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Economy

Domestic Debts Hit N22.57tn As Buhari Seeks Fresh N819bn Loan

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Nigeria’s domestic debt rose to N22.57tn as the Federal Government on Wednesday proposed  a last-minute supplementary budget for the 2022 fiscal year.

The President, Major General Muhammadu Buhari (retd.), is seeking the approval of the National Assembly for N819.54bn supplementary budget, which it planned to finance through domestic borrowing.

Buhari on Wednesday forwarded to the National Assembly for approval, N819.5bn supplementary budget for the 2022 fiscal year to fix various infrastructure destroyed by floods across the various states in the country a few months ago.

The supplementary budget as explained by the President in a letter read in plenary by the President of the Senate, Ahmad Lawan, is meant for the capital expenditure component of the 2022 budget with an attendant increase of deficit to N8.17tn.

The letter read, “The year 2022 has witnessed the worse flood incident in recent history which has caused massive destruction of farmlands at a point already closed to harvest season.

“This may compound the situation of food security and nutrition in the country. The flood has also devastated road infrastructure across the 36 states and the FCT (Federal Capital Territory) as well as bridges nationwide that are critical for the movement of goods and services.

“The water sector was equally affected by the flood and there is a need to complete some ongoing critical projects that have already achieved about 85 percentage completion. The nine critical projects proposed in the sector cut across water supply, dam projects, and irrigation projects nationwide.

“I have approved a supplementary budget of 2022 appropriation of N819.536bn, all of which are capital expenditures. The supplementary will be financed through additional domestic borrowings which will raise the budget deficit for 2022 to N8.17tn and deficit to GDP ratio to 4.43 per cent.”

Being a proposal coming 10 to the New Year, the President of the Senate hurriedly forwarded it to the Senate Committees on Appropriation, Finance, Works, Water Resources and Agriculture for expeditious consideration.

The Federal Government’s initial plan was to borrow N5.01tn (with domestic debt put at N2.51tn) to finance part of the N6.26tn budget deficit.

With the newly proposed N819.54bn domestic debt,  the Federal Government’s domestic borrowing is  expected to hit N3.33tn for 2022.

Data from the Debt Management Office showed that the Federal Government’s domestic debt stock was N19.24tn as of December 2021.

By September 2022, the domestic debt stock had risen to N21.55tn, which means that the Federal Government had borrowed N2.31tn so far.

With the additional N819.54bn borrowing, the Federal Government can still accommodate N1.02tn more domestic debt in line with its plan.

The Federal Government’s domestic debt rose from N8.4tn as of June 2015 to N21.55tn as of September 2022, according to The Punch.

This showed an increase of N13.15tn or 156.55 per cent under Buhari.

The Federal Government proposed to spend N4.5tn on interest charges for domestic debt by 2023, according to the proposed 2023 budget.

This is an increase of 243.51 per cent from the N1.31tn proposed allocation for interest charges on domestic debt in 2016.

In its latest Africa’s Pulse report, the World Bank said that public debt in Nigeria was concerning due to the rising debt service-to-revenue ratio.

According to the bank, the debt service to revenue ratio could stand at 102.3 per cent by the end of 2022.

While presenting the 2023 appropriation bill to a joint session of the National Assembly recently, the President, Major General Muhammadu Buhari (retd.), noted that despite the revenue challenges in the country, the country still consistently met its debt service obligation.

“Despite our revenue challenges, we have consistently met our debt service commitments. Staff salaries and statutory transfers have also been paid as and when due,” Buhari added.

However, speaking at the launch of the World Bank’s Nigeria Development Update titled, ‘The urgency for business unusual,’ held recently in Abuja, the Finance Minister, Zainab Ahmed, had admitted that Nigeria was struggling to service its debt.

She said, “Already, we are struggling with being able to service debt because even though revenue is increasing, the expenditure has been increasing at a much higher rate, so it is a very difficult situation.”

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Economy

Illegal JVs in Oil Industry: Agbakoba Threatens to Sue FG

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A former President of the Nigerian Bar Association (NBA), Olisa Agbakoba (SAN), has threatened to drag the Federal Government to court to determine the constitutionality of continuing outsourcing of oil and gas management to International Oil Companies (IOCs) through Joint Ventures (JVs) and Production Sharing Contracts (PSCs).

Agbakoba also called for a complete overhaul of Nigeria’s oil and gas sector, insisting that the current system has ‘completely failed’ and is responsible for poverty and hunger across the country.

The human rights lawyers, who stated this at a press conference in Lagos, argued that the current Contract Oil model directly contradicts Sections 16 and 44(3) of the Nigerian Constitution.

