Category: Lead

• You can’t spend cash, agency tells helmsmen of states

Governors and the Nigerian Financial Intelligence Unit (NFIU) may be set on a collision course over cash withdrawals and the use of security votes, The Nation learnt yesterday.

The NFIU has said that the restriction on cash withdrawals from public accounts was still in force.

The 36 governors will engage the leadership of the anti-graft agencies, the Central Bank of Nigeria (CBN), the Federal Inland Revenue Service (FIRS) and others on how to better manage security votes tomorrow. The meeting will be virtual.

Ahead of the meeting, the governors have been advised to spend whatever they want, but not in cash.

A source at the NFIU told The Nation: “Nobody is saying the governors cannot do anything with their money. They should just do the right thing.

“Must they spend security votes in cash? If it is payment they want to do, they can do it through transfer. It doesn’t have to be in cash.”

After the NFIU announced the ban on cash withdrawal from public accounts, the Nigeria Governors’ Forum (NGF) scheduled a meeting.

In January, the NFIU announced that “Nigeria will become a full non-cash economy by March 1”. 

It added: “As a consequence, any government official that withdraws even one naira cash from any public account from March 1 will be investigated and prosecuted in collaboration with relevant agencies like the Economic and Financial Crimes Commission (EFCC) and the Independent Corrupt Practices and Other Related Offences Commission (ICPC).”

The NFIU had told banks and government agencies to move fully into online payments “as all transactions involving public money must be routed through the banks for the purpose of accountability and transparency”.

“Any government official who flouts the order will be prosecuted alongside his or her accomplices,” the NFIU warned.

However, it is not certain how NFIU intends to prosecute any erring governor because of the immunity clause in the constitution.

Spokesman of the NGF, Abdulrazaque Bello-Barkindo, in a statement yesterday, quoted NGF’s Director General Mr. Asishana Okauru, as stating that the crucial meeting will hold tomorrow

He said it is “with a view to ironing out thorny issues surrounding their states’ security votes, towards establishing a better option of managing the funds”.

The spokesman added that the decision to hold the meeting virtually was to ensure full representation.

According to him, those invited to the meeting, at the instance of the NFIU, include the EFCC, the ICPC, the FIRS and the CBN.

Bello-Barkindo added: “The meeting will also consider deepening the management and expansion of the cashless policy, which took effect from the time of the redesigning of the national currency last year, to further the financial inclusion of all citizens in the ensuing scheme of things, going forward.

“This meeting is called at the instance of the NFIU, in its letter of 30th March, which was addressed to the Chairman of the NGF and signed by the NFIU Director, Modibbo Hamman Tukur.

“The letter said that apart from the facilities for national financial inclusion, it is also putting on the table the uniform development and cooperation on the national addressing and post-code project, which will put Nigeria on the same pedestal as all advanced countries across the globe.

“Also on the agenda is a consensus on harmonising and updating the national tax collection and business entry standards and its requirements to help respond to the Financial Action Task Force (FATF) and the European Union (EU) greylisting in which Nigeria appeared.

“All governors are advised to prioritise the meeting as its contents had been discussed at the NGF emergency meeting of Thursday 30th March, where it was unanimously agreed that a meeting with the afore-mentioned agencies was imperative.”

The NFIU guidelines barring governors, ministers, foreign missions and other public servants from making cash withdrawals from public accounts came into effect on March 1.

Banks notified their customers about the directive and urged them to use digital channels.

The Nation learnt that 167 countries were placed on the alert for any governor, minister and other public officials who withdraw cash from public accounts from March 1.

The NFIU had activated the Egmont Secured Web (ESW) protocol to share information with the countries if any governor is flagged for money laundering.

In a January 4 circular, the agency directed all financial institutions to discontinue cash withdrawals in naira and foreign currency from public accounts at all levels.

The policy may pit the governors against the Federal Government again after some states were forced to sue the Attorney-General of the Federation at the Supreme Court over the naira redesign and scarcity.

The money borrowed by Federal Government in the first quarter stood at more than N3.17 trillion, records have revealed.

Data obtained by The Nation Economic Intelligence showed that the government had raised N3.17 trillion in the past three months through the issuance of regular bonds, retails savings bonds and treasury bills at the domestic capital market. 

