Domestic Debt Rises To N6.153 Trillion

The country’s domestic debt profile rose to N6.153tn in June.

Statistics obtained from the Debt Management Office showed that the domestic debts had increased from N5.966tn ($37.71bn) at the end of the first quarter ended March 31, 2012, to N6.153tn ($38.89bn) at the end of the second quarter ended June 30, 2012.

This represents an increase of N187bn or three per cent over the figure recorded in the first quarter.

Details of the domestic debts showed that FGN bonds accounted for N3.71tn or 60.37per cent of the money borrowed by the Federal Government from internal sources as at June ending.

The Nigerian Treasury Bills accounted for N2.08tn or 33.88 per cent, while Treasury Bonds accounted for N353bn or 5.75 per cent.

As at March 31, 2012, the domestic debt component of the total debt profile, which stood at N5.966tn, showed that FGN bonds accounted for N3.67tn or 61.44 per cent of the money borrowed by the Federal Government.

The Nigerian Treasury Bills accounted for N1.95tn or 32.63 per cent, while Treasury Bonds accounted for N353.73m or 5.93 per cent.

Presenting the 2012 budget proposal to the National Assembly, President Goodluck Jonathan had lamented that the domestic debt had been growing at an alarming rate in recent years with the clearest evidence of this being that in 2012, the Federal Government earmarked N560bn for debt servicing.

The President had spoken of curtailing domestic debts, but he gave room for the government to accumulate more debts with a caveat that the debts should not go beyond 30 per cent of Gross Domestic Product.

At the moment, the debt to GDP ratio is slightly less than 20 per cent. With latitude of 30 per cent debt to GDP ratio, the government can add up to 50 per cent of the current debt level.

Reacting to this, the Chief Executive Officer, Lambeth Trust Investment Limited, Mr. David Adonri, said the huge domestic debts were not good for the economy.

According to him, the situation is capable of crippling the real sector of the economy, which is supposed to be more active than it is at present.

He explained that the escalating debt profile of the Federal Government had crowded out the real sector of the economy and the equities market.

He said, “The implication is that the capital being formed by the way of debt is what the government is using to finance consumption and not investment. It is contributing next to nothing to the economy.

“It is an action that is destabilising the economy by increasing interest rate and inflation rate. By increasing these two rates, the government is causing more problems to the economy.”

The Head of Research and Strategy at BGL Securities Limited, Mr. Olufemi Ademola, recently attributed the increase in domestic debts to a shortfall in revenue and the controversial oil subsidy expenditure.

http://www.punchng.com/business/business-economy/domestic-debt-rises-to-n6-153tn/

Another reason why funds for capital spending is so low is the excessive interest being paid on these borrowings. If Nigeria must borrow at all, it should borrow long-term bonds for the purpose of financing infrastructural development and capital spending. Why issue treasury bills at 15 percent interest rate and starve funds badly needed for the real sector? This is poor fiscal management in my opinion.

HNosegbe: The country’s domestic debt profile rose to N6.153tn in June.


The President had spoken of curtailing domestic debts, but he gave room for the government to accumulate more debts with a caveat that the debts should not go beyond 30 per cent of Gross Domestic Product.

At the moment, the debt to GDP ratio is slightly less than 20 per cent. With latitude of 30 per cent debt to GDP ratio, the government can add up to 50 per cent of the current debt level.


http://www.punchng.com/business/business-economy/domestic-debt-rises-to-n6-153tn/

The government needs to drop all this debt-to-GDP ratio arguments. This ratio means different things for different economies depending on the rate of growth, the GDP growth drivers, and future ability to repay loans. Moreso, it's not an easy task to determine a good debt-to-GDP ratio.

If you must take loans then tie them tightly to specific projects. Pursue aggressive cut-down of the bogus recurrent expenditure which is over 70% so that you can have the much-needed savings for infrastructure. Pursue the corrupt politicians to wherever they are and recover at least part of the loot. At least all the ex-governors, ministers, LG chairmen are not covered by the immunity clause.

