*Says covid-19 pushed borrowing plan for 2020 fiscal year from N1.2 trn to N4.2 trn
By Myke Uzendu, Chuks Oyema-Aziken and Daniel Tyokua
The Debt Management Office (DMO) yesterday offered explanations on why Nigeria cannot stop borrowing to finance its budget, stressing that certain unforeseen factors make borrowing inevitable.
The Director-General of DMO, Mrs. Patience Oniha, who made the clarification said that some Nigerians who reacted on the nation’s debt stock, were misconceived, especially on the details and the reasons for borrowing.
Citing the 2020 budget as an example, she said it has an initial borrowing plan of N1.6 trillion in the Appropriation Act, but the effects of covid-19, which drastically slashed the nation’s projected revenue by more than 50 percent, pushed up the borrowing plan to N4.2 trillion.
She insisted that there is nothing wrong with borrowing, adding that even the industrialized countries, with their huge revenue profile, like the USA, UK, Germany, UAE, Japan, etc, borrow more than Nigeria.
She explained that in any fiscal year, if the projected expenditure is more than the projected revenue, the only option left for government to finance it’s expenditure is through borrowing, either domestic or through external borrowing.
She explained that when a country is financing specific project, like when President Muhammadu Buhari submitted the request to borrow $22.75 billion, the money was needed to finance specific projects, which could not be financed without resorting to borrowing.
The DMO boss stated: “You can’t have deficit in your budget and you are borrowing to finance the deficit and your debt stock is not rising.
“Some of us are not looking at it in a holistic manner. We simply look at the debt stock, which is why we arrive at wrong assumptions.
“And so, borrowing is cumulative and I dare say there is nothing wrong with borrowing.
“The DMO must in tune with the Fiscal Responsibility Act collaborate with the Federal Executive Council (FEC) and the National Assembly before we can borrow.
“The President can’t just wake up and ask DMO to borrow. All the authorising agencies and processes must be followed.
“In the current Appropriation Act, it provided for N1.6 trillion borrowing, but covid-19 slashed out projected revenue by more than 50 percent and brought up the borrowing plan to N4.2 trillion.
“Know therefore that by the end of this year, the minimum you will see is N4.2trillion. We have raised about 80 per cent of it already.
“The Fiscal Responsibility Act allows you to borrow on confessional terms (cheap borrowing plan). And since our law says we must appropriate everything, we won’t do anything without such National Assembly approvals.
“And mind you, we don’t get all the monies (monies quoted as coming in from creditors) at the same time.
“They give us milestones; That is to say, what we need at a time. And before the lender gives out loan, their own consultants inspect and certify that we are working according to the agreement.
“Like I stated earlier, the monies come in piecemeal and we also have to break the debt down among federal, states and FCT.
“Am sure you know how indebted the US borrows. Even their congress at some point said they were not going to approve borrowing, but they discovered that government can’t work well without money.
“UK, Germany, UAE, France, etc, even the big players in the oil industry borrow.
“Governments borrow because they need to get money to finance their budget, because there is always a deficit. And so, in order to get the budget running, we have to borrow to finance the budget.
The growth in the debt stock has that origin.
“Once there is deficit in the budget, that is where it starts from; to finance deficits in the budget and this is because revenue is less than expenditure.
When asked if Nigeria could one day come out of the debt burden, she said that “so long as we keep borrowing, we can’t give such a date.
“You know to stop borrowing the National Assembly has to pass such bills and the president assents, but without that, this issue does not arise”.
On where government got money to pay the salary of public servants since it already said it has spent up to 90% of the national revenue to service loan, she explained that under the circumstances, government must look elsewhere to finance personnel costs.
She painted a hypothetical scenario of what is likely to happen should government fail to pay the salaries of public servants because 90% of the revenue had been used to service debt, stressing that it would be catastrophic and have grave consequences on the national economy and well-being of the citizenry.
She attributed the several uncompleted projects to lack of consensus on our national priority, adding that “there are times when you have to do things differently”.