Economists, bankers and budget experts, on Thursday met in Lagos to review the performance of the 2009 budget, taking a look at the 2010 Act so far, raising concerns over the continued budget expansion at a time when other nations are shrinking theirs.

Speaking at a one-day “policy seminar on the 2010 Federal Government budget,” jointly organised by the Nigerian Economic Society (NES) and the Chartered Institute of Bankers of Nigeria (CIBN), most of the facilitators lamented that the 2009 budget largely performed below expectation. They added that going by the budget’s expansionary nature, Nigerians are inflation this year.

According to Prof. A. G. Garba, of the Department of Economics, Ahmadu Bello University, Zaria, government continues to finance the deficit through the capital market, thereby raising the nation’s sovereign debt. He estimated that at current growth rate, and relying on the trend between 1996 and 2009, Nigeria’s cumulative debt may hit N16.08 trillion by 2020. The debt level, he noted, is currently being serviced with about N2.3 trillion.

Garba, who spoke on “Management of domestic and external debt and early warning signals,” regretted that “Nigeria is on the march again to the debt trap that it got into until the Paris Club debt agreement in 2006. We should ask (ourselves) whether the debt is sustainable.”

In his intervention, however, Dr. Abraham Nwankwo, DG of the Debt Management Office (DMO) explained that the nation stopped financing its budget deficit through “ways and means” in 2003 when the agency started borrowing from the capital market thereby subjecting itself to the discipline of the market.

“Borrowing is a normal feature of all economies. Nigeria is currently one of the lowest in terms of ratio of debt to GDP (Gross Domestic Products). This does not mean Nigeria is doing well, as what is more important is whether the proceeds is being used judiciously,” he added.

Nigeria plans to sell N867.5 billion of bonds this year to fund a budget deficit due to a drop in oil revenue, Nwankwo said, adding that government, deliberately shifted away from foreign to domestic debt to avoid exchange rate volatility, noting that at a debt to GDP of 13.88 per cent, Nigeria’s debt remain sustainable given the present conditions in the economy.

Bright Okogu, DG of the nation’s Budget Office, in his presentation provided other comparative figures showing that troubled Greece has a debt to GDP ratio of 14 per cent; the UK has 12 per cent, US, 11 per cent and Germany (Europe’s largest economy) has over 4.0 per cent ratio.

The expansionary budget, the speakers agree, is not entirely evil for an economy like Nigeria’s that is growing. Curtailing inflation resulting from the increased budget spending, Okogu lamented has been restricted, because the Fiscal Responsibility Act is applicable only to the Federal Government and its agencies. The State Governments, he noted would always quote provisions of Section 162 of the constitution relating to the sharing of revenue accruable to the nation, which can then be spent independently.

The DG explained that government is working to rejig the 2010 budget to make it more realistic, adding that it has a deficit of 4.75 per cent, “which for now is not bad (even as it depends) on what the funds appropriate is spent for.”

In a goodwill message, Sanusi Lamido Sanusi, Governor, Central Bank of Nigeria (CBN) explained that following the 2008 financial and economic crises that led to recession across the globe, nation’s have had to deliberately expand expenditure to mitigate effects of the global liquidity crunch, while addressing infrastructure gap.

Represented by C.N. Anyanwu, the CBN Governor said while government intends to reduce cost of doing business through intervention in critical infrastructure, the CBN hopes to strengthen the financial system to ensure sound and viable banking and payment system. The Asset Management Corporation, he assured, will be established soon to enhance the flow of credits to the real sector, in addition to the N500 billion already provided by the CBN, “of which N200 billion is earmarked for the refinancing/restructuring of loans granted to the small medium enterprises and manufacturing companies by banks. The remain N300 billion has been set aside to address some identified problems in the energy and aviation sectors.”

Prof. Akpan Ekpo, Director-General of the West African Institute Financial & Economic Management (WAIFEM) stressed that the 2009 budget performed below target, owing to challenges such as the weak budgetary framework, lack of proper accounting, ineffective monitoring and control, as well as delayed approval, leading to a plethora of uncompleted projects across the country.

Phillip Asiodu, chairman of the workshop stressed that “the most important critical necessary factor (to enhance Nigeria’s international competitiveness to attract necessary investment inflows) is good governance in all its implications.”

Nigeria’s Debt May Hit N16.08tr By 2020
By Kingsley Ighomwenghian, FINANCE EDITOR
http://www.independentngonline.com/D....aspx?id=15952