The borrowings doubled government’s borrowings in the fourth quarter of last year. It remained the largest debt issuances over the past 10 quarters tracked by The Nation team.

The data indicated a consecutive monthly increase in borrowings in first quarter of this year with the government raising its initial offer sizes in most instances to mop up oversubscriptions to its offers.

A month-on-month breakdown showed that the government raised a total of N940.62 billion in January. The government, which increased borrowings to N1.035 trillion in February, closed the quarter with N1.196 trillion.

With sovereign downgrades by global rating agencies and attendant higher risk profile as well as cost of international debt issuances, the government had been constrained to the domestic capital market to fund its budget deficit.

The government plans to raise N8.8 trillion through regular debt issuances to fund the N10.78 trillion 2023 budget deficit.

In January, the government raised N662.617 billion through its regular bond auction, N277.468 billion through the Nigerian Treasury Bills (NTBs) and N533.03 million through the Federal Government of Nigeria Savings Bonds (FGNSBs), a retail monthly debt issuance introduced in 2017.

The government raised N770.56 billion in February through bond auction, N263.50 billion through NTBs and N1.271 billion through the FGNSBs. 

The government issued regular bonds worth N563.36 billion, NTBs valued at  N631.84 billion and FGNSBs worth N1.01 billion last month.

Managing Director, Arthur Steven Asset Management Limited, Mr. Olatunde Amolegbe, said the increase in debts had not led to improvement in the country’s economic profile.

Amolegbe, a former president of Chartered Institute of Stockbrokers (CIS), said: “Well, if you look at the debt to GDP ratio, it was approximately 37.35 per cent as of 2022. Most economists will frequently argue that there is no problem with increasing debt as long as it is put to useful use and will ultimately cite the case of Japan with a debt-to-GDP ratio of 221.32 percent.

“If you compute the CAGR, you will see that our debt profile increased by 24.30% while our GDP between 2015 and 2022 had a CAGR of -3.40 per cent If you look more closely, the debt to GDP ratio in 2015 was around 20.30 per cent while it was around 43.95% in 2022.

“Even though the GDP has been increasing recently, it seems to me that the debt-raising process was accelerated significantly without having a corresponding effect. I firmly believe that if we keep moving forward at this rate, a debt sustainability problem could develop.

“As a result, I will push for the government to take on more revenue-generating projects while also increasing its debt load, at least until the revenue issue is resolved. As an example, I supported the idea of tolling some of the federal government roadways.

“As for the restructuring I doubt if we will get the magnanimity which we got during President Obasanjo’s administration in terms of debt forgiveness looking at some of our creditors such as China.”

The Debt Management Office (DMO), which oversees government’s debt issuances and management, had said the domestic debt issuance was designed not only to provide funds to finance budget deficit but also refinance federal government’s maturing obligations during the fiscal year.

According to the DMO, funds raised are deployed for deficit financing as well as refinancing maturing obligations. The DMO last week published its official national debt position indicating that Nigeria’s total public debt stood at N46.25 trillion by the end of fourth quarter 2022.

The government laid out a budget size of N20.51 trillion on a total revenue of N9.73 trillion in 2023, with plans to borrow N10.78 trillion in 2023.  

At the presentation of the breakdown and highlights of this year’s budget proposal, the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, said the overall budget deficit of N10.78 trillion would largely be financed through domestic loans.

She outlined that the budget deficit would be financed mainly by borrowings including domestic sources, N7.04 trillion; foreign sources, N1.76 trillion; multilateral and bi-lateral loan drawdowns, N1.77 billion and expected N206.18 billion proceeds from privatisation of national assets.

Ahmed had raised the possibility of higher budget deficit and financing in 2023, noting that “there is a continuing need to exceed this threshold considering the existential security challenges facing the country”.

She, however, said Nigeria has no plan to restructure its debt as government remains committed to meeting its domestic and external debt obligations.

According to her, the government will continue to utilise appropriate debt management tools to streamline the cost and risk profile in the debt portfolio, including through concessional loans, spreading out of debt maturities to avoid bunching, and re-profiling of the debt maturities by refinancing short-term debt using long-term debt instruments.

Nigeria has increasingly relied on borrowings to bridge its dwindling national revenue.

