Why Nigeria is still borrowing —DMO boss

He said the nation’s external debt is $9.16 billion, with the states having approximately $2.8 billion. He was speaking on rising debt profile of the country before the committee on public finance  members sought to know the level of control the his office has on state governments as regards to borrowing. He said even countries […]

He said the nation’s external debt is $9.16 billion, with the states having approximately $2.8 billion.
He was speaking on rising debt profile of the country before the committee on public finance  members sought to know the level of control the his office has on state governments as regards to borrowing. He said even countries like Germany and UK that have strong and frugal economy are still borrowing.
He said states account for 18 percent of domestic debts while the federal government accounts for 82 percent. The laws guiding borrowing, he said, stipulate that no state can borrow except with the expressed permission of the National Assembly; and any state that does not conform to the stipulation would be seen as committing an illegality.
He said states also require the approval of the minister of finance to borrow from the capital market. For states to borrow in whatever form, they must obtain the approval of their respective Houses of Assembly.  
Nwankwo added that it was the responsibility of Security and Exchange Commission (SEC) to ensure that the money borrowed from the capital market by the states is judiciously used.  
He explained that in 2007, the DMO took a decision to help states establish debt management departments to reconstruct their debt profile, particularly domestic debt which he put at N8.7 trillion, excluding debts owed local contractors.
Contractors’ debt is not included because it is a structured debt and usually provided for in the budget, he explained.  The committee chairman, Senator Adamu Aliero demanded explanation as to why states are indiscriminately borrowing from foreign sources without due process.
Nwankwo said responded that relevant agencies of government saddled with the responsibility of tackling states that violate the laws regarding debt management and borrowing should take appropriate action.
The committee also met with the delegation of the National Planning Commission led by Mr. Tunde Lawal, a director of Micro Economic Analysis, who represented the Minister of National Planning, Shehu Yuguda.
Lawal also briefed the committee on the state of the nation’s public finance and the role of national budget in public finance management. He said deficit financing was inevitable for a developing nation like Nigeria.
He said the net federally collected revenue in 2013 was N6 trillion, while oil revenue accounted for 76 percent of all net revenue accruing to federal government.  
The GDP in 2013 was 9.8 percent, VAT 16 percent and Customs nine percent; non-oil tax increased from N1.5 trillion in 2010 to 2.1 trillion in 2013, he said.
He also said there is need to tackle issues of waivers and exemptions, and said government was working towards reducing recurrent expenditure.