Nigeria – Borrowing Limit

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Diversification efforts fail to bear fruit as the country can no longer afford to keep borrowing.

According to Finance Minister Kemi Adeosun, who was speaking during a quarterly business forum in Abuja on July 11th, the country can no longer afford to keep borrowing and must find alternative fundraising mechanisms.

Adeosun said that the country should seek to continue to diversify its economy to generate more revenue.

“We have got to get our budget bigger and to do that we cannot borrow anymore. We simply have to generate more revenue, we have to plug the leakages, we have to improve tax collection so that we can manage our borrowing,” she said.

“The problem is that we have been relying on oil and oil gave us a big budget size,” the minister added.

Nigeria has been in talks with the World Bank and the African Development Bank (AfDB) for at least US$2bn in loans, with another $1.5bn proposed from international sources. President Muhammadu Buhari has also proposed borrowing of up to $30bn to finance major infrastructure projects across the country, although this continues to remain stalled.

The Naira (N) 7.44trn (about $24.39bn) 2017 budget has a deficit of N2.2trn, according to the Premium Times. Meanwhile, Nigeria’s external debt increased to $13.8bn in the first quarter of 2017 from $11.4bn in the fourth quarter of 2016, reported Vanguard.

The government had planned to borrow extensively from overseas to fund this record budget, aimed at enabling the country spend its way out of its first economic recession in around 25 years.

PIC.10.-MINISTER-OF-FINANCE-HOLDS-NEWS-CONFERENCE-ON-STATE-OF-THE-ECONOMY-IN-ABUJA
Finance Minister Kemi Adeosun – Premium Times

However, some lawmakers, sceptical about the proposal, expressed fears that it might not be favourable in the long run, especially as the government presented no clear plans of how it will utilise the proposed loans.

When Buhari was elected in 2014 he was hailed as the saviour, a transformer of the economy, and the man to lead the country away from fossil fuel reliance and susceptibility to oil price volatility.

Since then little has changed and he has spent much of the past year being treated for a unspecified illness. According some commentators and analysts his financial and economic policies have been largely incoherent.

The push for economic diversification and boosts for manufacturing have not materialised. Many manufacturers were banned from receiving important foreign exchange and in 2016 the manufacturing sector shrank, reported the Financial Times.

However according to reports from BBC News, Buhari is now “recuperating fast” and will soon return to Nigeria from London, where he has been receiving treatment since May. His absence has led to speculation about whether he will be able to resume his position. In his place Buhari has given Vice-President Yemi Osinbajo full powers to act.

Find out more in the Africa Research Bulletin:

NIGERIA: Emergency Aid Shortfall
Economic, Financial & Technical Series
Vol. 54, Issue. 5, Pp. 21707C–21709A

NIGERIA: Dim Light at End of Tunnel
Economic, Financial & Technical Series
Vol. 54, Issue. 4, Pp. 21675A–21676A

NIGERIA: Forex Boost
Economic, Financial & Technical Series
Vol. 54, Issue. 3, Pp. 21649A–21651C

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