State governments will soon smile to the banks as the federal government has concluded plans to commence the final phase of the Paris Club debt refunds.
Addressing journalists in Abuja on Thursday on the state of the economy, Minister of Finance Zainab Ahmed disclosed: “The total sum of N649.434 billion was verified by the Ministry as the outstanding balance to be refunded to the State Governments.”
She also revealed the payments made by the Central Bank of Nigeria as at March 2019 stands at N691.560 billion.
“The increase in CBN payments partly arose from exchange rate differential at the point of payment,” she said.
Ahmed, while not divulging the status of the states with regards to the Paris Club disbursements noted “some states still have outstanding balances, which will be refunded, in due course.”
The finance minister also stated that a total sum of N4.8 trillion was distributed to the three-tiers of government between September 2018 and April 2019 from the Federation Account noting “the sum of N784.7 billion realized from value added tax (VAT) for the same period was also shared.”
Speaking on Nigeria’s growing debt profile, the finance minister stated “the debt increase from N12.2 trillion to N23.0 trillion is by design.”
The Federal Government, she said “designed the Economic Recovery and Growth Plan (ERGP) to reflate the economy to take us out of recession when we came on board and we made an assessment, it was clear that our country was going into recession.
“When we did a research on the best way to reverse the recession was to reflate the economy and that means putting resources in the economy so that consumption will increase.”
Based on government’s findings, she said they “designed the ERGP to borrow in the first, second and third years and in the fourth year the borrowing was supposed to start reducing. That is exactly what we have done.”
Defending the borrowing, Zainab Ahmed said government “made sure that we borrowed to finance capital projects.
“At the same time we went into recession there were other countries similar to Nigeria that went into recession. Some of them are still not out of recession but because of the method we adopted.
“But the consequence of course is the increase in debt and that is why the ministry of finance and all its agencies are working to make sure that we increase revenues.”
She reiterated “at 19.09% Debt to GDP ratio we still are the lowest comparative to countries like Brazil, South Africa that all have an average of 56% debt to GDP ratio.
“If you look at our budget the debt service to GDP ratio is 30% but because revenues underperformed it went as high as 50% to 55% and in some months up to 60%. So if our revenues perform optimally we are in a good place as far as revenues are concerned.”
The finance minister said the country’s External Reserves grew from $28.3 billion in 2015 to US $44.69 billion as at May 13, 2019.
“This represents a significant improvement that has helped to stabilize the economy, including stabilizing our exchange rates,” she stated.
Also the Foreign Exchange (FX) market, she said, “remains relatively stable because from 2017 to now there is a significant convergence of the NIFEX and NAFEX windows and they have in fact merged by the end of November 2018.”