HNosegbe:

Presenting the 2012 budget proposal to the National Assembly, President Goodluck Jonathan had lamented that the domestic debt had been growing at an alarming rate in recent years with the clearest evidence of this being that in 2012, the Federal Government earmarked N560bn for debt servicing.

http://www.punchng.com/business/business-economy/domestic-debt-rises-to-n6-153tn/

What has President Jonathan used the N1.2trillion that was collected within a year of his administration for? Has he set debt limits for the various levels of government as demanded by the Fiscal Responsibility Act?

The Federal Government and many states of the federation are just collecting loans like drunken sailors. This is in addition to the proceeds which some of them have got from issuance of bonds along with the usual federal allocations and IGR. In July 2012 alone, the FG and the states shared N830billion. From the partial removal of subsidy of subsidy, the state and federal governments have also shared N248billion out of which the FG got N105billion. This is apart from the excess crude account.

Please, where is the evidence of all these revenues and inflows? The roads are still bad and infrastructure is still in tatters, yet government at all levels continue to borrow.

As an aside, there should also be more focus on the various state governors on how they are spending all these inflows.

HNosegbe:

Presenting the 2012 budget proposal to the National Assembly, President Goodluck Jonathan had lamented that the domestic debt had been growing at an alarming rate in recent years with the clearest evidence of this being that in 2012, the Federal Government earmarked N560bn for debt servicing.

http://www.punchng.com/business/business-economy/domestic-debt-rises-to-n6-153tn/

As the quest for more debts continue unchecked, so will the debt servicing amount continue to climb. How much is being paid back out of these loans as they continue to pile more and more on them? What is the interest rate(s) of these loans?

HNosegbe:

Presenting the 2012 budget proposal to the National Assembly, President Goodluck Jonathan had lamented that the domestic debt had been growing at an alarming rate in recent years with the clearest evidence of this being that in 2012, the Federal Government earmarked N560bn for debt servicing.

http://www.punchng.com/business/business-economy/domestic-debt-rises-to-n6-153tn/

Compare the allocation of N161.4 billion for power in 2012 budget to debt servicing figure of N560billion for the same period. This is like three and a half times as big as the allocation to power that is deemed very important in the country. The allocation for works is N180.8billion while it is N26.5billion for Lands and Housing. The allocation for agriculture, the largest contributor to GDP, is N79.9billion.

Compare what the country is spending on debt servicing to budgetary allocations to critical sectors.

How sustainable is this? How beneficial is this to the entire country?

Also, the basis of borrowing and even more borrowing is tenuous and unclear. You have the Excess Crude Account into which you put savings and yet you are borrowing. How can you be borrowing and saving at the same time? What exactly are you borrowing to fund? Have you exhausted other financing non-debt arrangements?

As at 2005, the national debt was estimated at something over $30billion. The Obasanjo government paid $12billion and got a relief of $18billion. Incidentally, it was the current Finance Minster, Okonjo-Iweala, that happily and excitedly declared Nigeria as debt-free. That government also left about $18billion dollar in the Excess Crude account and about $34 billion in Foreign Exchange reserves.

Is it not surprising that about 7 years after, Nigeria has rallied the external debt to at least $4billion as the domestic debt also continues to rise. Meanwhile, the inflows from production of crude (2007 to 2011) alone cannot be less than $300 billion (over 47 trillion Naira). This is aside other sources of government revenue.

Where is our country going - at both the federal and state levels?

@Pukkah, the DG of the Debt Management Office told Nigerians that all government borrowings would be project-tied i.e. all borrowings would be for specific capital projects. I checked out the DMO's website (http://www.dmo.gov.ng/) to see if I could get a breakdown or listing of the projects concerned. I got nothing except a list of the debt stock of all the states, list of domestic and external debts. So basically I do not know which projects are being funded by government debt.

What a country.

HNosegbe: @Pukkah, the DG of the Debt Management Office told Nigerians that all government borrowings would be project-tied i.e. all borrowings would be for specific capital projects. I checked out the DMO's website (http://www.dmo.gov.ng/) to see if I could get a breakdown or listing of the projects concerned. I got nothing except a list of the debt stock of all the states, list of deomestic and external debts. So basically I do not know which projects are being funded by government debt.

What a country.

Sincerely speaking, Nigerian citizens need to demand more accountability and transparency from their governments - the state governments and the FG. Is it not ridiculous that governments are just amassing debts in spite of receipts from oil, federal taxes and IGR?

