The Debt Management Office (DMO), Wednesday, called for privatisation of some Federal Government’s viable enterprises and listing them as quoted companies on The Nigerian Stock Exchange to raise fresh funds to supplement its revenue for capital investments.
The enterprises include Nigerian Postal Services (NIPOST), Nigerian Commodities Exchange, Lagos International Trade Fair Complex, National Stadia and Nigerian Security and Minting Company (NSPMC).
The DMO’s suggestion contained in its 2017 Debt Sustainability Analysis (DSA), explained that “Hence, the need for Government to sustain the on-going efforts aimed at reforming, restructuring and repositioning some of these enterprises for privatization or commercialization.
‘’Aside saving government huge budgetary funds usually allocated for such entities annually, it will lead to wealth redistribution through public ownership of enterprises, as well as facilitate further deepening of the domestic capital market.”
However, DMO warned that Nigeria’s high Debt Service to Revenue ratio, which deteriorated in 2016, could trigger a debt crisis, saying the country could experience debt crisis in the event of prolonged shocks (decline) in revenue, exports and naira devaluation.
It also said that for the country to stay within its 25 percent Debt to Gross Domestic Product (GDP) threshold, the three tiers of government should not borrow more than $6.25 billion in the 2018 fiscal year.
The DMO stated, “The Fiscal Sustainability Analysis for the Federation (Federal, States and FCT), showed that the ratio of Total Public Debt-to-Gross Domestic Product (GDP) remained below its threshold throughout the projection period. The ratio of Total Public Debt-to-GDP for 2017 was projected at 19.80 percent.
“Both the External and Fiscal Sustainability Analyses showed that all the Revenue indicators (the ratios of Debt-to-Revenue and Debt Service-to-Revenue) deteriorated under varying shocks, suggesting that any prolonged shocks on the revenue would lead to Debt Distress in the medium to long-term, except other sources of revenue are speedily developed to enhance the revenue generation performance of the country.”
The DMO recommended that in order for the country to remain in the proposed country-specific Threshold of 25 percent borrowing limit it would have to borrow (Domestic and External) the maximum of $6.25 billion or N1,906.37 billion for this year.
“In order to estimate the borrowing limit for 2018, it requires the determination of the difference between the proposed Country-Specific Threshold of 25 percent and the end period.
“Total Public Debt-to-GDP ratio for 2017 for the Federation, projected at 19.80 percent. Therefore, the fiscal borrowing space left for the three-year period is 5.2 percent (i.e. 25.00 percent less 19.80 percent), and based on the projected 2018 GDP of $360.6 billion, the quantum of borrowing for 2018 will be 1.73 percent of $360.6 billion, which translates to $6.25 billion.
“Therefore, the maximum amount that could be borrowed (Domestic and External) for the fiscal year-2018 by the Government without violating the proposed Country-Specific Threshold of 25 percent up to 2020 would be $6.25 billion or N1,906 billion (at N305 per dollar)
“Accordingly, for the fiscal year 2018, the maximum amount of $6.25 billion that could be borrowed is proposed to be sourced equally (50:50) from the Domestic and External sources, respectively, as follows: new Domestic borrowing $3.125 billion or N953.18 billion and new External borrowing: $3.125 billion or N953.18billion.”
The Office also recommended that the government should boost revenue generation strategies by broadening the tax base, increasing tax revenue collection and privatise some viable enterprises.
It stated, “The federal government is also encouraged to fast-track the implementation of its reforms in the Solid Minerals sector of the economy such as the establishment of the Solid Minerals Development Fund and to formalise Artisanal and Small-Scale Mining activities by automating Mining Cadastral Office operations etc. It is expected that the increased revenue from this sector would favourably impact on public debt, by reducing government borrowing needs and public debt stock in the long-term.