He maintained that the law mandates the government to manage Nigeria’s natural resources in a manner that secures the maximum welfare, freedom, and happiness of every citizen and that the current arrangement, which primarily benefits IOCs, falls far short of this constitutional requirement.

Agbakoba also stated that it is a fundamental principle of administrative law that statutory bodies, including the government, can not delegate their core functions without express legal authorisation. Without such express authority, the current arrangements may be ultra vires and potentially void.

The lawyer said, “These responsibilities, fundamental to the nation’s sovereignty and economic well-being, may be inherently governmental and thus incapable of being lawfully delegated to private entities. Furthermore, it is dubious whether the federal government has the authority to delegate the inherent rights of Nigerians to their natural resources to third parties.

“While the federal government is reluctant to consider shared or joint ownership with state governments, who represent Nigerians more directly, it sees no issue in delegating, outsourcing, and sharing joint ownership with IOCs. This inconsistency raises questions about the government’s interpretation and application of its constitutional mandate.

“We will approach the court to declare that the PIA, the current legal framework for the continued outsourcing or unlawful delegation of the management of Nigeria’s oil and gas to IOCs, is unconstitutional.

“The dominance of IOCs in the sector has historically limited opportunities for developing local content and building domestic capacity in the oil and gas industry,” he said.

Agbakoba also said that the current system of JVs and PSCs, which was initially justified by a lack of funds, now appears to violate the inherent rights of Nigerians over their natural resources.

He stated that if the country adopts a “Development Oil” approach, it can reclaim control over its vital oil and gas sector and transform it into a powerful engine for national development.

The senior lawyer insisted that this paradigm shift requires bold policy changes, including securitising oil reserves through a Sovereign Oil Fund, allowing Nigeria to finance its oil and gas operations.

He said, “The current exit of IOCs presents both a challenge and an opportunity for new Nigerian actors in the oil and gas sector. In collaboration with the federal government, these actors must rise to the occasion and build a new strategy for oil and gas exploration based on development oil principles.

“By aligning the oil and gas sector with broader national interests and constitutional obligations, Nigeria can create a more diversified, resilient, and prosperous economy that truly benefits all its citizens. This approach not only promises economic growth but also reaffirms Nigeria’s sovereignty over its natural resources, ensuring that they are managed for the welfare and security of all Nigerians, as mandated by the constitution,” Agbakoba stated.

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Dangote Refinery Reaffirms Commitment to Supply Petrol This July

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The Vice President of Oil and Gas at Dangote Industries Limited, Devakumar Edwin, has reiterated that the Dangote oil refinery will supply petrol in July as promised.

Edwin said this when he took officials of the S&P Global on a tour of the facility over the weekend.

According to Edwin, the company aims to catalyse a virtuous cycle of industrial development, job creation, and economic prosperity by harnessing Africa’s abundant crude oil resources to produce refined products locally.

He also revealed that “as earlier promised, the company will start the production of Premium Motor Spirit this month.”

While claiming that the products from the facility are of high quality and that they meet international standards, Edwin said it could meet 100 per cent of Nigeria’s demand for petrol, diesel, kerosene, and aviation fuel, with surpluses available for export.

Meanwhile, S&P Global said the Dangote refinery is capable of resolving Nigeria’s foreign exchange challenges by putting an end to fuel importation, which mounts huge pressure on the local Naira currency.

Our correspondent learnt that S&P Global visited the Dangote Refinery at Ibeju-Lekki, Lagos as part of its sovereign credit ratings assessment of Nigeria.

The team from the international rating agency was accompanied by officials from the Federal Ministry of Finance.

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Economy

Naira Depreciates Further, Sells at N1,517/$

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The Naira, on Monday, continued its depreciation against the US dollar in the foreign exchange market.

Data from the parallel market section and FMDQ showed further depreciation against the dollar on Monday.

At the parallel market, a Bureau De Change operator in Wuse Zone 4, Mistila Dayyabu, said that the Naira was sold as high as N1,517 per dollar on Monday morning.

“On Monday morning, the dollar was sold at N1,517 per dollar. However, on hearing the information about the coming of the Economic and Financial Crimes Commission (EFCC) operatives, we started selling at N1,500 this evening, ” he said.

The figure increased from the N1, 450 per dollar it traded at the weekend.

Similarly, at the official market, FMDQ data showed that they dipped to N1478.11 per dollar on Monday from N1466.31 last Friday.

This represents an N11.8 drop from the N1466.31 recorded last Friday.

Earlier, the Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso, said the apex bank’s Monetary Policy Committee will do everything to bring down soaring Nigeria’s inflation, which stood at 33.22 per cent in March 2024.

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