The DMO should tell us the specific projects for which President Jonathan increased the debt profile by over N1.2trillion. Abi na for recurrent expenditure?

Why should Nigeria be borrowing at all in spite of the fact that the country's total revenue exceeds the budgeted total expenditure? Of course, there are other sources of revenue apart from proceeds from crude oil.

The answer(s) to this question, which Nigerians should insist on, is the beginning of the fight against corruption.

My problem is not with Nigeria borrowing, because debt can be deployed to good purposes. The rule of thumb is that the returns (for a business) and societal welfare (in the case of a government) derivable from deploying the funds generated from the loan MUST surpass the interest being paid on the loan. Seen in this light, the question is whether this debt profile is sustainable given the high interest being paid on these loans.

I am simply NOT COMFORTABLE with this arrangement.

HNosegbe: Another reason why funds for capital spending is so low is the excessive interest being paid on these borrowings. If Nigeria must borrow at all, it should borrow long-term bonds for the purpose of financing infrastructural development and capital spending. Why issue treasury bills at 15 percent interest rate and starve funds badly needed for the real sector? This is poor fiscal management in my opinion.

The relatively 'high' interest rate of the risk-free Treasury Bills is the reason many funds providers would not lend to businesses at say 22-25%; moreso, the lending to such business is much riskier than Treasury Bills.

If you look at the composition of domestic debts, a large chunk of it was incurred as a result of CBN's issuance of Treasury Bills.

But for regulation and the quantum of Treasury Bills available, I doubt if any bank would have been lending to the real sector at all when it can just sit pretty, collect deposits at an average cost of 5-7% and invest in Treasury Bills at 15%. By the time you even look at the lending they make to businesses at an average lending rate of 23%, from which they would deduct provisions for non-performing debts and other indirect costs, it's easy to see that it pays them better to favour investing in Treasury Bills at the expense of finance-hungry businesses.

I am in favour of raising debts via bonds at a coupon rate of say 8%. But does Nigeria really need to borrow? I'll return to that shortly.

Pukkah:

The relatively 'high' interest rate of the risk-free Treasury Bills is the reason many funds providers would not lend to businesses at say 22-25%; moreso, the lending to such business is much riskier than Treasury Bills.

If you look at the composition of domestic debts, a large chunk of it was incurred as a result of CBN's issuance of Treasury Bills.

But for regulation and the quantum of Treasury Bills available, I doubt if any bank would have been lending to the real sector at all when it can just sit pretty, collect deposits at an average cost of 5-7% and invest in Treasury Bills at 15%. By the time you even look at the lending they make to businesses at an average lending rate of 23%, from which they would deduct provisions for non-performing debts and other indirect costs, it's easy to see that it pays them better to favour investing in Treasury Bills at the expense of finance-hungry businesses.

I am in favour of raising debts via bonds at a coupon rate of say 8%.

The bolded is the reason why the average Nigerian businessman can NEVER grow when he tries to access bank loans. For me, the blame for this lies squarely on the CBN which has continually pursued an anti-growth monetary policy, sacrificing potential economic growth of the real sector on the altar of short-term "monetary stability".

Now is the time for the CBN to pursue a pro-growth strategy by reducing prime rate (MPR) from 12 to say 6 percent over the next few months. If MPR can be reduced, it will have a knock-on effect on interest rate on treasury bills and government bonds, since all interest rates are tied to the MPR. This will reduce the government's cost of borrowing and free up more funds for capital expenditure.

For banks and other lending institutions, lending rates are also tied to the MPR. Reducing MPR will therefore induce a reduction in lending rates, meaning that more serious entrepreneurs will have an opportunity to access loans at more reasonable rates. 15 percent could be a reasonable target.

Also the impact on the capital market will be positive. Imagine a situation where interest rate on TBs is about 15%, tell me which sensible, rational investor will bother to take a risk on buying company stock when he can make 15% interest on TBs without sweat. Reducing the interest rate could induce more investors to stake funds in the capital market.

There are so many benefits... But they require a change of policy direction on the CBN's part. Pursue growth and de-emphasise short-run stability. My opinion.

