Akwa Ibom – N111.23 million, Katsina – N99.28 million, Osun – N95.28 million, Ogun – N72.8 million, Edo – N64.1 million and Kano – N54.33 million.
Data from the Accountant General’s office also showed that the 10 states that paid the least on external debt service in September were: Taraba – NN17.2 million, Borno – N17.41 million, Plateau – N18.71 million, Benue – N20.8 million, Delta – N22.32 million, Kogi – N23.94 million, Jigawa – N25.73 million, Nasarawa – 26.96 million, Gombe – N30.54 million and Niger – N30.73 million.
No Harm in Borrowing
Meanwhile, the Managing Director and CEO of First Bank of Nigeria Limited, Dr. Adesola Adeduntan, has endorsed the federal government’s decision to borrow $5.5 billion to refinance its domestic debts and fund the capital component of the 2017 budget, saying that “there is indeed no harm in seeking foreign loans because we currently have the leadership in place to ensure the loans are tied to regenerative projects”.
Speaking at a media parley Wednesday in Lagos, Adeduntan acknowledged that the case against foreign loans was logical in some cases but in the case of Nigeria, “there is no harm in the federal government seeking to borrow to fund the budget because we have the leadership that would ensure that these moneys are judiciously utilised in critical sectors of the economy”.
The International Monetary Fund (IMF) had cautioned developing countries including Nigeria that greater reliance on foreign borrowings might at some point expose their economies to vulnerability arising from debt service burden, foreign exchange risk, and a sudden jump in long-term interest rates if the funds are not put to good use.
However, Adeduntan said: “On a personal note, I don’t see any harm in borrowing to fund critical projects that would spur development in an economy. “In our case, we have the leadership that would provide the comfort that these loans would be tied to projects that would turn around the economy.”
Citing the federal government’s recent successful issuance of the N100 billion Sukuk to finance 25 key roads, with the capacity to have a multiplier effect on the economy as an example of why borrowing tied to specific critical projects should not be seen as harmful to unborn generations, Adeduntan said the sourcing of the money locally and tying the proceeds to provide these critical infrastructure would spur growth in the economy.
According to him, “You can see an example of how the federal government raised N100 billion through the Sukuk locally. The beauty of this is that the proceeds were tied to road intervention projects spread across the country.
“The money is targeting the provision of critical infrastructure that is needed to provide growth in the economy.”
The federal government recently released the proceeds from the N100 billion Sukuk to the Ministry of Power, Works and Housing to fund the key economic road projects.
Each of the geopolitical zones of the country is expected to receive the sum of N16.67 billion for road projects from the funds raised through the Sukuk, in their respective zones.
The North-central and South-south zones accounted for five each of the 25 road projects, while the North-east, North-west and South-east have four road projects each.
Three projects are to receive funding from the Sukuk proceeds in the South-west zone.
AMOUNT SPENT BY STATES ON EXTERNAL DEBT SERVICE IN SEPT 2017
01 ABIA 31,326,205.88
02 ADAMAWA 35,765,643.60
03 AKWA IBOM 111,225,880.57
04 ANAMBRA 36,392,250.36
05 BAUCHI 55,909,234.76
06 BAYELSA 28,391,300.12
07 BENUE 20,792,622.92
08 BORNO 17,411,845.73
09 CROSS RIVER 231,962,506.35
10 DELTA 22,321,499.20
11 EBONYI 31,282,856.03
12 EDO 64,088,110.49
13 EKITI 45,608,594.70
14 ENUGU 45,799,061.67
15 GOMBE 30,538,887.79
16 IMO 46,358,595.57
17 JIGAWA 25,733,823.96
18 KADUNA 180,575,169.37
19 KANO 54,328,126.76
20 KATSINA 99,227,240.44
21 KEBBI 36,342,977.01
22 KOGI 23,941,292.93
23 KWARA 34,961,787.12
24 LAGOS 802,753,160.64
25 NASSARAWA 26,961,830.75
26 NIGER 30,734,086.28
27 OGUN 72,750,986.82
28 ONDO 50,606,534.74
29 OSUN 95,247,661.72
30 OYO 115,182,557.78
31 PLATEAU 18,708,659.81
32 RIVERS 48,720,437.13
33 SOKOTO 33,665,974.99
34 TARABA 17,164,063.46
35 YOBE 31,564,249.48
36 ZAMFARA 20,300,625.15