 28 governors pile up 5.8 trillion Naira debts for incoming government, even as the country's debt profile hits 77 trillion Naira amid rising repayment burden. Tonight, we discuss Nigeria's debt profile and the implications on the economy. This is PlusPolitics, I'm Mary Anna Coleman. The governors of 28 states who are leaving office on May 29 or running for re-election and the Minister of the Federal Capital Territory have piled up about 5.8 trillion Naira sub-national debts amid an economic crunch. They include Gov. Mohamed Yahya of Gumbay, Baba Ganazulam of Borunu, Abdelahi Suley of Nassarawa, Sheikh Makhindi of Oyo, Baba Jireh Songhulu of Lagos, Dakbo, Abiyadum of Ogong state and some other states. While defending its huge debt profile, the Lagos state government explained that domestic and foreign debts were necessary because there was no other way the government could fund the projects executed in the states. Also, Nigeria's total debt figure will jump to 77 trillion if the National Assembly reconsiders President Mohamed Buhairi's request for 22.7 trillion ways and means loan. While joining us to discuss and make sense of this is Dr. Muda Yusuf, who is the Director Centre for Promotion of Private Enterprise, CPPE, and also joining us is Alesta Wilcox as a Chatted Accountant and Gospela Bili is the Chief Economist of Stritonomics Ltd. Thank you so much gentlemen for joining us and happy New Year. Thank you for having me. It's a pleasure. Thank you. I'm happy to be here. Thank you. First of all, I would like to welcome you to the esteemed listeners. Okay, great. Pleasure to meet you. Pleasure to meet you. Thank you. I'll start with you, Dr. Yusuf. As we speak right now, the federal government is still expecting, in fact, Mr. President, is expecting the House or the National Assembly to agree on the amount that he's asking for them to approve. Now he's also saying that if the National Assembly does not approve this money in time, they risk about 1.8 trillion Naira interest payment. Let's start with that before we go back all the way to, you know, 2015. Here we are right now, even with post-COVID and all of the other excuses we've given. Is this the worst place that we've been or are we almost close to the worst? Dr. Yusuf, can you hear me? Yes, I can hear you. Go ahead, please. Can you hear me too? Yes, I can. Yeah, it's a very disturbing situation, because just as you said in your report, the death situation is getting close to 77 trillion, and of course you talk about the states, but I think the bigger challenge has to do with the federal level of death, because out of the 77 trillion, which we are likely to have by the time it securitizes the waste and maids, only about 12 percent of that are death that are incurred by the state government. So the bigger challenge has to do with the federal government. So it's a very, very disturbing situation, and this is already reflecting in the appropriation of the budget. In the 2023 budget, for instance, we are talking about 6 trillion, over 6 trillion for death service, that is humongous, you know, that is even bigger than the allocation for capital project. So it's a very disturbing situation, and on top of that, huge deaths of this nature has a way of crowding out the private sector in the financial markets, because in 2023, for instance, we are looking to raise over 7 trillion from domestic financial markets. You can imagine the impact of that on the credit market and the capacity of the private sector to be able to raise funds, because it's not often easy for the private sector to compete with government in raising capital in the capital market. So it's a very disturbing situation, it's going to affect a whole lot of things. The capacity to fund infrastructure, the capacity to fund some very important government expenses will be impaired because of this growing debt, and the thing about debt is that it's like a visual cycle, it's like a trap, when you are in need to get out of it can be very challenging, because if you have a situation where you are spending almost 80% of your revenue on debt, on debt service, sometimes also on interest payment, how are you going to fund the other major budget items, like personnel, like overhead, like capital? So invariably, you fall into the visual cycle of continuous borrowing. So we need very critical reforms to be able to pull out of this whole. Unfortunately, this administration will be leaving a very regrettable legacy of huge debt, because even at this point we are talking about 77 trillion. The current budget is going to deficit of 11 trillion, which also has to be borrowed. But then you add that to 77 trillion, you can imagine the kind of figures we are talking about by the end of 2023. So it's going to be a very, very challenging year as far as debt management is concerned, and as far as those who are going to take over the administration of government in 2023 will have to cope with it. Let me backtrack a bit, because it's very difficult for us to have this conversation without going back to where it all started and how we even got here. A lot of people would say that they applaud the Obasanja government for some of the debt cancellations that we've had and the debt forgiveness and the Paris Fund payments that we've gotten, that even this administration has gotten to enjoy from. But that cannot be said about the Bahá'í administration. How did we get to this point where we're borrowing so much that even the interest that is on top of it is enough to serve the coffers of all the states across the Federation? But first things first, in terms of our industry, we're looking at if we have any that's still working, how much are we getting from it? Our oil that is supposed to be our mainstay, the last time I checked, the NNPC was reportedly unable to remit any monies into federal government coffers. So if we're borrowing, what are we borrowing to do and is there any plowed back profits at the end of the day? Well, as of 2015, the debt level was 12.6 trillion, that was 2015. And that's about the time that this administration came in. Today, the debt talk according to DMO is 44 trillion. By the time we factor, the waste are missing to it, we are talking about 77 trillion. You can see the huge humongous gap between what they have been spending on and what we are talking about at the moment. And all