Connect with us

the nation

Okonjo-Iweala, Adesina warn African leaders of Debt trap

Published

on

Director-General of the World Trade Organisation (WTO) and ex-Minister of Finance, Dr. Ngozi Okonjo-Iweala

The Director-General of the World Trade Organisation (WTO) and ex-Minister of Finance, Dr. Ngozi Okonjo-Iweala; President of the African Development Bank (AfDB), Dr. Akinwunmi Adesina; Governor of the Central Bank of Egypt (CBE), Tarek Amer and other regional economic stakeholders, yesterday, expressed concern about rising national debts, warning that majority of countries in the continent to face a high risk of falling into a debt trap.

They expressed their concerns during the ongoing African Development Bank Group’s 2021Annual Meetings, warning African political leaders to explore other funding options and scale up debt management transparency. The experts observed that majority of the countries are grappling with sustainability just as debt servicing has become a major burden on the regional economy.

Okonjo-Iweala observed that the current debt burden pre-dated COVID-19 but was worsened by the pandemic. Noting that “prevention is better than crisis management”, she warned that Africa could not afford to fall into a debt trap again.

According to her, many African countries’ debt to gross domestic product (GDP) ratio ballooned during COVID-19 and the oil market crisis. For instance, she said, Nigeria’s debt to GDP moved up from 29 per cent to 35 per cent during the recent lull in the international crude market.

Recent data shows that the Federal Government spent a sum of N1.02 trillion on domestic and foreign debt service in the first quarter of 2021, representing a 35.7 per cent year-on-year increase compared to N753.7 billion spent in the corresponding period of 2020.

A cursory look at the data released by the Debt Management Office (DMO) reveals that N612.71 billion was spent on domestic debt service, while N410.1 billion was expended on servicing of external debt.

The WTO DG described Africa as an embodiment of the global trickery growth, noting that the continent lags while the advanced economies and China “are growing at a faster rate”. She noted that the growth prospect was further compromised by the debt burden and uneven COVID-19 vaccination, which could exclude African countries from the travelling space.

Adding that higher debt carriage capacity meant a higher risk of distress, she observed that most African governments considered it convenient to ignore the debt sustainability threshold when “things are good” only to expose themselves to systemic risks when the economy is on a downtrend.

The ex-Finance Minister called for the adoption of innovation in public finance and debt management, adding that increasing demand for bonds and enforcing open border initiatives as represented by the African Continental Free Trade Agreement (AfCFTA) could help to unlock economic potential and increase debt sustainability.

“Innovation in debt financing is key,” the trade expert said while noting rising debt to revenue translated to fewer resources for the much-needed developmental projects across the continents.

Citing continent-wide research, Adesina said only one out of 38 African countries with sustainability reports was free from sustainability challenges. The rest, he said, had challenges ranging from moderate to high risks.

According to him, to increase sustainability, African countries would need to agree on the convergence of macroeconomic reforms, increase the fight against corruption and deepen domestic resource mobilisation to reduce the risk of a debt crisis.

“There should be full transparency on debt, especially those owed by state enterprises,” he stated, adding that debt relief might not lead to economic growth. He stressed that financial stability was also key to averting the looming debt crisis.

In his opening remarks, Adesina said the meeting offered the stakeholders an opportunity to share ideas on how to position African and AfDB for growth. Regretting that Africa produced only one per cent of the global COVID-19 vaccine, the AfDB President said the continent must brace up for the challenge of vaccination as “I would not continue to beg for vaccines”. He said the bank would continue to support the continent to overcome the challenge.

He said sub-Saharan Africa would require $425 billion just as low-income sub-Saharan Africa would need over half of the figure by 2030 to fully recover from the effects of COVID-19, adding that another 30 million Africans would fall into poverty by the end of the year.

“The effects of the pandemic on the continent’s economy have been massive. Africa’s cumulative GDP losses are estimated between $145 billion and $190 billion. Africa will need a lot of resources to support its recovery,” he said.

Acknowledging the role of public debt in escalating poverty, he promised: “We will support countries to tackle debt and embark on bolder economic governance reforms to forestall a debt crisis.

“We now have a real opportunity to tackle Africa’s debt challenges, more decisively, with the recent decision by the IMF to issue $650 billion special drawing rights (SDRs). As agreed by African heads of state and global leaders at the Summit on Financing of African Economies, called by President Emmanuel Macron of France, $100 billion of these SDRs should be provided to support Africa,” he said.

Amer, who called on macroeconomic managers to expand the tax net to increase public revenues, challenged Africa’s finance ministers to take responsibility for the economic development and their accounting responsibility, warning that “quick fixes” would not usher in sustainable growth. He charged leaders of the continent to pay special attention to unemployment and inflation as the continent seeks economic rebirth.

