 Welcome back, it is the entrepreneurial Thursday of the Breakfast Show on Plus TV Africa and it's time for our hot topic. We have our guests Mukhtar Mohamed, financial analyst, Lagos State, and Dr. Frank Abageng. And we are going to be talking about something that has been necessitated because Nigeria's debt management office made a press release available on the 25th of April 2023 in an effort to erase concerns raised by the media regarding Nigeria's $6 trillion narrow debt to the World Bank while it confirmed the figure quoted by the media. It clarified, however, that the loans from the World Bank come from the IDA and the IBRA, which makes it a positive development because such loans are concessional, unlike loans from the commercial banks. Gentlemen, welcome to the breakfast this morning. Thank you. Good morning. All right. Do we have both of them because I just heard one voice. I think it's Mukhtar for the moment. All right. So we have Mohamed Mukhtar for now and Frank Abageng will be joining us later on. Mukhtar, Nigeria's debt has hit $49 trillion narrow and Nigeria ranks fourth on the IDA debtor's list, IDA meaning International Development Association fourth. Please explain to us, let's begin on that note, I think, why a country as Nigeria should be on that list, an opaque nation. Let's start with that. Well, good morning once again, being on the, I mean, the challenge we have as a nation is not because we are on that list. In the world's best economy, sometimes it could hit in terms of debt. But the most challenge we have as a country is because most of our revenue is not enough to service our debt and our productive sector seems not to be working at all. If you look at the bill of economies that are into debt, the American owned more than $49 trillion in terms of debt, but again, you look at your productive sector, you look at the overall revenue of your economy. You look at your own employment and employment rate. So like I keep saying, it's like when you want to grow your business, the best of business are business that are going through debt. But again, they make sure that their revenue is above the debt. So a major challenge is not in the 49 trillion that we are going, it's in the revenue in the terms of what harm we have to pay. We are not generating enough to be able to even pay salary, talk less of paying our jobs, I mean, paying our debt. So for now, it looks a little bit better. That's why they are telling you about the lease from the World Bank that is more concession because they are not going to be the one to pay it. They have concession period. They have one more team period that they are not expected to pay anything. But again, the future generation are going to be at the brink of it. Just like what happened when the military were busy burrowing and the innovative was the president or passenger that came up and clear of the step. So it's the same thing that is happening now. It's not because we are not on a bad level. But we, the government don't keep telling you that we're not a bad level. But they don't tell you that how much revenue do we have to service debt? According to World Bank, your budget, the budget to debt pressure should be about 23.7, 22.3 percent. That was 24 percent. But what we have in Nigeria is our debt to our debt service income as our revenue. We are using about 86 percent to service debt alone. So we have gone way, way up the threshold. So there is a big challenge and I feel for the income administration. And dependence on crude oil is a major reason why we have consistently underperformed in terms of revenue target. How do we curtail expenditure and increase revenue, would you say? Well, when you talk about a dependent on crude oil has become a major challenge where we have not been able to make more revenue. I beg to disagree a little bit because it's not that we are not making the revenue from crude oil. But what we make in terms of sales, we lose in terms of subsidy payment throughout last year, the NNPC did not remit anything into the federation account. So definitely our major cash cow, we are using it to to for our loss for other things like subsidy payment, which is not we've not seen, we've not made a complete structure of how we pay the subsidy, how much for do we consume and all this. And so definitely it's not because we are not making revenue, because revenue, we are using it to service our subsidy payment. So definitely that that should be out of it. How do we begin to think of getting more revenue? There are two ways to get revenue to your economy. You look at the job area, they look at the good area when you're looking at the job area, then you are looking at attracting foreign direct investors and attracting portfolio investors into your economy. And by virtue of doing this, then you are creating jobs. But then when these companies are coming, this company need wanting taxes is either you increase your tax or you reduce your tax. It's either you use tax as a means of growing your economy or you start as a means of revenue for a country like ours. If we should begin to think of how do we see tax as a means to grow our economy, because we are not only suffering from the burden of debt payment, we are suffering from unemployment. So if you are going to bring in the major companies into the economy, then you need to begin to think how you can begin to give them tax bracket so that when they come in here, they are able to have tax bracket for five years, but they will employ a lot of Nigerians. These Nigerians will have to pay tax. And then from those Nigerian taxes, it's a women's situation for the government. But unfortunately, when you talk about widening the tax bracket in Nigeria, you are talking about increasing more burden on the already tax because what we've seen is that just less than 20 to less than 20 percent of Nigerians are really, really paying tax. 80 percent of Nigerians in the creative