The data provided by the Budget Office of the Federation showed that Nigeria has consistently over the past eight years significantly underperformed its revenue target. For instance, while the country had budgeted a revenue target of N7.2 trillion in 2018, it generated only N3.9 trillion, about 54 per cent of revenue target. In 2019, it achieved about 59 per cent with revenue budget of N7 trillion and actual of N4.12 trillion.

The revenue target and actual stood at N5.4 trillion and N3.96 trillion and N6.64 trillion and N4.64 trillion in 2020 and 2021 respectively. In the current budget, while the country had set a revenue target of N5.82 billion, it only achieved 63 per cent or N3.66 trillion by July 2022.

Nigeria has been using more than three-quarters of its revenues to service debts. Debt-service to total revenue ratio stood at 61.3 per cent in 2020, rose to 90.9 per cent in 2021 and currently stands at 84.5 per cent. Debt-service-to-total revenue was about 32.7 per cent in 2015.

The DMO expressed concerns that the country now faces the risk of being unable to sustain its rising national public debts unless urgent actions are taken to curtail expenditure and increase the country’s revenues.

It warned that while Nigeria’s loans may still be within acceptable range of the country’s economic size, the country’s ability to sustainably meet the obligations on such loans is now under threat.

The Director-General, Debt Management Office, Ms. Patience Oniha, said beyond keeping within debt-to-GDP ratio, it is important that the public debt is sustainable and government is able to service its debt without the risk of distress.

Reviewing revenue budgets and actuals against actual debt service over the past eight years, Ms. Oniha said the debt service-to-revenue ratio is “high”.

She said dependence on borrowing and low revenue base were now threatening debt sustainability.

“Nigeria’s public debt stock has grown consistently over the past decades and even faster in recent years. Consequently, debt service has continued to grow,” Ms. Oniha said.

She pointed out that Nigeria’s low revenue base compounded by dependence on crude oil resulted in budget deficits over the past decades, putting pressure on the country’s debt sustainability.

“The outlook shows that both the local and international markets are becoming tighter and interest rates are rising, thus priority should be less on borrowing and more on revenues from oil and non-oil sources,” Ms. Oniha said.

She said while efforts at increasing non-oil revenue are yielding positive results, urgent actions are required to moderate the level of new borrowings and ensure that the public debt is sustainable.

The DG outlined that government should, as a matter of urgency, rationalise expenditure and accelerate the growth in revenues, including implementation of strategic actions to boost tax administration and efficiency.

She said it was unacceptable that Nigeria has the lowest revenue-to-GDP ratio among a list of country sampled by the World Bank noting that an efficient tax administration would ensure greater compliance to remittances devoid of all forms of evasions in the system.

According to her, most countries around the world have placed more emphasis on taxation as a principal source of funding for the government while reverse is the case in Nigeria.

Oniha also advised that “borrowing should be tied to projects and some of the projects should generate commensurate revenues to service loans used to finance them”.

She called for sale of government assets to unlock funding, adding that physical assets such as idle or underutilised properties could be redeveloped for commercialisation to generate revenue.

China yesterday allayed fears of the transparency of the terms of its loans to Africa.

The Asian nation, said all loans are done within international rules. 

It was responding to the claim by World Bank President David Malpass who expressed concern about some of the loans China has been lending developing economies in Africa. 

Malpass, who spoke with the BBC, said the terms and conditions need to be “more transparent”. 

It comes amid worries that countries, including Ghana and Zambia, are struggling to repay their debts to Beijing.

Beijing has become one of the biggest sources for loans to developing economies in recent years. A new study led by the Kiel Institute for the World Economy shows that globally China lent $185 billion (£150 billion) in bailouts to 22 countries between 2016 and 2021.

Developing countries often borrow money from other nations or multilateral bodies to finance sectors that will grow their economies such as infrastructure, education and agriculture.

However, steep increases in interest rates in the U.S. and other major economies over the last year are making loan repayments more expensive because lots of borrowing is done in foreign currencies such as U.S. dollars or euros. 

It is a particularly acute problem for developing economies who can struggle to find the extra money that is required as the relative value of their own currency falls.

It is a “double whammy and it means that economic growth is going to be slower,” says Malpass.

Tackling that challenge and its consequences was one of the main reasons for this week’s visit by U.S. Vice-President Kamala Harris to three African countries. It is a visit that comes with big commitments of financial support to Tanzania and Ghana.

