Nigeria will not key into option of debt relief being considered for low income countries by the International Monetary Fund (IMF). Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, made government’s position known yesterday in Abuja during the public presentation of the 2021 Budget.
Nigeria’s total public debt stock has been on steady rise, a development that warrants comments about its sustainability. The Debt Management Office (DMO) put Nigeria’s total debt stock at N31.009 trillion ($85.897bn) by June 30, 2020 from N28.628 trillion ($79.303bn) figure of March 31, 2020.
The increase in the debt stock by N2.381 trillion or $6.593 billion was accounted for by the $3.36 billion Budget Support Loan from the IMF, new domestic borrowing to finance the revised 2020 Appropriation Act, including the issuance of the N162.557 billion Sukuk, and Promissory Notes issued to settle claims of exporters.
The IMF approved a second debt service relief of six months for 28 low-income countries at its Executive Board on October 2. Asked about Nigeria’s position on IMF’s debt relief to poor nations, the minister said: “I will say for now, the answer is no.
The reason being that, we have assessed the offer and we also reviewed the loan agreements that we are committed to; between us and bilateral partners – that is other countries that we borrowed from.
“We also had to review the loan agreements that we have between us and commercial lenders such as the private parties that buy our Eurobonds. And right now, we are limited in being able to access this. We understand that there will be a DSSI 2.0 that is currently being considered by G20. Not only in Nigeria. There are a number of countries globally that are not able to access the DSSI 1 because of similar limitations that we find in Nigeria.”
The moratorium granted under the Catastrophe Containment and Relief Trust, would help the benefiting countries concentrate on fighting the economic impact of the COVID-19 pandemic. Africa has the highest number of those benefiting with about 18 countries eligible for the six-month debt service relief.
The IMF stated that the debt service relief covers the period of October 14, 2020 through April 13, 2021. The multilateral lender had, on April 14 this year, approved the first six-month relief which lasted between April 14 and October 13, 2020. This comes as government admitted exceeding the three per cent fiscal deficit threshold prescribed by the Fiscal Responsibility Act in preparing the 2021 Budget.
The N13.08 trillion 2021 Budget presented last week by President Muhammadu Buhari had revenue projection of N7.5 trillion and deficit of N5.21 trillion. The President had said the proposed N13.08 trillion expenditure comprises Capital Expenditure of N3.85 trillion, Non-debt Recurrent Costs of N5.65 trillion; Personnel Costs of N3.76 trillion; Pensions, Gratuities and Retirees’ Benefits of N501.19 billion; Overheads of N625.5 billion; Debt Service of N3.124 trillion; Statutory Transfers of N484.49 billion; and Sinking Fund of N220 billion to retire certain maturing bonds).
The President said the 2021 Budget deficit inclusive of Government-Owned Enterprises and project-tied loans is projected at N5.2 trillion, adding that this represents 3.64 per cent of the budget size. The N5.21 trillion deficit of the budget exceeded the three per cent threshold prescribed by the FRA 2007 for the annual budget.
The minister admitted that although the 2021 Budget deficit exceeded the three per cent threshold, the government has not breached the law. She said that there is a provision in the Fiscal Responsibility Act that allows the government to surpass the threshold during “unusual times.”
The Finance Minister noted that since the country is battling the negative impact of Coronavirus pandemic and faced with the threat of economic recession, there is need to exceed the threshold to save the economy from collapse. “Under the Fiscal Responsibility Act, the deficit prescribed is three per cent, but there is a provision that states that during unusual times, the three per cent fiscal deficit threshold can be exceeded and that is what we did,” she said.