sector of the Nigerian economy, the most vibrant sector of the Nigerian economy, which is the informal sectors do not pay tax. Why? Because that sector is coming up, not being able to come up with a strategy on how to begin to collect tax from the informal sector. And we talk about the informal sector. We are talking about the National Union of Road Transport workers. We are talking about the woman in the market. We are talking about the woman that sells in the street. We are talking about those are the largest employer of labor and also those are the key drivers of the Nigerian economy. So how do we have to get revenue? You need to tax those sectors, but in the sector, you need to provide amenities for them because what you see in the sector, they virtually provide everything for themselves. So they are not encouraged to even pay taxes. Let's just try to get some clarity here again, Muqtah. The government insists that the economy is still very comfortable to borrow as much as they want. And in fact, we've seen in the last five months that the borrowing has been up to like 3.73 trillion naira over the past five months. Make it make sense to us how the economy is still comfortable. What gives them the confidence to say what they say? The economy that they have is us in the debt to GDP. And like I keep saying debt to GDP will not pay your debt. It's debt to revenue that pays your debt. The government have also established that there's a challenge in revenue. But they said a test of GDP, they are OK. So what the government is using is using our debt to GDP. If I am going to make about debt to GDP also, you're looking at like your colleagues said in the studio, we're looking at our most vibrant sector, which is the oil sector. And we've been able to increase productivity, we've been able to increase production. So those are the most vibrant. In terms of that, what really grow our GDP? So once the oil sector is well on top, then our GDP goes. But when we talk about payment of debt, you don't pay your debt by your GDP. You pay your debt to your revenue. So what we have in Nigeria, like the minister of finance said once or twice, he said, we don't have a debt problem, we have a revenue problem. But you cannot, you cannot separate debt from revenue. It's just like a man, you can't say, oh, I have a very good job and then you are borrowing and you are not able to pay them. That means your job is not able to meet up with your debt. So the challenge we have is debt to GDP is OK. But debt to revenue, very, very poor. OK, just I'm trying to I'm trying to learn as well as, you know, I'm not just trying to enlighten the people, I'm trying to learn as well. When you say that the informal sector is not being taxed, and that's why that's part of the reason why the revenue is suffering. We don't have taxable adults that are in the tax net already, especially the informal sector. So how does this taxation work? The woman in the market goes to the market and buy a ticket from like five different people, agencies of government and all that. And they see that as them being taxed. So how does the taxation that you're talking about work differently from what the government does to the people in the informal sector that they get this money on a daily basis from in the market, for instance? Well, when you look at the market, we need to clarify, that is fee. That is fee. So it's fees that most of these fees are being collected by local governments by associations, by they have various names to collect those fee. At a point in Lagos, they used to pay the television fee. I mean, if you have television, you're supposed to pay a tax on that and that and that. That is different when you talk about tax is tax. When you want to pay your taxes, that you look at how much income if you made a financial year after a monthly month, then you now pay. There are two types of taxes, the company income tax and the personal income tax. Now, for the company income tax is what you pay to the federal government. And that is done where you make your profits. Then after that profit, then you have to pay tax for the personal income tax that has to do with your salary, how much you have paid salary. And from that salary, they remove their taxes directly for some. But for the informal sector, you are the one to go in there. I tell them this amount, sometimes they come in, have to investigate. And then you pay that taxes on your own. Not like the formal sector that is deductible from sources. So what they are paying is fees, which I know that a lot of people in the formal sector say that's multi-taxing. Yes, I agree that that pay multiple levies, not multiple tax, which differentiate between multiple tax and multiple levy. It's multiple levy, they are paying not multiple taxes. So they need to come to a place. And that is where government need to begin to look at your structure. Do they pay taxes or do they pay levies? That is offered to government. Besides because I was going to ask in the climbs where we know that tax tax is being paid by individuals and everybody in the community that tax net is quite wide, do they still pay the kind of levies that people pay here, the fees that you're calling them now that we pay in Nigeria? Do they pay them outside there? Or there's some kind of harmony between all these ones? I don't know. You can say you can say some kind of economy like in America, they pay petroleum taxes, I mean, based on the amount of fuel you consume. And they pay taxes on fuel. So but in Nigeria, they pay taxes on fuel. We don't say that. So they still pay taxes in their money, they still pay some levies in spite of their poverty and from your income also. So it's it's all about the structure that is on ground. I think the problem with the average Nigerian and the Nigerian businessmen is not in the payment of taxes, but it's in the in the proper use, utilization of these taxes by the by the government. Most