Despite criticisms of President Muhammadu Buhari administration’s penchant for foreign loans, the Federal Government said its decision was not misplaced, insisting that external borrowing was necessary to facilitate infrastructure development in the country.
Minister of Finance, Budget and National Planning, Zainab Ahmed, who clarified sundry issues at the maiden State House media briefing on the economy in Abuja, hinted at plans to present the supplementary budget to the National Assembly for the acquisition of COVID-19 vaccine and vaccination of frontline health workers.
She pointed out that Nigeria would continue to explore facilities that enhance the business environment and better yields for the economy until the country’s revenue profile improved, adding: “The more revenue we realise, the less we will borrow. As oil prices rise and enhance revenue and provide us with some reliefs, we will reduce our borrowing.”
The minister had said in January that there was no provision in the 2021 Budget to fund the acquisition of the COVID-19 vaccine but disclosed that the Federal Government was working on the kind of vaccine to be procured, while the ministry and Ministry of Health would meet to finalise an amount to be allocated to the procurement of vaccine.
On insinuations that the government was planning to increase the budget for the vaccine, Ahmed said: “There will be a supplementary budget in March relating the COVID-19 pandemic, but we will also have a mid-year review. After the review, if there is the need to make an amendment for the supplementary budget, we will take that decision, otherwise, we will just report the review.”x
She reassured that the country’s debt profile was still within sustainable limit once the country rolled out its infrastructure and the economy began to grow.
“There is a lot of sensitivity in Nigeria about the level of government’s borrowing, but it is not misplaced. I said earlier that the level of borrowing is not unreasonably high. The problem is that of revenue.
“So, what we need to do is increase revenues to be able to enhance our debt to Gross Domestic Product (GDP) obligation capacity. If we don’t borrow, fail to build rails and major infrastructure until our revenue rises, then, we will regress as a country.
“We will be left behind and we won’t be able to improve our business environment and our economy will not grow. So, it is a decision that the government has to take. Our assessment is that we need to borrow to build infrastructure. We need to ensure that when we borrow, we apply the borrowings to specific infrastructure that will enhance the business environment.
“The Federal and state governments have to strive to increase revenues and enhance our debt service obligations. We also have to ensure that when we choose projects, we choose those ones that will enhance the business environment so that more revenues can come into the treasury,” she stated.
She explained that Nigeria’s total borrowing as of December 31, 2020, was 21.6 per cent of GDP, adding: “So, if we are not looking at adding the other category of loans that I mentioned, we don’t even need to increase that at this time. As of 2019, the country’s debt to GDP ratio was 19.2 per cent, so only two per cent was added.”
On the impact of rising crude oil price, the minister said: “The more revenue we realise out of the budget, the less we borrow. As oil prices rise and we get more revenue, there will be some reliefs and we reduce our borrowing.
“So, it is a positive thing for us and also, we have a provision in the 2021 budget for immunisation. We are already releasing money to the health sector to start operation on the first batch of vaccine that will arrive in the country soon.
“But what we have in the budget is not enough, so we are working with the health authorities to provide a plan that will be taken to the National Assembly and the President for approval as the supplementary budget for COVID-19 vaccination.”x
On loans from development partners, she said the country closed 2020 with $3.4b realised from the IMF and $600m from the African Development Bank (AfDB), adding that the government concluded negotiations with the World Bank and the Islamic Development Bank (IDB).
“Even with the IDB, we signed for the last tranches and we started negotiation with the World Bank on about 10 requirements that we need to address and we had addressed them, but the World Bank insisted that we have not sufficiently addressed the requirements on single exchange rate.
“Their view is that despite the fact that we have adjusted the official exchange rate from N305 to N360 and moved to Investors and Exporters (I&Es) or the Nigerian Autonomous Foreign Exchange Fixing (NAFEX) window, government’s inflows and outflows are monitised at the NAFEX window rate.
“So, we feel we have met that requirement, but the World Bank says we have to close the gap between the black market and NAFEX window,” she explained.