The Nigerian Government has defended its recent decision to dissuade banks from granting unsecured loans to state governments, saying it was to protect the states from excessive accumulation of debts.
The Minister of State of Finance, Bashir Yuguda, denied that the decision was aimed at stalling the development efforts of the state governments.
The Minister, who was addressing participants in Course 23 for security agents at the National War College, Abuja, said most of the states have been experiencing difficulties in servicing their existing debts and it would not be advisable to allow them take fresh loans.
Mr. Yuguda, who was delivering a lecture on the title: “Nigeria’s Economic Policies and Reforms: An Assessment of the Real and Informal Sectors”, said the country’s overall debt profile, particularly those of the state governments, was scary.
Though he did not provide specific details, the minister emphasized the need for the states to continue to look inwards for other sources of revenue to pursue their development programmes.
Nigeria’s total public debt stock, according to the Debt Management Office, as at December 2014, stood at about $67.73 billion and N11.2trillion, which is about N1.2trillion higher than the 2013 figure of N10.04trillion.
A breakdown of the figures showed that external debt, including those of the states, was $9.71 billion and N1.63 trillion.
The Federal Government’s domestic debt was $47.05 billion and N7.9trillion, while those of the states stood at $10.97 billion and N1.708 trillion.
Based on the huge debt profiles of the state governments, the Federal Government had last year directed Deposit Money Banks not to grant fresh loans until they got the relevant approval and clearance from the Federal Ministry of Finance.
The directive had stirred misgivings from most state governments, which accused the Federal Government of attempts to frustrate them from securing funds from banks to settle contractors and finance ongoing development projects.
But, according to the Minister, “The domestic debt profile of some states is scary. The states are so much in debt that only a small amount of their allocations get to them at the end of the day, because most times, money for debt servicing is removed from source.”
The minister said this was the reason the Federal Government had to discourage states from further borrowing.
Even where it becomes necessary that they must take such loans, the minister said they must be for the execution of priority projects with prospects of high returns to service those loans on schedule.
On the impact of falling crude oil price at the international since the middle of last year, the Minister said the Federal Government focus was on the development of the potentials of key sectors of the economy to sustain the country’s growth and create jobs.
He identified some of those sectors to include agriculture, which he said government was repositioning for greater growth through the Growth Enhancement Support and the agricultural lending scheme, among others.
The other sectors, the minister said, include tourism and manufacturing, which government was putting in place policies that would encourage investors to make meaningful investments.
According to him, the Nigerian Industrial Revolution Plan, launched in 2014, would accelerate the growth of the automotive sector, pointing out that at the moment at least three auto manufacturing firms have already set up plants in the country.
He said government was determined to ensure policy consistency and sustainability based on established institutional capacities of the various agencies of government, whose operations would continue to align with government’s policies in the different sectors.
Considering that Nigeria was not a donor-dependent country, he said what would determine the success or failure of any government policy would continue to be the contribution of such policies to the value chain.
Noting the significant achievement of the government so far in the agriculture sector, Mr. Yuguda said at the moment the country has already received long-terms orders from the Chinese government for the supply of Nigeria’s cassava chips.
He said government was committed to provide necessary incentives to boost the capacity of Nigerian entrepreneurs to export cassava chips and sustain the business of cassava production as a foreign exchange earner.
On tourism, he said the success story of Nollywood has demonstrated the huge potentials in the film sector to grow into another revenue generating business like agriculture, assuring that government was already exploring the prospects of providing the assistance necessary to promote that objective.
He said despite the negative impact of falling oil price on most economies, particularly those of the oil producing countries, Nigeria was one of the few developing countries that do not rely on donor agencies to fund its budget.
“We are self-sufficient. Most of our businesses do not receive support from international agencies. All oil producing countries have been downgraded, including the world’s leading oil producer, Saudi Arabia, But, Nigeria’s credit rating has remained unchanged at stable,” the Minister said.
Mr. Yuguda said the Federal Government was working on ways to tighten further means through which public funds were being mismanaged, adding that Central Bank of Nigeria would advise the government on strategies to curb the unpleasant effect of the recent devaluation of the Naira on the economy.