Buhari Against Unserviceable Debts – Adeosun

Despite scathing criticisms and worrying commentaries in certain quarters, Minister of Finance, Mrs Kemi Adeosun said the administration of President Muhammadu Buhari will not burden Nigeria’s future generations with unserviceable debts.

This is even as the Minster stated that the Federal Government has “successfully saved N206 billion in payroll costs using technology to drive the cleansing process, with the removal of 54,000 fraudulent or erroneous entries.”

She however called out those thinking and insisting that the economy inherited in 2015 by the present administration only needed minor adjustment as being unfair and economical with facts of history.

In an article titled; ‘The debt debate: Deconstructing the debt story’, where she explained the debt history, the short-term strategy and the medium to long-term outlook for the economy, Mrs Adeosun stated that; “Oil prices had plunged from a height of over $120 to a low of $28 per barrel, yet the country had foreign exchange reserves of a paltry $28.34bn in June 2015 (having declined by $16bn from a $44.95bn high in under two years).”

According to the Minister, “Despite just 10 per cent of the budget allocated to capital expenditure, debt had (in a period of unprecedented oil earnings), inexplicably risen from N7.9tn in June 2013 to N12.1tn in June 2015. Depending on the candour of the commentator, the outlook was at best challenging, and at worst, bleak.”

She further stated that government’s expansionary fiscal policy with an enlarged budget aimed at delivering a fundamental structural change to the economy while reducing Nigeria’s over-exposure to crude oil revenue.

Speaking on inherited debt, Adeosun said the Federal Executive Council (FEC) had in July 2017 approved that N2.7 trillion of hidden liabilities must be addressed, explaining that these obligations include salaries, pensions, oil importation, energy bills and contractor payments, some of which date back to 2006.

“It is instructive to note that the recent Academic Staff Union of Universities’ strike that crippled our tertiary institutions is one of many examples of commitments made by previous administrations that were saddled on this team” she said, adding; “ASUU’s dispute relates to an agreement reached with the Federal Government in 2013 (when oil prices fluctuated between $102 and $116 per barrel), which was not honoured.”

The minister said on a daily basis, previously undisclosed obligations are being uncovered, with the most recent relating to oil importation in 2014, even as she noted; “The figures recently released by the Debt Management Office indicate that while total public debt in dollar terms had remained relatively stable since 2015; our debt, when denominated in naira, has increased from N12.1tn to N19.6tn.”

On the Efficiency Unit’s operations and Ministries, Departments and Agencies’ (MDAs) enrolment on the Integrated Payroll and Personnel Information System (IPPIS), Mrs Adeosun said a whopping N206 billion was saved in payroll costs using technology to drive the cleansing process, with the removal of 54,000 fraudulent or erroneous entries.

The Minister said this milestone was achieved ‘without the negative social impact of retrenchment’ adding that the economic modeling team correctly forecast that in the short-term, there would be acceleration in the accumulation of debt and an increase in debt servicing costs.

She however, said this would be ameliorated by correcting the low tax to Gross Domestic Product (GDP) ratio through revenue mobilization; releasing funds to sustain investment in capital projects; and repaying of debts.

“Mobilising revenue aggressively is not advisable, nor indeed possible, in a recessed economy. But as Nigeria now reverts to growth, our revenue strategy will be accelerated.

“This is being complimented by a medium-term debt strategy that is focusing more on external borrowings to avoid crowding out the private sector. This would also reduce the cost of debt servicing and shift the balance of our debt portfolio from short-term to longer-term instruments”, Adeosun said.