Okonjo-Iweala warns incoming Governors against debt acquisition

Director General of the World Trade Organisation (WTO), Dr. Ngozi Okonjo Iweala on Monday warned incoming State Governors against acquisition of debt.

Dr. Okonjo-Iweala gave the charge in Abuja during the opening of the 2023 induction for Re-elected and elected Governors with the theme: ‘Governing for Impact (Building Sub-national Governance), organised by the Nigeria Governors Forum (NGF).

According to Debt Management Office (DMO) in its Q4 report of 2022 fiscal year, Nigeria’s total domestic debt stock was N27.55 trillion, while external debt stock was N18.70 trillion (US$41.69 billion).

She said: “We have challenges on the fiscal, debt, and monetary policy fronts.

“Nigeria’s gross debt level has climbed from N19.3 trillion in 2015 to $N91.6 trillion in 2023. The debt-to-GDP ratio has almost doubled from 20% to 39% over that time period.

“While the debt-to-GDP ratio may not look so alarming, as revenues decline, the burden of debt servicing has increased dramatically. The debt service to revenue ratio is certainly alarming, at 83.2% in 2021 and 96.3% in 2022, according to the World Bank.

“This means that at the federal level, after servicing our debt there is little room to pay for recurrent expenditures, let alone investment. The fiscal deficit of 5.3% of GDP is higher than our agreed fiscal rule of 3% of GDP. This has to be carefully monitored and brought down. Dealing with the fiscal deficit will of course be infinitely more difficult with an oil subsidy bill of N3.36 trillion for the first half of 2023 (or N6.72 trillion if it is not removed).

“The deficit is made worse by revenue losses from oil theft. The difficulties around this issue underscore the importance of political consensus – whether you are in government or in the opposition – on policies critical for nation-building.

“On the revenue side, States have a substantial responsibility. Too few states are raising internally generated revenue of any significance.

“According to analysis of data from the National Bureau of Statistics and State Audited Financial Statements by the civic-tech group BudgIT, 33 States relied on federal transfers for the majority of their revenue. For 13 of these states, monthly FAAC allocations accounted for over 70% of revenue.

“Aggregated IGR from the 36 states did rise from N1.2 trillion in 2020 to N1.61 trillion in 2021 – but this pales in comparison to FAAC allocations to states of N2.23 trillion in 2020, N2.42 trillion in 2021 (and N3.16 trillion in 2022).”

As encapsulated in her book titled: ‘Fighting Corruption is Dangerous’, she maintained that several Nigerian states have economies bigger than entire African countries.

“The FAAC allocation received by some states is bigger than the budgets of several African countries – and if those countries can grow at 4 or 5 or 6%, your states can do better!

“In terms of capital inflows, foreign direct investment inflows have been weak, but remittances from the diaspora have thankfully remained robust.”

To this end, she enjoined the State Governors to invest in infrastructure, education and basic health systems, pay teachers, health workers and others their salaries, and retirees their pensions.

Dr. Okonjo-Iweala argued that: “With our large numbers of educated people fluent in English – together with a deep network of connections to the diaspora – we are well positioned to seize these opportunities. But such businesses, like our tech startups, will struggle to thrive if we keep losing so many of our most skilled young people to emigration.

“Let me share some numbers. Over 15,000 Nigerians emigrated to Canada in 2021, joining 19,000 who had moved there in the previous two years. Estimates for 2022 are 20,000.

That is over 50,000 skilled Nigerians in the space of 4 years.

“In the first half of 2022 alone, the UK granted skilled worker visas to nearly 16,000 Nigerians. Thousands of Nigerian-trained medical doctors work in the USA. The most popular phrase in Nigeria now is “I am going to japa.” I am not telling people not to go, but what I am saying is how many of these japas can we afford? If you japa we want you to ‘Kaka’ (return).

On his part, Managing Director/CEO of Premium Trust Bank, Emmanuel Emefienim who spoke at the sidelines of the induction programme called on the State Governors to increase internally generate revenue in their states.

Mr. Emefienim also urged the State Executives to stop the overdependence on the center to develop their states.

“They should come up with innovative ways of raising IGR that they can use to drive development in their states. 

“The moment you are less depends on the center the more you have the capacity to do more for your people and once that is done, infrastructural development will take place, you will deliver more dividends of democracy to the betterment of the people.”

In the bid to achieve the feat and area of priority, he observed that: “It differs from state to state. What could be the major drivers for revenue in an oil producing state may not be the same for a state like Anambra or Abia, where you have retail businesses.

“It is for the Governor to determine what work for them and how best they can harness the opportunities available in their environment.”

Emefienim, who said Premium Trust Bank, was one of the sponsors of the event, welcomed the induction programme, saying it will position the governors to provide the right leadership in their various states.

“It is something everyone needs to support, it’s something you just leave to government. We feel that the private sector has a role to play in good governance, accountability and development.”

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