 Welcome back, it's still the breakfast on PLOS TV Africa away from the Ikari registry and of course on married licences. We'll be looking at national revenue and public finance and specifically the debt management office has put Nigeria's public debt at 38.005 trillion by the third quarter of 2021. That's between July 1st and September 30, 2021. Are we okay? Are we afloat? Are we in troubled waters? These are some of the issues where we just need to find out and get solutions and clarifications and on. Joining us this time around is Mokhtar Mohammed Isam, a financial analyst. Good morning to you, Mokhtar. Thanks for joining us on this particular discourse. Thank you. Good morning. All right. A lot of Nigerians are seemingly worried that for us to have heat at that particular amount in nine months, 3.005 trillion. Is it something good or is it that we should be worried? Are we okay as a nation in terms of our finances? Well, okay as a nation in terms of our finances. I don't think we are okay as a nation in terms of our finances. That's why we are borrowing. We are okay on borrowing. I need to get it clear that borrowing in the service is not a bad idea, but again it's meeting your payment plan and then what is behind the borrowing. The House of Assembly was telling them that they need to know what are the conditions of the borrowing. So that's also very, very important. Borrowing in itself is not bad. And if you look at this particular borrowing that they've been doing that, it's tied to Pacific project. The World Bank project is there for agro-agriculture. You look at our project from the Chinese Emsen Bank. You look at all the projects that ties to Pacific, which makes it nice. So definitely this project that I can have, what we call a steeper effect that will be able to also impact other areas and also be able to create jobs, especially for the middle class and the downtrodden, especially when it comes to construction of all these projects, infrastructural development. So it's the only challenge we have as a nation that we've been grappling with. It's not because our debt to GDP that the government always reminds us about. It's our debt to revenue that is a challenge. So if you look at our debt to revenue, then we have every cost to be raised. We look at our debt to the GDP. We don't have so much cost to worry because we are still under a good threshold. But when you look at the debt to revenue, then we have every cost to be worried. That means we are definitely being, we are taking more than we can chew. Okay. Let's also look at the fact that, I mean, looking at this administration in 2015, and I just, that profile increased on the president, Mohamed Buhari from 12.12 trillion to this point that we're 38 trillion. What did we, how did we get to this point? What are we doing? What are we doing wrongly? And how can we correct all of this? The Buhari administration comes with a lot of promises and they are trying to meet up these promises, especially in the era of infrastructure. I think they are trying to set a legacy for themselves, the era of infrastructure. And they don't care how they are going to do that. It means borrowing. I think that's what they are. Basically, the color you look at the type of borrowing, they have been borrowing ever since they came in. It's tied to specific projects which we can do and we can see if it's borrowing. You look at the rail project, you look at the road project, you look at the power project, even if we are not seeing so much impact yet. But we must know that most of these projects are long-term projects. They are not projects that you just begin to find impact any time soon. So if you look at that, you say, okay fine, borrowing itself is not bad. But say from 12 trillion, like you said, when they came into 38 trillion, which is almost double what we had before. Then you need to look at when they came in, what was the price of cobalt as a revenue base. Since they came in, revenue base have been driven. So if they have to go by that, the majors end up in salaries in London. They will not be able to do anything. So I think they looked at the other way around, is to borrow and borrow to tie to Pacific. Because some of these projects have their own effect on the economy, which in turn can generate the payment of some of these loans. I would not forget the fact that sometimes they are borrowing also to also build our external reserve like the 4 billion euro bond borrowing that the judge did. It was building our reserve to see how we can control the volatility in our exchange rate. Even if we have not achieved that yet, we just added 4 billion to our external external reserve. So those are part of the strategy that they are using to combat external reserve also. And also trying to look at means to build infrastructure. Instead of just paying salaries, they will not be able to do anything. For me, it's a good strategy, but I just feel that sometimes there are other types of borrowing that we should have been doing, like what we call infrastructure borrowing. Using your project as a tool to gain investors to come and invest in that project. And then you in turn gain revenue from this project when the investors are investing. But we've not been able to use that yet. And I don't know why the government is not using that. Alright, Moqta. Interestingly, you said that we should be worried because we have a problem when it comes to debts to revenue in a ratio. But it's coming in the wake of the House of Representatives approving a loan request of 5.8 billion dollars and a grant of 10 million as requested by the president. So what is the issue right now? Is it that we are having some sort of funding mismatch? We are not actually putting these funds to where they should go and bring the revenues that we need. Because out of all of the house of reps, the lawmakers are also asking for transparency regarding the terms and conditions given by the funding agencies. That is a challenge. That is a challenge because I don't know why the House should be asking for terms and references. Those are things that are supposed to come with the approver. You don't just approve without looking at the terms and references. And they will not approve and then you don't be asking for the terms and references. That's not the way to stop. You can't be approving them there. You're asking for terms and references after you finish approving. You need to look at the terms and references before you approve to see whether this debt are variable or obtainable or will be able to pay. So for me, the House of Rep or the Senate has become robust to whatever the President be, especially in the area of borrowing and forcing that it does stamp it. And then after telling them to go and tell us what do you really want to do after the money has been approved. So for me, that is a major, major, major challenge. Like I said, they have what we call public-private partnership. That's what the world is turning into. Instead of government bringing in all the funds, government is using their project as part of their own tool to say, okay, this is what we have. This is the project you take it. You build and manage it for the next 25 years for the next 30 years. After that, you hand it over for us. You get all the costs. Those are what is done. Then with that, you are able to channel some of this money that you used to servicing this debt into other key areas that will bring up policies that will attract investors