Nigerian do not trust the government when it comes to proper utilization of their taxes. And because when you look at the former sector that have been paying taxes, they also tell you that if not that some of those money that they thought were set from source, most of them may not have been paying those taxes. So it has to do if you want to pay you if you want more people to come into the tax bracket, it's not all about going to see more people. It's all about building opacity and infrastructure. When I mean infrastructure, you know, when we talk about infrastructure, is this what the government tell us why we have to pay tax? Is there a built road, a physical infrastructure? We have a lot of road, we have railways. This is a physical infrastructure. What we drive the average Nigerian to begin to pay tax is when you see social infrastructure, social infrastructure has to do with education, social infrastructure have to do with healthcare. If I know that my child is going to go to a public school, which I'm not going to pay so much fee, but it's going to get the best of education, it is easier for me to pay tax. If I know when I go for medicals, I can go in there and have my medicals or not go to a hospital and the government hospital tells me there's no bed and I have no option but to use the private hospital. Then I am going to pay my taxes. So government should begin to think of social investment, social infrastructure, physical infrastructure. That is the way taxes are collected in developed nations of the country. In a developed nation, there's a particular area you don't expect. In a developed nation, if you are staying in Ikui, because of the kind of taxes you pay, the schools in Ikui are made better with the taxpayers money than the people that pay tax in Mushi. So you need to come up with structure that encourage people to pay taxes. And that has to come up if you are doing a lot of social investment that is reducing the cost of living of the people. But in Nigeria, what we see that cost of living keep going up, but the income of the people still remain the same. And in some instance, even going down. All right, thank you so much, Mr. Mokhtar Mohamed. I have been informed that our second guest, Dr. Frank Abagn, Political Economist, Department of Political Science, Burnett State University has joined us. Hello, Dr. Abagn. Can you unmute so that we can hear you? Yes, good morning. Can you hear me now? Good morning. You're welcome to the show. Thank you very much. All right, so you joined us halfway. But while this discussion is going on, I've been trying to triangulate the assertion of the DMO that debt is good for Nigeria's development. I guess a question to also ask at this point is, would you set the purpose for collecting this debt? You know, it's been achieved. Thank you very much. That has been the major problem for our political leadership. Borrowing is not a bad thing, but it is what you use the money for. So there is very little accountability when it comes to the utilization of the funds we've assessed from the international community. If you take a look at our past history, we'll brood a lot. But when it comes to accountability, that is where there's a deficit. We don't have, you know, very good information as to what particular projects are tied to the amounts. We've tried to improve over time the midterm projects that the federal government has tried to do over time. But that has been our major problem. Tying in the funds we've borrowed from the international community because those funds are very expensive to actual projects on ground. This has been the major deficit we've had. So it's been a challenge. We will always try to ask governments to provide very clear information so that we can see how much was received from our borrowers, our international lenders, and what is on ground in terms of infrastructure or other capital projects that they've borrowed the money for. Just wondering, the next administration is coming on board. And we've seen this, like I just asked Mukta before you came on, is that 3.7 trillion has been borrowed in the past five months. And I don't know how the next administration is going to fare. Do you think we are in for rougher times or there's a possibility of turning the wheels in our favor? OK, I wish I could sound hopeful. It's actually distressing that we're in this kind of situation. And if I could recall, I think the total amount that the next government is going to inherit in terms of the total debt is 77 trillion, it's a bit worrying. The only thing you can do is to enter new agreements with your international lenders. That's one. Then number two, we just have to get back to production. The international community is a market. But what are we producing and taking to the international market? That's the only way to get foreign exchange. That's the only way to earn foreign revenue. What is Nigeria taking to the international community that this is the product that we're marketing, that is valuable, that people want, apart from raw crude oil. Even the raw crude, we don't set the prices for it. International market forces set the prices for that. So this is the big challenge we have. But we can enter into new concessionary agreements to defer dates of payment or defer interest rates. Also defer the payment packages. Let's say yearly to pay, who knows, maybe one billion, two billion dollars a year. We could decide that, please review it downwards so that we can breathe. I think that's the only thing the government can do. We have to get back to production and we have a production deficit. Because when you look at the international community in terms of the international trade relations we have, we are not going to have anything apart from crude oil. So we need to really get into manufacturing so that we can now have a product or two or three products that can earn us the needed revenue. With that, we'll be