of these things are partly as a result of the quality of domestic governance and the management of the economy, and partly as a result of some global developments. First, we have been carrying on as if we don't have any revenue challenge. The cost of governance has been growing in lives and bounds. So that is a major problem. Personnel costs, overhead costs, and some of these have been growing in a very big way. So if you have a situation where you are just blowing up the expenditure, without worrying so much about your revenue, you will end up in this kind of crisis. That's why we talk about fiscal consolidation in any public sector management. Fiscal consolidation is about managing your expenses and optimizing your revenue. All along the government has not shown any serious commitment to cutting down on expenditure, even if expenditure has been growing. That is why we have been having this wide gap between revenue and expenditure. Unfortunately, some of the areas from which we could also have got revenue have been compromised, like the oil and gas for instance. You all know all the challenges we have faced with oil theft, which has been there for close to a decade. It is only now that we are realizing that we have to do something about it, after a lot of damage has been done. Then there are issues of corruption, leakages, and of course we have the problem of subsidy, which is also a major burden on the finances of governments. If we are spending close to annually between 5 to 6 children annually on subsidy, that's a very big issue. And apart from that, we also have policy issues. Policy around the oil and gas, it has led to a situation where many of our investors have left. So investment in that sector has gone down drastically. It is a very strategic sector for us as far as foreign exchange is concerned, as far as revenue is concerned. Partly because of the problem of insecurity, and partly because of the quality of policy in the oil and gas sector. So that is an issue. Then of course tax administration. What percentage of people who are earning income are paying tax? It is economy. The people paying tax are people who are in the former sector. Largely, either their employees or their investors. That is why we look at the data on revenue. It is coming largely from VAT and from company tax. All of these are being paid by companies. So what percentage of the economy are these people? And all this issue of additional tax and all of this is being paid on the same set of people. So we have not been able to expand the tax net. All the guys who are building mansions in Kanu, in Lagos, in Abuja, people who are flying private jets, people who are riding limousines and Rolls Royce, how many of them are in the tax net? So our tax administration is also an issue. This economy is almost 50% informal. How much are we able to get from the informal sector? So these are some of the issues around fiscal consolidation, around revenue. So we have issues around revenue optimization. We have issues around the management of the court of governance. Okay. Let me go to Gospel. Mr. Muda has been able to highlight some of the major problems that we are facing. But let's talk about the economic policies that have been made under the Bahá'í administration from 2015 till now. And of course, why we're here again, because of course the reason why we're having this conversation is assessing the ball rolling for 2023 election. Some of the policies that we've seen, I mean, Nigeria is known to have an economic, I think it's called the economic committee or something headed by the vice president. And that committee is mostly responsible for all of the policies, if not most of them that are being churned out. How well have these policies played out? Has anybody really watched how these policies have played out? Or were they just policies that were made and not followed through? Again, the central bank governor, many would say, has been doing the job of not just the agricultural minister, but the minister for coordinating the economy and sometimes the minister of finance. With all of these duties and the lines crossing, has this also contributed one way or the other to the problems that we're facing today? Thank you so much Mimi. It's really great to speak with you this new year. Yes, so speaking to the question you asked, I think there are a lot of issues. I mean pertaining to the culture and public leadership in Nigeria. And if you look at it very closely, these are challenges that we've had, you know, past administrations, you know, and it's very consistent. It's very good in the context of the political economy, current political economy in the nation. And that is to say that the long history of fiscal and discipline and the gross lack of abilities to really make policy that I think fight with our homegrown issues or, you know, throwing out solutions that can identify with our homegrown issues and backing it up with a political veil, you know, and the ideology around inclusivity. You know, it's really the challenge here. We've seen that we have extractive institutions in our own context, you know, make policy or run policy processes for a critical few, you know, in kota nam koche, the minority, you know, and all that. So that has impacted on how policies have, you know, over time become very incoherent and looked at still its language to sort of control, you know, rather than enable the system to thrive as it were. The roller coaster of policies by the central bank has been largely very consistent with what Nigerians need, you know, vis-a-vis the monetary system to develop and drive inclusion in that context. So it's not been a very, very good story, you know, but then the opportunities are right there sitting right in front of our faces. And central bank policies have been very contradictory to very large extent and, you know, seeking to also control money and having to use a very strategic approach to mop up cash and encourage and curb inclusion within the economy. What we expect in terms of going forward into the year 2023 would be that the political ideology has to move from where it is right now, being extractive to being more inclusive, until it's a lot more inclusive. We may not be able to see the efforts around political real matching political reforms and the capabilities across institutions to drive