that will create jobs for you. But you see, in Nigeria, government has gone to where they look at the cheapest way out of every situation. And the cheapest way the government will think is out of every situation is just to go and borrow. So that is what they are doing. They are not thinking out of the box. They're looking for cheap means, and they think borrowing is it. They don't care because they will tell you that some of this borrowing, we are getting it at a very close interest rate, which is less than what you get from the commercial bank, which is true. But then again, you need to look at it. You are mortgaging the future of a generation that might not be able to pay some of these debts. Okay. You have mentioned the fact that revenue shortfall is a major concern for us. And of course, at the time, we had actually experienced 33.3% that shortfall. Now, what do we also experience the fact that we've had a fair raise or rise in the prices of crude oil? Why has that not really improved on the fiscal situation of the country? When you talk about crude oil, why has it not improved the fiscal situation? And like I said, we make the revenue, and then in the other area, we spend it. You look at, we just make revenue in terms of crude oil. What are refined to prolong product? So what we do is that what we source in terms of revenue, we spend it in other way, payment of subsidy. So at the end of it, the money is not coming to the federation account that will have state and local government. So that is the major challenge as long as we keep on paying subsidy, paid by, and some of the subsidies are paid through the earnings that will end through crude, because we are not refining enough for local consumption. So that is basically the challenge while you are not seeing those impact of the crude oil price on our external reserve. Because what we do is that we sell the crude and we import refined petroleum product. And the cost of refining petroleum, but the cost of importing refined petroleum product is getting higher by the day. Because when you look at, NNPC was telling you that we use about 1. something trillion, trillion, I mean four, daily million, at least 1.5 million liters of daily, I think more than that, even. So, and then you look at the subsidy payment that I said at the end of this year, we could be paying subsidy of about 1.5 trillion. So you see that it's not commensurable what we earn in crude oil. So the challenge is that we make so much money from crude oil, but we end up using it to deal with our challenges that has to do with refining this product back to Nigeria. So, okay, just quickly, let me chip this in now. We're 33 trillion Naira as our debt profile now. What are the consents? What does this mean for investors, both foreign and local investors? For local investors, it could mean, you know, local investors are looking at it in terms of where we're hiding the impact in the economy activities. And for that, it's not helping local investors because what it means is that local investors are going to be paying more for a lot of activities. Then that means the bottom line in terms of your profit margin becomes low because the cost of the business would be high. So that is what it means for local investors. But for foreign investors, they stay as a goldmine because in their own economy, they don't get a return. You're talking about the Eurobound, the Eurobound will get a return of 7.5% per every investor that invests in the Eurobound, which they cannot get. So what we're seeing that for foreign investors, it seems to be attractive to them because of the return. But for local investors, even if they decide to invest in the Eurobound, it will not be an attractive return for you because you are doing inflation, inflation of almost 15%. And then you are getting 7.5%. But for those foreign investors that are at the Eurobound, the inflation, if not for United States, they have an inflation of 6.8%. So even with the inflation of 6.8%, you still have 7.5%. So it's attractive to the foreign investor, but to Nigerian investors, it doesn't look attractive. So you see this advantage towards Nigerian investors, but very, very advantageous to foreign investors. Okay, as we round off now, let's look at other ways the federal government can actually generate a revenue in terms of an IGR. You know, even as much as the finance minister, Zena Ahmed has said that in 2020, there may be some revisiting of some policies, the tax policies in terms of the finance bill. She talked about the stamp duties. She also talked about the capital gains in tax. You know, should we be looking in that direction? Is it the right step in the right direction, really? Unfortunately, it's not the right step in the right direction because you are trying to, I mean, you are saying you want to attract investors into your economy. Look, tax has gone beyond using tax as a means of revenue. You stack as a means of growing your economy and try to invest on credit jobs. By any credit job, those people that are working in the job will pay tax. This is no boycott. But when you think of always taxing, you're just the only way you think, the revenue needs to put more tax on your people. Now, you're trying to attract investors to the economy. Your currency is suffering a lot in a lot of ways. And you are trying to attract foreign investors so that it could stabilize your currency. And now what you're thinking about is that for every capital gain, there must be a tax. Remember that Nigeria has always taxed foreign portfolio investors. And those foreign portfolio investors are the ones that in turn will become foreign direct investors. By the time you begin to tax capital gain on each of those foreign investors, you don't attract the money. And that will make your currency continue to suffer. The government should begin to look at itself as a way to attract the right investors into your economy, instead of just seeing taxing means of just getting revenue, revenue, revenue. You're talking about the government will see locally want to widen the tax bracket. We're saying, what do you give to widening the tax bracket? What are you giving to the informal sector that will attract them, that will make them want to pay tax? Because they know they are enjoying a certain benefit from government that is helping their business. But whereby the informal sector has still been waiting for themselves, providing power, providing infrastructure for themselves to build their business. And you are thinking of widening the tax. It's a challenge. So what the government should begin to look at is, how can we use tax as a tool to grow our economy and in turns be able to tax the people that are going to be benefiting from the growth of the economy. That is the way they will look at economic work these days. That's why you have tax bracket for some businesses and also many other policies. But unfortunately, the government only just think of revenue, revenue, revenue. All right, we must say a very big thank you to you, Mokta Mohamed and financial analyst for bringing some insight into all of the public debt and the ways forward. We do appreciate your time. Thank you. All right, that's the size of the show for today. Once again, a very big thank you to all of you who have signed back to watch our return against 7am tomorrow. My name is Justin. And I am Merciable Paul if you missed out on any part of the conversation. 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