HNosegbe: My problem is not with Nigeria borrowing, because debt can be deployed to good purposes. The rule of thumb is that the returns (for a business) and societal welfare (in the case of a government) derivable from deploying the funds generated from the loan MUST surpass the interest being paid on the loan. Seen in this light, the question is whether this debt profile is sustainable given the high interest being paid on these loans.

I am simply NOT COMFORTABLE with this arrangement.

First of all, I will like to show that Nigeria's revenue exceeds its expenditure (as shown by the budgets o). This is the point to start from although I agree that debts, if it must be taken, must be taken at reasonable interest rates and tied to specific projects with good economic/social returns.

Mrs Ngozi Okonjo-Iweala has proposed a deficit of over N1trillion naira in the 2013 budget (expenditure of N4.9trillion vs revenue of N3.89trillion). My problem is with the revenue part which has been greatly underestimated. Do we need that deficit, which they may cite as the reason for borrowing?

Let's start with the revenue from oil.

For the 2013 budget, Mrs Okonjo-Iweala predicated oil receipts on a crude oil benchmark price of $75 a barrel and production output of 2.53 million barrels per day. The benchmark for the 2012 budget was $72 per barrel and output of 2.4 million barrels per day.

However, the claims of a deficit is dubious because in reality, the crude oil benchmark price has rarely fallen below $90 per barrel. The crude oil output has also been very consistent at 2.7mbpd (according to the NNPC). The revenue from this alone is not less than about N4trillion. This already surpasses the 2013 budget revenue projections. But this is not the only source of government revenue.

On July 22, 2012, the Federal Inland Revenue Service (FIRS) announced that it had netted N2.4 trillion for the first half (January to June) of the year. Although the Acting Chairman of FIRS noted that it was a marked increase, it is safe to assume that at least N4trillion would come from FIRS in 2013. This brings the total to N8trillion (N4t from crude oil and N4t from FIRS). This is not all.

The Comptroller General of Nigeria Customs Service said in April this year that the Service will generate N1.2 trillion in 2012. I expect that the figure would exceed that in 2013, however, let's assume a conservative figure of the same N1.2trillion for 2013. This brings the total revenue to N9.2trillion. The projected expenditure remains at N4.9trillion.

So, why are we expecting to run a budget deficit in 2013 and what's the rationale for borrowing? Why should you borrow when there is a surplus?

Why is Nigeria yet to exhibit clear and unambiguous signs of infrastructural turnaround?

HNosegbe: Now is the time for the CBN to pursue a pro-growth strategy by reducing prime rate (MPR) from 12 to say 6 percent over the next few months. If MPR can be reduced, it will have a knock-on effect on interest rate on treasury bills and government bonds, since all interest rates are tied to the MPR. This will reduce the government's cost of borrowing and free up more funds for capital expenditure.

For banks and other lending institutions, lending rates are also tied to the MPR. Reducing MPR will therefore induce a reduction in lending rates, meaning that more serious entrepreneurs will have an opportunity to access loans at more reasonable rates. 15 percent could be a reasonable target.

Also the impact on the capital market will be positive. Imagine a situation where interest rate on TBs is about 15%, tell me which sensible, rational investor will bother to take a risk on buying company stock when he can make 15% interest on TBs without sweat. Reducing the interest rate could induce more investors to stake funds in the capital market.

There are so many benefits... But they require a change of policy direction on the CBN's part. Pursue growth and de-emphasise short-run stability. My opinion.

It would be so nice and desirable to have the MPR reduced so that lending rates, and of course deposit rates, could come crashing down. But it is far complicated than that in reality. You see, the rate to tackle is the inflation rate as the MPR does not exist in isolation. In fact, it is usually higher than the inflation rate. If it is lower, then people would have no incentive to save.

Now, who tackles inflation? Of course, it is the government through its fiscal policies and not the CBN which can't do so much in that area through its monetary policies. The inflation rate, in a way, is a reflection of the cost of doing business and it's the government that should embark on an avalanche of projects that can tackle the rot in physical and social infrastructure with a view to bringing costs down and significantly improving the welfare of the citizens.

So we are back to what government uses all the revenue (crude oil, IGR, loans, etc) at its disposal for? Aren't we?

HNosegbe: My problem is not with Nigeria borrowing, because debt can be deployed to good purposes. The rule of thumb is that the returns (for a business) and societal welfare (in the case of a government) derivable from deploying the funds generated from the loan MUST surpass the interest being paid on the loan. Seen in this light, the question is whether this debt profile is sustainable given the high interest being paid on these loans.

