Tie each loan tranche to capital projects, experts urge FG

Analysts at Cowry Research have advised the federal government to tie each loan tranche to a particular capital project as it did with its Sukuk loans which have been more effective in delivering infrastructure.

The analysts made the recommendation in their scrutiny of the proposed deficit component of the 2022 budget.

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According to Cowry Research, much of the country’s rising debt was spent on recurrent expenditure and abandoned capital projects that could have eased business operations and catalyzed profitability that would, in turn, yield higher income via taxation for the government, hence, the imbalance between the physical infrastructure and the huge debts so far.

“Meanwhile, we commend the positive vibe coming from the side of the executive as presenting the budget in good time would enable early implementation although the oil output projection appears unrealistic given current output levels,” the experts said.

Newly released data from Debt Management Office (DMO) showed that Nigeria’s total public debt stock increased quarter-on-quarter (q-o-q) by 7.12 percent to N35.47 trillion as of June 2021 (from N33.11 trillion as of March 2021).

President Muhammadu Buhari last week presented the N16.39 trillion 2022 proposed budget to the National Assembly, with the crude oil benchmark price and production at USD57/barrel and 1.88 million per barrel respectively.

Notably, the revenue of N10.13 trillion is expected in 2022 – of which N6.97 trillion and N3.16 trillion would come from non-oil and oil revenue respectively – resulting in a deficit of N6.26 trillion.

According to Cowry Research, “the worrisome part is that the fresh N5.01 trillion proposed borrowings could be partly spent on recurrent expenditure.

On the expense side, N4.89 trillion was earmarked for capital projects, N3.6 trillion for debt service, N6.82 trillion for recurrent non-debt, N768.27 billion for statutory transfers, and N292 billion for sinking funds.