As Nigeria continues to grapple with growing public debt, the federal government, overwhelmed by debt-servicing, has been pushing to restructure its debt.

Although last week, the Minister of Finance Budget and National Planning, Dr Zainab Ahmed, denied a report that Nigeria has asked both the International Monetary Fund (IMF) and the World Bank to restructure its debt, the recent government’s move shows that the report is not far from the truth.

The minister has announced that President Muhammadu Buhari has approved plans to convert more than N20 trillion Ways and Means loan from the Central Bank of Nigeria’s (CBN) to 40-year bonds.

“The total Ways and Means today is 20 trillion and we have the approval to securitize. The securitization will be over in a 40-year period with an interest rate of 9%. But over the years, we have been paying the interest component at the current rate that is charged on the Ways and Means,” she said.

The approval underscores how tight public finance has become under Buhari, whose administration has taken Nigeria’s public debt portfolio to N42.8 trillion as of August this year. The public debt portfolio does not include the N20 trillion from the CBN’s Ways and Means, which climbed to N22 trillion in August, representing a 36% increase year-on-year

The CBN has in the last five years, illegally provided the federal government with the loan, which the Buhari’s administration obviously can’t repay now due to Nigeria’s current economic turmoil. Thus, the Buhari’s administration has chosen to bequeath it to future governments.

“It is a one-time restructuring repayable over 40 years with a moratorium. The timing of the conversion will be announced after the government seeks approval from the cabinet and lawmakers later this year,” Patience Oniha, head of the country’s debt management office, told Bloomberg in a text message.

Ahmed, who disclosed the approval at the Ministerial Presentation of the 2023 budget at the Ministry of Finance Headquarters in Abuja, also said that total public debt as a percentage of GDP recorded a decline of 2.64% in 2021 from 2.7% the previous year – and the decline is expected to remain stable throughout the year.

“The total public debt as a percentage of GDP stood at 23.06% as of June 30, 2022, within the 55% threshold recommended by the International Monetary Fund (IMF)/World Bank (WB) as well as Nigeria’s self-imposed limit of 40% set in the MTDS 2020-2023, even after including the outstanding balance on CBN Ways & Means Advances.

“The Target Ratio under the MTDS 2020-2023 is 70:30 and that the Debt Management Office was expecting to achieve the target by end of 2023,” Ahmed said.

She further said that the exposure to refinancing risk remained stable as a result of the strategy of issuance of long-dated securities in the domestic and international markets in addition to accessing long-term funds from multilateral and bilateral lenders.

But she expects the country’s total debt stock to increase to about 35% of gross domestic product from 23% after the central bank loans are converted.

Nigeria has resorted to borrowing to offset its public finance since 2015, following a decline in the country’s oil revenue. With two recessions and rising inflation, the economy has been on steady decline – forcing the government to turn the central bank into a cash-cow through the Ways and Means loans.

Experts believe that it spells doom for the future. Compared to the Asset Management Corporation of Nigeria (AMCON)’s N5 trillion debt that is believed to have contributed to Nigeria’s current double-digit inflation, a N20 trillion debt is expected to unleash worse economic consequences.

Against this backdrop, experts said that debt servicing is expected to rise to N4 trillion, representing 20% of the budget for 2023, while debt servicing to government revenue would likely rise to 180%.

“With the N20tn to be offloaded at an unrealistic 9% coupon, Buhari’s govt. is setting a big trap for the next govt.,” Seun Onigbinde, executive director, BudgIT said. “That’s putting a burden of at least N1.8tn annual debt servicing on governments for the next 40 years. Crisis.”

The president assented to the Nigerian Startup Act, yesterday, the 19th of October, 2022. This new law basically, is to ameliorate the huddles technology innovation and tech-centric startups have been facing in Nigeria and make that sector highly attractive for investors both foreign and local investors to invest in it.

These are five key points of the new act that you may want to pay much attention to:

In order to attract foreign investors, the act provided in S.40 for easy repatriation of capital and profits by foreign investors. One of the major hurdles foreign investors encounter while investing in a Nigerian business is the repatriation of their capital and gains back to their home country. This law has made provisions to ensure that foreign investors will no longer encounter this challenge.

This new act provides for Tax reliefs and other fiscal incentives like pioneer status schemes for tech startups in Nigeria. Although there are condition precedents before you can enjoy these incentives. Tech startups can enjoy tax breaks for a period of four after their inception/labeling years while their founders can also enjoy some tax reliefs. This is the provision of S. 24 of the act.

This new act established Startup Investment Seed Fund to provide capital/ seed funding for tech startups that may have struggles with raising seed capital for scaling. Every labeled startup is qualified and eligible to apply for this seed fund and this is the provision of S. 19 of the act.

Tech startups have access to grants and loans from CBN and other financial institutions of the government. Some of these loans are interest-free while some attract minimal interest and a flexible repayment period. This loan and grant are totally different from the seed funding we earlier talked about. This is the provision of S. 28 of the act.

Finally, for the purpose of driving technological innovations to the grassroots in Nigeria, this new act proposed the establishment of tech hubs and innovation parks across the 36 States of the federation and the federal capital territory. This is the provision of S. 43.

You may wonder why this village boy from Nigeria is wasting time on UK matters? People, it is a free world. And with that, this was my post (May 2019) after Brexit when I predicted largely what is happening in the UK now – . May I note that if you check this piece on LinkedIn, many pushed hard against my largely pessimistic near-term future of the UK leadership.

“UK Prime Minister Theresa May resigns. I do not know why it took so long. The fact is this: the world that United Kingdom wants will not happen in the very near future. So, they better be changing leaders because no one can take them to their designed equilibrium point. In the past, it used to be The Rise of Me Only; today, it is now The Rise of All.

“That means – if you expect the world as it was 100 years ago, you are living in an illusion. UK benefited from the world, ravaging empires from Asia to Africa; now, it wants to sleep under its pillows happily, out of the world. That will not happen. Gone David Cameron, gone Theresa May, bring the next person. It will not change UK until it realizes that the new world is The Rise of All and citizens must make adjustments for that reality.

Next please…Boris Johnson, possibly. He will experience the same thing: sobering resignation. By the time markets begin to work on Brexit, UK will understand the world has changed…”

Comment on LinkedIn Feed

Comment: Prof., it’s amazing how you accurately foretold the current happenings. But would be a possible solution, Sir?

My Response: You see my photos with the UN Secretary General, Bill Gates, Richard Branson, etc. There is a reason that happens. If a boy has a talent, the kings and queens will call to the palace. On the solutions, we do not focus on political solutions since that does not make sense. But we focus on the solutions for investors and companies. I will be in Saudi Arabia in Feb and we will discuss some of the solutions. I am thankful to God for His Grace.