o2 January 2015, Lagos – The Federal Government, in a bid to cushion the impact of oil price drop on the nation’s economy, is seeking external loans worth $5.7bn (N2.97tn) from its development partners to finance infrastructure projects contained in the 2015 budget.
The development partners, from whom the loan will be sourced are the World Bank, African Development Bank, Islamic Development Bank and China Export-Import Bank.
The borrowing plan was confirmed by the Minister of Finance, Dr. Ngozi Okonjo-Iweala, in a 28-page document entitled, ‘The overview of the 2015 budget proposal’, a copy of which was obtained by our correspondent in Abuja on Wednesday.
According to the document, the debt service to revenue ratio will increase from 19 per cent in 2014 to 22 per cent in the 2015 budget.
The 2015 budget, which was submitted to both chambers of the National Assembly by the Finance minister, had an oil production target of 2.27 million barrels per day, with a benchmark price of $65 per barrel; and an exchange rate of N165 to a dollar.
The fiscal document is also targeting a projected aggregate revenue of N3.602tn made up of N1.918tn oil revenue and non-oil revenue of N1.684tn.
This, according to analysis, will imply a ratio of 53 per cent oil revenue to 47 per cent non-oil revenue.
The budget also projects a Gross Domestic Product growth rate of 5.5 per cent, with non-oil revenue (including non-Federation Account funds) of N1.68tn; fiscal deficit of N755bn (or 0.79 per cent of GDP); and domestic borrowing of N570bn, down from N571.9bn in 2014.
The 2015 budget proposal has a N4.358tn expenditure figure made up of N412bn for statutory transfers, N943bn for Debt Service, N2.61tn for recurrent expenditure (non-debt) and N634bn for capital expenditure (inclusive of the Subsidy Reinvestment and Empowerment Programme).
While the recurrent vote is 85.8 per cent of aggregate budget, the capital expenditure is just 14.2 per cent of the aggregate spending, inclusive of the SURE-P.
But, Okonjo-Iweala in her analysis as contained in the document, explained that as a result of the massive drop in capital spending, the government had decided to augment capital expenditure with external long-term concessional borrowings for infrastructure projects.
She stated that the sum of $100m (N16.8bn) would be sourced from the World Bank for Clean Energy Technology project; $800m (N135.4bn) would be obtained from the African Development Bank and the Islamic Development Bank for the East-West Road project, while $4.8bn N806.4bn) would be borrowed for the Mambila Hydro Electric Power Project from China Exim Bank.
In addition, the minister stated that the Federal Government had received an invitation from the Chinese government to negotiate a credit of about $12bn for the coastal rail project to be given in six tranches over a six-year period.
She said, “Including debt service and statutory transfers, aggregate recurrent expenditure amounts to N3.971tn or 85.8 per cent of aggregate budget (inclusive of SURE-P).
“This leaves capital expenditure at 14.2 per cent of the aggregate budget (inclusive of SURE-P). Because of this, government has decided that certain expenditures must take priority and some MDAs may not get any allocation for capital projects.
“This is temporary but I must mention here that this capital budget of 14 per cent will be augmented with external long-term concessional borrowings for infrastructure projects such as $100m from the World Bank for Clean Energy Technology project; $800m for the East-West Road from the African Development Bank and the Islamic Development Bank; and $4.8bn for the Mambila Hydro Electric Power Project from China Exim Bank.
“The Chinese have also invited us to negotiate a credit of about $12bn for the coastal rail project to be given in six tranches over a six-year period.”
As of the end of September 2014, Nigeria’s overall public debt stock stood at $69.6bn or about 13 per cent of the Gross Domestic Product.
The debt stock is made up of external debt of $9.5bn and domestic component of $60.1bn.
But while the debt stock is worrisome, the minister recalled that the increase in the domestic debt stock from N200bn in 2007 to about N1.36tn in 2010 was due to the 53.7 per cent rise in the 2010 wage bill for all categories of federal employees.
– The Punch