Nigerians need not panic over the country’s rising public debt and how the huge 2021 budget deficit would be financed, the Vice President, Yemi Osinbajo, said on Wednesday in Abuja.
Rather, he said, what Nigerians should be concerned about is the purpose for which the debts are being used.
Mr Osinbajo spoke during a media roundtable with a select group of journalists in his office.
He was briefing the journalists on the progress of the Nigerian Economic Sustainability Plan (NESP) approved by the Executive Council of the Federation last June to develop a response to the challenges posed by the COVID-19 pandemic.
He said the government is in a good place in the management and utilisation of funds from loans to finance the deficit in the budget.
Update on Nigeria’s debts
In September, the Debt Management Office (DMO), the government agency managing the country’s debt, said total public debt stock increased by about N2.38 trillion, or $6.593 billion, as of June 30 this year.
The agency said the debt grew from about N28.628 trillion, or $79.303 billion, as of March 31 to over N31.009 trillion, or $85.897 billion.
On Tuesday, the Minister of Finance, Budget and National Planning, Zainab Ahmed, during the public presentation and analysis of the details of the “2021 Budget of Economic Recovery and Resilience,” said the N13.08 trillion proposed appropriation has total deficit component of about N5.196 trillion.
The deficit, which constitutes about 3.64 per cent of the country’s gross domestic product (GDP), the minister said, would be financed through borrowings from domestic and foreign sources as well as loans from multi-lateral and bilateral finance institutions.
Mrs Ahmed said about N2.14 trillion each would be sourced through loans from domestic and foreign revenue sources, while loans from multi-lateral and bilateral groups would provide about N709.69 billion and N205.15 billion from privatisation proceeds.
Nigerians have continued to express concern that the fresh loans being considered by the government in 2021 would push the country further into a debt trap and derail the targets set under the government’s NESP designed to create a financial stimulus for the economy, support micro, small and medium scale enterprises (MSMEs) create more jobs and ensure food security.
The DMO figures show the country’s total public debt profile as of June 30, 2015, shortly after the present administration took over office, stood at about N12.12 trillion, or $63.81 billion.
The debt has spiralled by over 155.9 per cent under the present administration between June 2015 and March 2020.
No cause for alarm
But the Vice President said there is no cause for panic over the rising debts as long as the loans are being used for a good purpose.
“There is no need to panic over rising debts so long as the loans are used to fund the growth of the economy. Every country has considerable debt challenge and deficit, even the developed economies like the U.S. and UK. What matters is what the debt is used for.
“A government must have a vision of what it wants to utilise the loans on. Our vision is for the loans to be used on the development of infrastructure that will continue to generate wealth for our people in various ways. That is why we are investing in the development of railway lines and airports for use by present and future generation of Nigerians.
“Our vision is to use the loans to fund the productive sector of the economy, particularly manufacturing. We should be confident that the debt will not present any problem for the country, as a lot of the loans are from Nigerians, who buy the government treasury bills and not foreign loans,” the VP said.
He said the only challenge the country is currently having was how to ramp up revenue in view of the debt service. He said the country’s debt-to-GDP position is good at less than 30 per cent.
Assessment of the NESP
Mr Osinbajo said a lot has happened under the NESP in mass sustainability projects, employment creation, food security, and low income housing.
He said so far, about five million farmers have been identified, with 1.5 million approved to benefit from the government’s direct support to encourage more people into farming.
The government’s strategy, he said, is to work with the big platform partners as anchors for a large number of small and medium scale farmers who access the credits, and in-puts provided through relevant agencies.
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Except for areas impacted by flooding, the VP said the mass agricultural scheme was making tremendous progress, with the Central Bank of Nigeria providing the loans to the farmers.
On housing, he said the government’s focus is on low cost, and not affordable houses, to enable Nigerians who earn minimum wage and can afford a maximum of N2 million, or N9,000 monthly, to benefit.
He said the mass housing scheme, which has already started in Borno and Nasarawa states, would ensure young Nigerians involved in the building industry as architects or engineers are gainfully engaged in the construction of the houses.
“The government has an ambitious plan to build between 300,000 and one million housing units per state of the federation,” he said.
He also spoke about the achievements of the government under the MSME Funds implemented by the Federal Ministry of Trade an Investment to assist small-scale businesses, as well as the Offtake Guaranty Scheme initiated to give government guaranteed to those involve off-taking and distribution of farm produce.
Under the survival fund, he said, the payroll support for small companies with about 10 staff on their payroll was able to pay such staff with a maximum of N50,000 per month, while 42,000 per state would receive about N32,000 under the scheme.
“We can create more opportunities and jobs for the people, apart ‘Trader Moni’ scheme, which has been lending money to small traders, the Bank of Industry has been able to pay a minimum of N30,000 and up to N200,000 to beneficiaries in places like Lagos and Kano,” he said.