The central banker also called on governments to work towards achieving autonomous monetary authorities, saying independent central banks would produce the right policies to ensure the stability of key prices.

It would be recalled that Nigeria’s total debt portfolio rose to N33.1 trillion as of March 2021 from N32.9 trillion recorded as of the end of 2020, representing an increase of 0.58 per cent. The debt expense for the period already represents 30.7 per cent of the total N3.32 trillion budgeted for debt service for the entire year.

This implies that every Nigerian currently owes about N157,906.30 in terms of debt per capita as with the country’s total public debt at N33.1 trillion. Debt per capita is calculated as the total public debt of a country divided by the country’s population and Nigeria’s population is estimated to be 209 million, according to the World Poverty Clock.

Nigeria’s dwindling revenue is still a major factor militating against the expected development of the economy. The situation has continually led the Federal Government to borrow to funds its fiscal budget. Nigeria spent the equivalent of 83 per cent of its revenue in 2020. The total revenue earned by the government during the year stood at N3.93 trillion, while the amount spent on debt service stood at N3.26 trillion.

In the same vein, Nigeria also recorded a 99 per cent debt service to revenue ratio in the first quarter of 2020, having recorded a retained revenue of N950.56 billion and incurred a sum of N943.12 billion in debt service. However, the government projects a debt service ratio of 46.9 per cent for 2021, with its revenue projected to stand at N6.6 trillion, depending on the crude oil benchmark of $40 per barrel.

According to the 2021 budget, N7.99 trillion was projected as the amount available for the year, indicating a budget deficit of N5.6 trillion, which is expected to be funded by borrowing. The Minister of Finance, Budget, and National Planning, Zainab Ahmed, explained that the deficit will be financed by borrowings from domestic and foreign sources. She also stated that N205.15 billion will come from privatisation proceeds

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

the nation

Lagos Assembly moves to end open grazing, considers VAT bill

Published

on

The Lagos State House of Assembly says the Prohibition of Open Cattle Grazing Bill, when passed will ensure harmonious relationships between herders and farmers in the state.

The assembly made this known after the bill was read on the floor of the house for the second time, by the Acting Clerk, Olalekan Onafeko, at plenary on Monday.

It said the bill would also protect the environment of the state and the South-west zone.

The House also read for the first and second time, the state’s Value Added Tax (VAT) bill, and asked the Committee on Finance, which was handling it to report back on Thursday.

The Speaker of the House, Mudashiru Obasa, who described the Prohibition of Open Cattle Grazing Bill’ as timely, thereafter, committed the bill to the committee on agriculture for public hearing.

The speaker also suggested that the bill should make provision for the registration of herders, and prepare them for ranching.

“Allocating parcel of land is not enough, but there should also be training for those who will go into ranching, as ranching is expensive and requires adequate preparation,” he added.

VAT

Concerning the VAT bill, the speaker said it would further lead to an increase in revenue and infrastructural development.

”This is in line with fiscal federalism that we have been talking about,” he said.

Mr Obasa said the VAT law, when passed, would help the state meet challenges in its various sectors.

He also urged the Lagos State government to do everything legally possible, to ensure the judgment of the Federal High Court, Port Harcourt, was sustained even up to the Supreme Court.

The speaker lamented a situation where about N500 billion would be generated from the state, while N300 billion was generated from other South-west states, but paltry amounts would be disbursed to Lagos State in return.

Mr Obasa said it was an opportunity for the state to emphasise again, the need for the consideration of true federalism.

Speaking earlier on the bill on open grazing, Bisi Yusuff (Alimosho 1) lamented that farmers had continuously become afraid to visit their farms, thus causing shortage of food.

Mr Yusuff also said many farmers had become indebted, as they now found it difficult to pay back loans they secured.

His position was supported by Kehinde Joseph (Alimosho 2) who noted that the bill would ensure peaceful coexistence, reduce crime and help to guide the activities of herders.

Olumoh Lukeman (Ajeromi-Ifelodun 1) suggested that the high court should be made to handle cases from enforcement of the bill when passed, or that the state should establish special courts for such purpose.

Also, Gbolahan Yishawu (Eti-Osa 1) expressed support for the bill, noting that it would give a level of security to the state and help reduce economic losses.

He added that Lagos had 250 hectares of land in Ikorodu and another 750 hectares in Epe for ranching.

David Setonji (Badagry II), said: “There was a time we went on oversight function in a school here in Lagos. We were embarrassed by cattle. We had to wait for the herder to move the cattle before we embarked on our oversight function.”

Mr Setonji suggested a collaboration between the Neighbourhood Safety Corps and the police, in the implementation of the law when passed and assented to.

