Leading economists in the country have advised the Federal Government to sell refineries and some moribund national assets being used to siphon public resources to finance its budget deficit of N6.3tn.
This follows the advice by the Senate that the Federal Government should cut down on borrowing and high deficit financing.
Ahmad Lawan, Senate President, noting that revenue generation and collection were major challenges in Nigeria’s quest for development, said that the recent effort by the National Assembly to challenge the revenue generating agencies was a step in the right direction.
Lawan said, “Mr President, the need to enhance revenue generation and collection cannot be over-emphasised. The level of budget deficit is high, and both the legislature and the executive should work to reduce this deficit through the availability of more revenues.”
Experts in area of economy said there was need to raise more funds through means other than borrowing.
The PUNCH quoted a senior vice-president and investment banker at FBN Quest, Uwa Osadiaye, as saying that depending on the size of the budget deficit, methods such as asset sales and signature bonuses could be explored but for a smaller deficit.
He said, “The N6.3tn deficit is just too large. The government’s budget cannot expand the economy. Infrastructure funding in the $30bn budget for a $400bn economy is not enough to move the needle.”
The Managing Director and Chief Executive Officer, Taurus Capital and Advisory, Dr Nnaemeka Obiaraeri, said, “The Federal Government of Nigeria has moribund assets that they are using to steal, loot and misappropriate our common resources.
“Some of these assets are the oil refineries, two in Port Harcourt, one in Warri and one in Kaduna. Between 2015 till now, the authorities in Abuja have used those refineries to misappropriate and squander over N893bn defined as losses. That is after wasting $389bn as maintenance cost.
“By privatising the refineries, we would cut down over 205bn we squander every year as losses. If we had sold those refineries in 2015, the N893bn we lost in five years which contributed to the deficit we have over those five years would have been saved.”
According to President Muhammadu Buhari, the N6.26trillion deficit in the 2022 budget would be financed with the N5trillion which his government proposed to borrow from local and foreign sources.
Buhari, while presenting the 2022 Appropriation Bill of N16.39tn before a joint session of the National Assembly, stated that his government had exceeded the borrowing threshold approved by the Fiscal Responsibility Act but said that certain needs necessitated more borrowing.
While admitting that Nigerians had genuine reasons to be concerned over the rate of borrowings, he said, “We expect the total fiscal operations of the Federal Government to result in a deficit of N6.26trn.
“This represents 3.39 per cent of estimated Gross Domestic Product slightly above the 3 per cent threshold set by the Fiscal Responsibility Act 2007.
“Countries around the world have to, of necessity, over-shoot their fiscal thresholds for the economies to survive and thrive. We need to exceed this threshold considering our collective desire to continue tackling the existential security challenges facing our country.
“We plan to finance the deficit mainly by new borrowings totalling N5.01tn.”
He said that his regime would source N90.73bn from privatisation proceeds and another N1.16trn drawdowns on loans secured for specific development projects.
“Some have expressed concern over our resort to borrowing to finance our fiscal gaps. They are right to be concerned. However, we believe that the debt level of the Federal Government is still within sustainable limits.
“Borrowings are to specific strategic projects and can be verified publicly. As you are aware, we have witnessed two economic recessions within the period of this administration. In both cases, we had to spend our way out of recession, which necessitated a resort to growing the public debt.
“It is unlikely that our recovery from each of the two recessions would have grown as fast without the sustained government expenditure funded by debt.
“Very importantly, we have endeavoured to use the loans to finance critical development projects and programmes aimed at improving our economic environment and ensuring effective delivery of public services to our people.”
