The disclosure last week by the Minister of Finance, Budget and National Planning, Zainab Ahmed, that Nigeria’s external and domestic debts have been projected to hit N38.68 trillion by December 2021, is quite alarming. This gory scenario should indeed serve as a caution on managers of the nation’s economy on the need to thread softly in the accumulation of debts, especially the external borrowings.
Mrs. Ahmed, who appeared before the Senate Committee on Local and Foreign Debts to defend the ministry’s next year budget, blamed abandonment of road projects on the intricacies in the preparation of annual budgets.
The minister noted: “The total public debt stock, comprising the external and domestic debts of the federal and state governments and the Federal Capital Territory (FCT) stood at N31.01 trillion ($85.90 billion) as at June 30, 2020. It (debt) is projected, based on existing approvals, to rise to N32.51 trillion by December 31, 2020 and N38.68 trillion by December 31, 2021.”
She noted that the 2021 Appropriation Bill has a provision of N3, 124.38 trillion for debt service, out of which domestic debts would be serviced with N2, 183.49 and external debt serviced with N940.89 billion. According to her, the 2021 Appropriation Bill provided for new borrowing of N4, 281.17 billion which was broken down equally between domestic borrowing of N2,140.58 billion and external borrowing of N2,140.58 billion. On the plethora of abandoned road projects, Mrs. Ahmed explained that the current Sukuk fund of N162 billion would be applied to 45 roads across the six geo-political zones.
The minister said: “I’m one person that feels that we should just do this and take one major road in one geo-political zone and finish (it). We were not able to do that because of the processes in which appropriation is made both at the Executive as well as the Legislative arms of government. But truly, if we were able to just take one or two projects at a time and complete it before going to the next one, it will be better. So, what the contractor does is the bit that has been cut out for him to do in that particular area.
”Once the fund is released and it is finished, we stop again. That’s the consequence of these numerous projects that we put in the budget. It is not related to Sukuk-funded projects alone, it cuts across all the projects. You will see a road that costs, maybe, N5billion, and you will see a provision for N100 million, N200 million or 300 million. Of course, the project will never finish. After two years, the contractor comes back and asks for variation, and the amount keeps growing.
“I wish that we get to a point when we sit down as a government and agree that let us select a few projects, finish them in 2020, and then in 2021, we select the next, so that on a geo-political basis, those selections are done as a collective process.”
She said work on the administration’s legacy projects which included the Lagos-Ibadan Highway, Second Niger Bridge, East-West Road and the Abuja-Kaduna-Kano Road, are ongoing without stop because funds were available and they are few.
Ahmed said: “The NSIA (Nigerian sovereign Investment Authority) was assigned four major road projects to do. These projects are Lagos-Ibadan highway, 2nd Niger Bridge, East-West road and the Abuja-Kaduna-Kano road. After the president gave approval, the appropriation for that year, 2019 was remitted to the NSIA, and then added its own fund.
“The projects are on course because there is funding on the ground and because they are few, they are concentrating on them and work is ongoing. I wish we get to a point when we narrow down project implementation to few a projects at a time.”
On the delay in releasing Sukuk funds to contractors for executed projects, the minister explained that though the fund is protected, there are procedures put in place to verify claims before payment are made. She added: “There is an audit process, the first batch has been released, the second batch is being released as we speak. There are some checks that we have to put in place to make sure that the claim that is being made is actually valid. There are parties that have been engaged to do a second level of verification in addition to the claims the ministry of works sends as invoices due for payment. The batch which is about N58 billion has been released. There is another N35 billion that is under processing.”
Although, Nigeria’s rising debt profile is a cause for concern, the silver lining is the fact that the country’s debt to GDP ratio is still considerably low. Notwithstanding this fact, we advise the federal government to inject the money borrowed into the development of critical infrastructure such as electricity, roads, water, among others. Government should also make concerted efforts towards settling the domestic debts in order to buoy up economic activities in the country.