Other lawmakers who contributed during the plenary were Adedamola Kasunmu (Ikeja II), Rasheed Makinde Ifako Ijaiye II), and Sanni Okanlawon (Kosofe I).

(NAN)

Continue Reading

the nation

Ngige: FG to recover millions wrongly paid to 588 doctors

Published

on

The federal government says it is planning to recover “millions of naira wrongly paid to 588 medical doctors” across the country.

While fielding questions from state house correspondents, Chris Ngige, minister of labour and employment, said the affected doctors wrongly benefitted from the medical residency training fund meant for a particular category of doctors.

The minister said the names of the doctors were uncovered after a scrutinisation of the 8000 names submitted by chief medical directors of federal government health institutions for the training programme.

Ngige said a substantial amount of the money has been refunded by some of the affected doctors while efforts are being intensified to recover the remaining balance.

He said the delay in making the refund by the affected doctors is holding back the residency fund payment by the government.

“Ministry of health has gotten the list of doctors who supposedly are to benefit from the medical residency training fund,” he said.

“Total submission of about 8000 names were gotten and the ministry of health is scrutinising them.

“We have done the first round of scrutinisation and they will now compare what they have with the Post-Graduate Medical College and the chief medical directors who submitted the names.

“The Association of Resident Doctors, in each of the tertiary centres, worked with the CMDs to produce those names, but now that the names are being verified.

“We discovered that about 2000 names shouldn’t be there because they don’t have what is called Postgraduate Reference Numbers of National Postgraduate Medical College and (or) that of the West African Postgraduate Medical College.

“So, this is it and that is the only thing holding back the residency fund payment because it is there already for incurred expenditure has been done by the finance minister and it’s in the accountant-general’s office.”

“So, once they verify the authenticity of those they are submitting, the Accountant-General will pay.

“We are doing that verification because we do not want what happened last time in 2020 to reoccur.

“In 2020, the submitted names didn’t come through the appropriate source, which is the Postgraduate Medical College and payment was affected and it was discovered that about 588 persons, who were not resident doctors benefited from such money.

“They are now finding it difficult to make the full refund. But they have to refund that money. Some are refunding, but there is no full consideration of the account.

“That account has to be reconciled to enable the accountants pay the next round of funding for 2021.”

The National Association of Resident Doctors (NARD) has been on strike for a month over “irregular payment of salaries”, among other issues.

Efforts by stakeholders, including the national assembly, to mediate between the federal government and the resident doctors have not yielded results.

Continue Reading

the nation

Insecurity: Kaduna suspends weekly market, bans livestock transportation

Published

on

The Kaduna State government has suspended trading at the popular weekly Kawo market.

The order on Thursday came days after the government suspended similar markets in five other local government areas of the state.

Kawo market is one of the largest weekly markets in Kaduna North.

It is located in the same area as the Nigerian Defence Academy (NDA), the Hassan Usman Katsina House popularly know as State House and the Legislative Quarters.

According to a statement by the state commissioner of Internal Security and Homeland Affairs, Samuel Aruwan, on Thursday, “the Kawo weekly market which usually holds every Tuesday in Kaduna North LGA has been suspended with immediate effect”.

“The Government of Kaduna State wishes to highlight that the previous directives suspending weekly markets, and selling of petrol in jerrycans in Birnin Gwari, Giwa, Chikun, Igabi and Kajuru LGAs, as well as banning the felling of trees for timber, firewood and charcoal and other commercial purposes in Birnin Gwari, Kachia, Kajuru, Giwa, Chikun, Igabi and Kauru LGAs, are still in force.

“Citizens are hereby informed that all these directives will be vigorously enforced by security agencies.”

Also, the statement said the state government banned the transportation of livestock.

“The ban also prohibits the transportation of livestock into Kaduna state from other states. Both bans take effect immediately, from today 2nd September 2021.

“The government also wishes to reiterate that the transportation of donkeys into the state is a criminal offence and anyone found engaging in this will be prosecuted accordingly.”

Kawo Market ban

Many traders who spoke with news men in Kaduna welcomed the suspension of the weekly Kawo market.

Apart from the larger weekly trading, trading also takes place daily among residents of the neighbourhood.

Danladi Bala, a grain transporter, said the state government’s decision to suspend weekly trading in the market is right.

“Yes, we are traders here, but the recent suspension of weekly markets in other local government areas will make the Kawo market the target for criminal activities. They will all come here. It is a wise decision from the government,” he said.

Hajiya Mama, a trader, also said she was not suprised by the announcement.

“I trade in the market, but in the last two weeks we have been witnessing the influx of traders with large commodities.

“With the closure of weekly markets in Zamfara and other part of the state, this market will be an option for good or bad traders,” she said.

Continue Reading

Trending