I am simply NOT COMFORTABLE with this arrangement.

The interest rates are too high and nonsensical. Why should sovereign borrowings, which are essentially risk-free, attract interest rates that are as high as 15-17%?

Let's ask them, how much interest rate is our external reserves earning?

It would be so nice and desirable to have the MPR reduced so that lending rates, and of course deposit rates, could come crashing down. But it is far complicated than that in reality. You see, the rate to tackle is the inflation rate as the MPR does not exist in isolation. In fact, it is usually higher than the inflation rate. If it is lower, then people would have no incentive to save.

I'm not very clear on the bolded. Please explain further how an MPR being lower than inflation rate removes incentive to save. Is our objective to accumulate savings, or investments?

Now, who tackles inflation? Of course, it is the government through its fiscal policies and not the CBN which can't do so much in that area through its monetary policies. The inflation rate, in a way, is a reflection of the cost of doing business and it's the government that should embark on an avalanche of projects that can tackle the rot in physical and social infrastructure with a view to bringing costs down and significantly improving the welfare of the citizens.

If the CBN can't do much in controlling inflation like you say, why then do they bear responsibility for it? I believe there are two major components of inflation in Nigeria: Cost-push (caused by high cost of production due to poor infrastructure, government's fault) and demand-pull (caused when there's too much cash pursuing too few goods, again primarily the fault of government since they are the biggest spenders). So how does issuing treasury bills at 15% interest resolve the issue? I'm really perplexed.

By the way, do you know that foreign investors also buy Nigerian treasury bills? What's the justification for that?

and yet they say GEJ will be the most loved president, at least that's the new advert making rounds in some website.
lets see whether the reverse will be the case

HNosegbe:

I'm not very clear on the bolded. Please explain further how an MPR being lower than inflation rate removes incentive to save. Is our objective to accumulate savings, or investments?

Income is either consumed or saved. It is the savings part (surplus) that is used for investments.

If the inflation rate is higher than the MPR, then people would rather spend their money and this would likely lead to more inflation.

If the CBN can't do much in controlling inflation like you say, why then do they bear responsibility for it? I believe there are two major components of inflation in Nigeria: Cost-push (caused by high cost of production due to poor infrastructure, government's fault) and demand-pull (caused when there's too much cash pursuing too few goods, again primarily the fault of government since they are the biggest spenders). So how does issuing treasury bills at 15% interest resolve the issue? I'm perplexed.

You're right about the distinction in the causes of inflation. The CBN bears responsibility for inflation rate to the extent of what it can achieve using the monetary policies at its disposal. I'll look for excerpts of the first year review by the CBN on this and post.

HNosegbe:

By the way, do you know that foreign investors also buy Nigerian treasury bills? What's the justification for that?

The foreign investors go for Nigerian treasury bills because of the relatively high rate of return. I would go it too if I had funds to invest considering its extremely low risk.

I agree, the government should do more of bonds.

Fresh air

Pukkah: Also, the basis of borrowing and even more borrowing is tenuous and unclear. You have the Excess Crude Account into which you put savings and yet you are borrowing. How can you be borrowing and saving at the same time? What exactly are you borrowing to fund? Have you exhausted other financing non-debt arrangements?

we no longer have the excess crude account.president jonathan "in his wisdom" decided to scrap the excess crude account and replace it with the sovereign wealth fund.he hasnt told us what happened to the $33billion that was in the ECA before its scrapping

Abeg who will pay the debts? dont we have an excess sovereign wealth fund? why not take money from there? are we that broke?

lacasa: Fresh air

Perhaps, you don't know that Lagos state government tops the list of borrowers. All the while, we have been following the intellectual debate over this issue by PUKKAH and HNSOEGBE, you have just jumped out from nowhere to politicize it in favour of your paymasters. Please take the exit

HNosegbe: Domestic Debt Rises To N6.153 Trillion

The country’s domestic debt profile rose to N6.153tn in June.

Statistics obtained from the Debt Management Office showed that the domestic debts had increased from N5.966tn ($37.71bn) at the end of the first quarter ended March 31, 2012, to N6.153tn ($38.89bn) at the end of the second quarter ended June 30, 2012.