the required structural, focused reforms that we need at a necessary level and then institutional management at a sufficient level until we can build up those two legs with the right ideology at the core. I do not think that we'll be able to drive any form of strategic solutions going forward, regardless of who wins the 2023 elections. Looking at, just like Mr Muda had said, he talked about, you know, the oil and gas sector. And this is a conversation I had yesterday with some people who are experts in the industry. Again, this is supposedly our mainstay because we moved away from agriculture and focused mostly on the oil and gas. But we have also seen a lot of oil theft in the past. In fact, I think this has been happening even before this administration, but then it's a bit more, you know, louder now and people are speaking up about it. Hence, you know, it making headlines. Now, if our mainstay seems to be bleeding, what about the other sectors of the economy? I mean, we still have refineries that are not working, they're not producing, but salaries are being paid and these refineries are being serviced every other day in trillions. Let's look at also the issue of us no longer producing. Production is on the low. We have the manufacturers association of Nigeria continuously complaining about some of the things that they need to even get these businesses off the ground, the enabling environment and businesses that have literally packed up and moved to neighboring countries, causing us to lose more and more monies. Again, you talked about the issue of, you know, government being strategic. But then government employ some of these people who are supposedly technocrats and experts. Is it that government is not taking the advice of the people that they've employed? Yes, I mean, you don't expect an institution that is run heavy on extractive ideologies, you know, to employ people and, you know, and expect that those individuals will deliver, you know, the systems are best functioning based on the ideologies that are around them in the first place. You know, so back again to the conversation, I think in my own opinion that the conversations around the oil in that sector is largely more rated and there's too much emphasis in that sector and that's because, I mean, that's what we've made of it, you know, that's it. We extract about 85% of our revenue from oil and foreign exchange receipts, you know, in that order as well. But if you look at the H1 numbers, we're saying that the non-oil sector holds about 1.1 trillion there more in revenue than the oil sector. That's one too. The selling sector currently adds about 57%, you know, to GDP than agriculture or industry services. But right now, sorry, that the industry sector, but right now Nigeria does not have any national service sector based on, you know, as a form of trade and investment position for the sector. Thirdly is that the Nigerian non-oil sector holds about 34% of GDP than the oil and gas sector. What I'm trying to say is that the Nigerian economy is very diversified. The challenge has been diversifying or organizing for a productive revenue base. And what I mean diversifying means that we've not properly unlocked the potentials of the non-oil sector, you know, to position for revenue. Two, we've not properly also organized the informal and the services sector, you know, to ensuring that we are also mucking in quotes revenue from that block. At best, the efforts have been putting revenue target pressure on the MDAs to deliver. And the MDAs take that pressure and they go for straight MSMEs and players in the non-oil space. Rather, the positioning and the language should be about enabling that enforcing. Until we begin to, you know, unlock this key productivity drivers across the non-oil sector we may not be able to organize the sector enough. There are many SMEs that are already export ready, but because the infrastructure, the access to market, access to finance and all of those critical elements are not in place, you realize that they miss out on the bigger market where they could play, you know, and because you have tons and tons of SMEs who are incapacitated in that order we may not be able to make the most of the non-oil block. However, the low hanging fruits have proven that the non-oil sector adds more revenue actually than the oil and gas sector. But the efforts, the energy, the focus, the policy drive has been heavy on the oil and gas sector and again the subsidy conversation has been sort of like a projected distraction, all right, that sort of has sort of how likely blinded Nigerians from the real argument. The reason why you have subsidy in the first place, because the critical chunk of PMS demand and the likes in Nigeria have driven heavily by household and businesses. If you fix power by 50%, you realize that Nigerians will have no business going to the Philly Station as a result to relax your local demand and also relax the local, your imported PMS and the likes. Which is where the subsidy argument is being hinged on. The fact that we import so much, the prices are high, we need to make it easier because there's high local demand. Secondly, if you fix local refineries, do relax the demand for imported food. Either ways, the subsidy is not the conversation but then again that has been hinged as a game strategy by the political class to distract Nigerians from what they should be holding government accountable for and all of that. So this series of narratives has shown to us very clearly that institutional leadership, public leadership and the ideologies that govern them are unhealthy in terms of positioning Nigerians to become much more prosperous, much more productive and much more inclusive in the grand scheme of things going forward. And I think that we really need a huge turnaround at this point in time if not the cost of living crisis is going to worsen way much more than we have right now. Let me come to you, Alastair. Alastair, you obviously had ICANN here in Lagos and so you are a very interesting person to have this conversation with. When some of our guests are saying oh we do not have decisive governance, we do not have governments who should be doing the right thing it's not like they do not know because the experts, people who know their onion working in the corridors of government and like I asked Gospel