There is a growing rivalry with China for influence in the continent, whose abundance of natural resources include the metals, such as nickel, crucial for the batteries needed for technology such as electric cars.

Speaking in Ghana’s capital, Accra, she said “America will be guided not by what we can do for our African partners, but what we can do with our African partners”.

Highlighting a new nickel processing facility in Tanzania Ms Harris said the project would be supplying the U.S. and other markets by 2026 and that it would “help address the climate crisis, build resilient global supply chains, and create new industries and jobs”.

That collaborative approach was praised by Malpass who said the competition between the world’s two biggest economies was “maybe healthy for developing countries” as it provided different options.

“What I encourage strongly is that they be transparent in their contracts. That’s been one of the problems; if you write a contract and say ‘but don’t show it to anybody else’, that’s a minus. So, get away from that,” the World Bank boss said.

 There was also a warning that “for governments in Africa, they shouldn’t be offering collateral as an inducement to make a loan, because it locks it up for generations. That’s been happening with China.”

China refutes suggestions that it is exploiting other countries with its financial support.

At a news conference this week, Foreign Ministry Spokesperson Mao Ning said China “respects the will of relevant countries, has never forced any party to borrow money, has never forced any country to pay, will not attach any political conditions to loan agreements, and does not seek any political self-interest”.

A National Working Committee (NWC) member of the Peoples Democratic Party (PDP) yesterday explained why critical organs of the party cannot help the suspended National Chairman, Dr. Iyorchia Ayu.

The party’s critical organs comprise the National Executive Committee (NEC), Board of Trustees (BoT), PDP Governors’ Forum and the National Caucus.

They have remained aloof since Ayu’s suspension on March 26 by his Igyorov Ward in the Gboko Local Government Area of Benue State and the subsequent March 27 order of a Benue High Court restraining him from parading himself as PDP National Chairman.

Ayu had, on March 28, stepped down as chairman, in deference to the restraining order of the Benue High Court.

The erstwhile national chairman was replaced with the party’s Deputy National Chairman (North), Ambassador Umar Damagum, same day.

Damagum’s appointment is in acting capacity.

The Benue High Court had fixed April 17 for hearing in the case against Ayu.

Explaining the apparent aloofness of the party’s organs, the PDP NWC member told our correspondent on telephone yesterday that the party organs cannot intervene in the matter until the court case is concluded.

The NWC member, who spoke in confidence, said any attempt by the party organs to discuss Ayu’s suspension would be sub judice and that it would amount to preempting the decision of the court.

The source said: “The fact on the ground is that the case is pending in court. So, nobody can dabble into it. But if parties to the dispute decide on their own to withdraw the case from the court, then the party organs may decide to mdiate on it. Until that is done, there is nothing anyone can do about it.”

But The Nation gathered that most of the stakeholders, including a good number of Ayu’s colleagues in the NWC, were not favourablly disposed to having Ayu back as National Chairman.

Confirming this, the source said not a few in the NWC and stakeholders in other organs of the party shared the sentiments.

According to him, Ayu’s current travail was self-inflicted because he disobeyed a subsisting order of another court in Benue State restraining the PDP from suspending or taking any disciplinary measures against Governor Samuel Ortom.

The NWC under Ayu had referred Ortom to the party’s national disciplinary committee for alleged anti-party activities while the restraining order of the court was still subsisting.

“Many of our leaders were not happy with the decision to drag Governor Ortom before the disciplinary committee against the order of the court.

“Although Governor Ortom had denied having a hand in the suspended national chairman’s ordeal, we all know that it was a backlash from Benue State and Dr. Ayu should take responsibility for it.”

Another highly placed party source yesterday dismissed reports in another national daily of a NEC meeting purportedly scheduled to hold tomorrow.

The source, who did not want to be named, said there would be no such NEC meeting tomorrow.

The last NEC meeting was held in September under Ayu and a vote of confidence was passed in the now suspended national chairman.

English premiership side Chelsea have sacked coach Graham Potter.

He was sacked after the club lost 2-0 to Aston Villa in a season shadowed by massive defeats.

“Chelsea would like to thank Graham for all his efforts and contribution and wish him well for the future,” a statement by the club reads on Sunday evening.

Details Shortly…