This represents an increase of N187bn or three per cent over the figure recorded in the first quarter.

Details of the domestic debts showed that FGN bonds accounted for N3.71tn or 60.37per cent of the money borrowed by the Federal Government from internal sources as at June ending.

The Nigerian Treasury Bills accounted for N2.08tn or 33.88 per cent, while Treasury Bonds accounted for N353bn or 5.75 per cent.

As at March 31, 2012, the domestic debt component of the total debt profile, which stood at N5.966tn, showed that FGN bonds accounted for N3.67tn or 61.44 per cent of the money borrowed by the Federal Government.

The Nigerian Treasury Bills accounted for N1.95tn or 32.63 per cent, while Treasury Bonds accounted for N353.73m or 5.93 per cent.

Presenting the 2012 budget proposal to the National Assembly, President Goodluck Jonathan had lamented that the domestic debt had been growing at an alarming rate in recent years with the clearest evidence of this being that in 2012, the Federal Government earmarked N560bn for debt servicing.

The President had spoken of curtailing domestic debts, but he gave room for the government to accumulate more debts with a caveat that the debts should not go beyond 30 per cent of Gross Domestic Product.

At the moment, the debt to GDP ratio is slightly less than 20 per cent. With latitude of 30 per cent debt to GDP ratio, the government can add up to 50 per cent of the current debt level.

Reacting to this, the Chief Executive Officer, Lambeth Trust Investment Limited, Mr. David Adonri, said the huge domestic debts were not good for the economy.

According to him, the situation is capable of crippling the real sector of the economy, which is supposed to be more active than it is at present.

He explained that the escalating debt profile of the Federal Government had crowded out the real sector of the economy and the equities market.

He said, “The implication is that the capital being formed by the way of debt is what the government is using to finance consumption and not investment. It is contributing next to nothing to the economy.

“It is an action that is destabilising the economy by increasing interest rate and inflation rate. By increasing these two rates, the government is causing more problems to the economy.”

The Head of Research and Strategy at BGL Securities Limited, Mr. Olufemi Ademola, recently attributed the increase in domestic debts to a shortfall in revenue and the controversial oil subsidy expenditure.

http://www.punchng.com/business/business-economy/domestic-debt-rises-to-n6-153tn/

too bad for d giant of africa,yet the 3rd richest man in d world (dangote) is a nigerian.I cry for my father land

Pukkah:

First of all, I will like to show that Nigeria's revenue exceeds its expenditure (as shown by the budgets o). This is the point to start from although I agree that debts, if it must be taken, must be taken at reasonable interest rates and tied to specific projects with good economic/social returns.

Mrs Ngozi Okonjo-Iweala has proposed a deficit of over N1trillion naira in the 2013 budget (expenditure of N4.9trillion vs revenue of N3.89trillion). My problem is with the revenue part which has been greatly underestimated. Do we need that deficit, which they may cite as the reason for borrowing?

Let's start with the revenue from oil.

For the 2013 budget, Mrs Okonjo-Iweala predicated oil receipts on a crude oil benchmark price of $75 a barrel and production output of 2.53 million barrels per day. The benchmark for the 2012 budget was $72 per barrel and output of 2.4 million barrels per day.

However, the claims of a deficit is dubious because in reality, the crude oil benchmark price has rarely fallen below $90 per barrel. The crude oil output has also been very consistent at 2.7mbpd (according to the NNPC). The revenue from this alone is not less than about N4trillion. This already surpasses the 2013 budget revenue projections. But this is not the only source of government revenue.

On July 22, 2012, the Federal Inland Revenue Service (FIRS) announced that it had netted N2.4 trillion for the first half (January to June) of the year. Although the Acting Chairman of FIRS noted that it was a marked increase, it is safe to assume that at least N4trillion would come from FIRS in 2013. This brings the total to N8trillion (N4t from crude oil and N4t from FIRS). This is not all.

The Comptroller General of Nigeria Customs Service said in April this year that the Service will generate N1.2 trillion in 2012. I expect that the figure would exceed that in 2013, however, let's assume a conservative figure of the same N1.2trillion for 2013. This brings the total revenue to N9.2trillion. The projected expenditure remains at N4.9trillion.

