The federal government has said the need to reflate the country’s economy during the last recession was responsible for its huge debt profile.
It also said between September 2018 and April this year, the trio of federal, state and local governments shared N4.8 trillion from the Federation Account.
Similarly, the government said a fresh sum of N649.434 billion, being the last phase of
Paris Club debt refunds would soon be paid to states.
Minister of Finance Zainab Ahmed said this Thursday while speaking to newsmen in Abuja.
On the increasing debt, she said, “The debt increase from N12.2 trillion to N23.0 trillion is by design. The federal government designed the Economic Recovery and Growth Plan (ERGP) to reflate the economy to take us out of recession when we came on board, and we made an assessment, it was clear that our country was going into recession.
“When we did a research on the best way to reverse the recession was to reflate the economy and that means putting resources in the economy so that consumption will increase.”
Consequent upon the research, the minister said, the federal government “designed the ERGP to borrow in the first, second and third years and in the fourth year the borrowing was supposed to start reducing. That is exactly what we have done.”
In further defence of the borrowing pattern, Ahmed said government “made sure that we borrowed to finance capital projects.
“At the same time we went into recession there were other countries similar to Nigeria that went into recession. Some of them are still not out of recession.
“But the consequence of course is the increase in debt and that is why the Ministry of Finance and all its agencies are working to make sure that we increase revenues.”
“At 19.09% Debt to GDP ratio, we still are the lowest comparative to countries like Brazil, South Africa that all have an average of 56% debt to GDP ratio.
“If you look at our budget the debt service to GDP ratio is 30%. But because revenues underperformed it went as high as 50% to 55% and in some months up to 60%. So, if our revenues perform optimally we are in a good place as far as revenues are concerned.”
She also said the country’s external reserves grew from $28.3 billion in 2015 to US $44.69 billion as at May 13, 2019, stating that “This represents a significant improvement that has helped to stabilise the economy, including stabilising our exchange rates.”
On Foreign Exchange (FX) market, the minister said it “remains relatively stable because from 2017 to now there is a significant convergence of the NIFEX and NAFEX windows and they have in fact merged by the end of November 2018.”
On revenue sharing among the three tiers of government, Ahmed said, a total sum of N4.8 trillion was distributed among the trio between September 2018 and April 2019 from the Federation Account, and that “the sum of N784.7 billion realised from value added tax (VAT) for the same period was also shared.”
Speaking on Paris Club debt refund, she said states would soon have cause to smile as the ministry had verified and confirmed the outstanding debts for refund.
“The total sum of N649.434 billion was verified by the ministry as the outstanding balance to be refunded to the state governments,” the minister said.
Similarly, she said payments made by the Central Bank of Nigeria as at March 2019 remains at N691.560 billion. “The increase in CBN payments partly arose from exchange rate differential at the point of payment. Some states still have outstanding balances, which will be refunded, in due course.”