Finance Minister, Mrs. Zainab Ahmed, has revealed that the sum of N649 billion, the final tranche of the Paris Club Refund, is available to be shared by the 36 States of the federation.
The minister told reporters at a news conference in Abuja that “the total sum of N649.434 billion was verified by the ministry as the outstanding balance to be refunded to the state governments.”
However, she added that debtor-states will have to settle their debts soon because the Federal Government plans to begin the final phase of the debt refund.
She also revealed that the payments made by the Central Bank of Nigeria (CBN) as at March stood at N691.560 billion.
The minister, who did not divulge how much would accrue to each of the 36 states, noted that “some states still have outstanding balances, which will be refunded, in due course.”
On Nigeria’s growing debt profile, Mrs Ahmed stated that the debt increase from N12.2 trillion to N23.0 trillion is by design.”
“The Federal Government designed the Economic Recovery and Growth Plan (ERGP) to reflate the economy to take us out of recession when we came on board and we made an assessment; it was clear that our country was going into recession.
“When we did a research on the best way to reverse the recession, it was to reflate the economy and that means putting resources in the economy so that consumption will increase.”
Based on the government’s findings, she said, the government “designed the ERGP to borrow in the first, second and third years and in the fourth year the borrowing was supposed to start reducing. That is exactly what we have done.”
Defending borrowing, Mrs. Ahmed said the government “made sure that we borrowed to finance capital projects”. “At the same time, we went into recession, there were other countries similar to Nigeria that went into recession.
“Some of them are still not out of recession, but because of the method we adopted; but the consequence, of course, is the increase in debt and that is why the Ministry of Finance and all its agencies are working to make sure that we increase revenues.”
She reiterated that ‘at 19.09 per cent Debt to Gross Domestic Product (GDP) ratio we still are the lowest compared to countries like Brazil, South Africa, that all have an average of 56 per cent debt to GDP ratio.
“If you look at our budget, the debt service to GDP ratio is 30%, but because revenues underperformed, it went as high as 50 per cent to 55 [per cent and in some months up to 60 per cent. So, if our revenues perform optimally we are in a good place as far as revenues are concerned.
“I am sure you know that we have issued promissory notes to states that constructed roads on behalf of the Federal Government; we have issued promissory notes to marketers and we are currently preparing promissory notes for businesses.
“However, the government is addressing the issue of the high debt service burden by a combination of substitution strategies, which include refinancing our shorter term, higher cost debts to longer term, lower cost debt.
“The emphasis on increasing and diversifying non-oil revenues from taxes, import duties is already yielding results, the ministry, in close collaboration with the Debt Management Office (DMO), is working on moving from high cost short term borrowings to long term low cost borrowings.”