So, why are we expecting to run a budget deficit in 2013 and what's the rationale for borrowing? Why should you borrow when there is a surplus?

Why is Nigeria yet to exhibit clear and unambiguous signs of infrastructural turnaround?

Woo! Easy plz with the figures. 1st, d 2.7m barrels of oil is not a consistent figure, it was only recently attaind; d average rate 4 d yr is still slightly less dan 2.5m. Also, most of d revenue 4rm FIRS come 4rm d Oil industry itself(Petroleum Income tax etc) so you cant just add d supposd figures 4rm d money from d no of barrels of oil sold. On d supposd money 4rm oil, i hope d figure u got was not just 4rm multiply d no of barrel with d average amount it is sold and say dat is d money dat goes to d 9ja govt cos it is actuali shard by d oil industry, govts nd oda funds like NDDC. Plz go over d final figure u got again. Thanks

HNosegbe: Another reason why funds for capital spending is so low is the excessive interest being paid on these borrowings. If Nigeria must borrow at all, it should borrow long-term bonds for the purpose of financing infrastructural development and capital spending. Why issue treasury bills at 15 percent interest rate and starve funds badly needed for the real sector? T[b]his is poor fiscal management in my opinion[/b].

I quite agree with you. The government shouldn't borrow just for borrowing sake without providing evidences that such money would be utilized for what it is meant for and should be proven to the society how they make use of the money .

This really eludes me after seeing the failure to develop the country.

taharqa: Woo! Easy plz with the figures. 1st, d 2.7m barrels of oil is not a consistent figure, it was only recently attaind; d average rate 4 d yr is still slightly less dan 2.5m. Also, most of d revenue 4rm FIRS come 4rm d Oil industry itself(Petroleum Income tax etc) so you cant just add d supposd figures 4rm d money from d no of barrels of oil sold. On d supposd money 4rm oil, i hope d figure u got was not just 4rm multiply d no of barrel with d average amount it is sold and say dat is d money dat goes to d 9ja govt cos it is actuali shard by d oil industry, govts nd oda funds like NDDC. Plz go over d final figure u got again. Thanks

Thanks for the observations taharqa.

I made provisions for the fact that oil production is a joint venture and NNPC only gets a part of the proceeds from the millions of barrels per day. Now, even if you further discount crude oil production but hold the price at $90 dollars, you would still arrive at a pretty high figure.

You may also do the same for the FIRS figures. Of course you'll agree with me that there are great potentials for the FIRS to increase the non-oil taxes and also plug the several leakages in the tax bucket. Nigeria has not optimized revenue from tax because of the reliance on the 'easy' income from oil. I wish for a day whereby Nigeria would fund her recurrent expenditure from IGR and totally deploy receipts from oil to building and maintenance of infrastructure. Anyway, let's not argue too much on 2013 figures (NNPC and FIRS) but rather focus on the actual figures for 2012.

In 2012, at least we have seen the crude oil production figures and the correspondent selling price; they have consistently been above the 2012 budget benchmarks. On this basis, is there any need for deficit budget or for debts to be rising?

Taharqa, there's so much money coming into the country. The problem is where it all ends up. The bitter truth is that the revenue from oil is not for ever. The future generations will blame us for putting them into debts without so much to show for it and with a reduced capacity (in the absence of the oil revenue) to repay. This is what every patriotic Nigerian, regardless of party affiliation or tribe/religion, should be addressing.

It is economically advisable to borrow as far as the fund will be channeled towards productive activities. The only problem we have in Nigeria is that we keep accumulating unproductive debt, which has no positive multiplier effect. Much of our 2012 budgetary expenditure went to security, which is totally unproductive, to the detriment of budgetary capital expenditure, which is a catalyst for economic growth.

Pukkah:

The foreign investors go for Nigerian treasury bills because of the relatively high rate of return. I would go it too if I had funds to invest considering its extremely low risk.

I agree, the government should do more of bonds.

My point exactly!!! Why should Nigerian TBs, which are ostensibly issued for the purpose for controlling money supply WITHIN the country, be accessible to FOREIGN investors? Does it make sense?

Ol boy clap hand for a nation endowed with riches - wonder where we are heading to and the citizen r poor