is it that they do not take the advice of these people. Let's look at the issue of open budgets. Many advocacy have gone in that direction for open budgets to know how much money is not just to tell us how much you are voting into the budget at the end of the day have these money has been used and what's not been done so that there can be some level of accountability why have we not seen that. Again the issue of us focusing on some parts of our economy and leaving others for example we have so much natural resources so many and some of these natural resources are being left in the hands of some cabals to run as opposed to these money coming into the coffers of government as we get ready for the elections what should the average person especially groups like ICANN be pushing for. Thank you very much I would like to close the questions into one let me try to unbend them in order to make a sense of what I am trying to say first and foremost let me turn the two other contributors I think I have learnt quite a lot of two things from them and it's quite instructive I would say that those in government do not know what they are doing I would say that there are no experts in government as a matter of fact there are so many general accountants who are holding very high responsible positions and giving government even ICANN as a body will always make their voice to governments on key critical issues just as the budget has been passed now ICANN will hold a seminar will hold a discussion a workshop on the budget and will make their views or their concerns known to government that has always been key some of the best hands have some of the best brains always have some of the best exposures to best advices and best programs but like this one we can say I am just trying to get his name some of these things has to do with structure and the foundation of what we have been used to what we have been used to all along each time budget is announced most often announced and even the media which is always holding content in some of these national discussions will always focus on the expenditure part of the budget and that's what everyone looks at 22.3 million this one at the very side hardly do people bother to know about the revenue side it's just because this camera we have a big budget deficit very huge and for me very embarrassingly huge that is why on an individual level I'm quarreled with the size of the budget because everywhere the budget size increases and nobody cares to know the performance of the budget in the first instance if actually the budget that is being proposed is actually what we need because when we have played this term and this incremental budget and remember in 2015 when this government came into power they countered the idea of zero base budgeting which I want to turn with and I clap for because that is way to go but what we do is incremental budget I mean at every year ministries, departments and agencies just test up the whole budget I mean make an incremental process journey and present and these things just continue like the truth you can say it's been fundamentally coming all the way but they will step back they will step back to really interrogate we will explain the truth look, a budget size of 32 trillion for a country like Nigeria is small if you add the states and other look up the budget of course is much bigger we do for the current government because you discover that the state is a place like South Africa with less population and if you look at the budget sizes because they do not have they have debt issues but the problem we really have is revenue just as the specific aspect revenue is our problem we have not unless our revenue most of the those that pay tax or conclude the revenue drive are those in the former sector and I've said this in time and time again the each of us sector the big boys don't do like he said those that have mansion, estates landlords and all work load how many of them pay the commisionary tax that they are supposed to pay either to the state or to the federal how many businesses that I mean as I said I can't turn I mean to consult I mean to account in services to small and middle scale businesses you see there are books you see there are books what is there but because they do not want to pay tax they are the financials and because they are not a regulated entity they are not a regulated entities they do not file their returns even the minimum return that they should be filed to the corporate affairs commission and it made worse but the government are trying to have an ease of doing business a finance act from 2019 2020-28-21 finance act has I mean created a problem of government the problem because now it attempts to want to have ease of doing business you excluded persons with turnover of 25 million from paying tax where people will say that is 5 but you are talking about the government is grappling with revenue now you now also come and say companies with 100 million turnover to pay 20% tax now in a country where people are very fraudulent people do not want to do the right thing and you are given a disagree so even those who could have needed task-clearance certificate to do this relaxed that they would not do it and so government does revenue now I am not quarreling the I am not quarreling the the idea behind government giving those incentives now we have been talking about subsidy on we subsidize education in this country we subsidize house we subsidize everything we subsidize so many subsidies is even now that they are not on board with electricity at the energy market for people to be paid a fair price for electricity in a way we subsidize now we are saying that at the same time we are also I mean delivery cutting down and you are going to make a revenue problem of each of you business so there is a total amount of bits and bits and bits of distribution and dichotomy that needs to be plugged into a second speaker will say it we might still be having revenue issues and of course seat needs are growing the budget side will keep growing up and the debt will keep mounting while there is still plus politics we will take a break when we come back we will be talking about states budgets and of course we will be talking about other things that gulp the monies that we allocate every single budget cycle stay with us we will be right back