able to now dent the debt profile we have now. Or else we're going to have imported inflation. It's going to put a pressure on our economy. It's going to put a pressure on our currency. As you can see what's happening now, our international lenders don't want to lose. So they will force us to reduce our exchange rate. The value of the Naira will still go down because they didn't give us money so that they will lose, they gave it for profit. And we have a situation now that people, our international lenders, for instance, when they see that a particular debt is becoming difficult, they now sell debt to new creditors. And these creditors come with new demands for servicing those loans. So Nigeria has to really go back, think a little bit outside the box, because the problem is it's quite serious. All right, it is quite serious. And a major issue is being able to grow our revenue. And how do we grow that? I'd ask that question a bit. Well, look at how do we grow the revenue? How do we cut expenditure? And how do we reduce wastages in government? Let's look at this vis-à-vis the ongoing crisis in cross river state where the sweepers have not been paid for four months. And they're talking about just 30,000 in 10,000 Naira a month, 8,500 Naira a month. Now, compare that to what someone has described as maximum wage being paid to the elites in government. Yes, I think it's a matter of priority here. It's what we see these kind of situations when our political leaders misplace priorities. The workers, the simple workers, if you if you see the total amount they needed to take care of them is not compared, nothing compared to what the political leaders take. I don't want to go into details now, but it's quite disheartening. It simply means that the value is placed more on those political holders than the workers there who are doing the work. If we want to increase revenue, there's a large section of the Nigerian economy that is not even captured. We have not created the right environment for a lot of businesses to grow and thrive. You need an active, small and medium scale industry structure in this country to bridge that gap. Not everybody can be a dango or a ten dollar, but there are people just slightly below that level who can move into business and create jobs and create revenue in the process. But the policies of government, the whole environment, it's a bit toxic. One, the cost of doing business is extremely high. What's the cost of power and the process of moving products to where they are needed and where the market is? We have to get back to these particular things. How about our export processing zones? They're there, but nobody's using them. If we want to earn revenue, we must get back to the drawing board. We must make these particular platforms active. It must be operative so that we have something to sell. It's like you're going to the market, you don't have anything to sell. How are you going to make revenue? Government makes revenue from assets. The worker, the typical worker is an asset because you pay taxes to government. So you are an asset, you are providing revenue. The person who sells in the market, I'm not talking about those who produce, who sells, based on the rented, you pay taxes to government to inform of levies, just like my former colleague, Speaker, said. Then you have those who are into business, who pay huge taxes for that. So it's a whole network and the government has to really be serious about this. One, you have to create an enabling environment. We don't have enough power to drive the manufacturing industry in our country. So how are you going to even start? Many industries have to generate their own power. Once they do that, they now pull back the cost into the product. So we're going to have a situation where you have goods that are overpriced and the average person can't buy them. Only a small margin of the population can do this. So this is what we need to do. Government has to really set about creating an enabling environment. Some of those things that are basic to production have to be there. You need power, you need good roads, very good roads. You need the export possessing zones to be functioning so that the product we can be taken to the international market. Once we do that, you see the revenues will go up. Well, time will not permit us to go any further. But just on a parting note, Mukhtar, I wonder if you could respond just within one minute to this same question, because solution must be provide to all the problems that we've enumerated on this program regards to the debt. Yes, the same thing, Doctor, I've said, I will still say that's what I said. You need to begin to create a social, social investment, I mean, social infrastructure, health and education. And then you need to get the PPP, public partner, public private partnership is the way to go globally. If you bring them in there, then most of this project that government are doing, government don't need to do them always. They need to involve the private sector. We build and operate. We've seen that work in developed countries that even have the resources. So build and operate for 25 years. When that 25 years, remember that government is taking to be taxing them based on the revenue and also those people that are working with them. So we need to look at PPP. Then we need to look at how much of social investment are we doing in our people? OK, well, thank you very much, Mukhtar Mohamed, financial analyst for coming on the show and educating us as it were. We do hope that the people who need to listen are listening right now and something needs to be done without necessarily putting people in more pressure than we already are. Thank you for coming on the program today. My pleasure. Thank you. And also, Dr. Frank Abhagan, thank you so much for being a part of our program this morning. Thank you very much. Thanks for having me. Well, we've been talking with financial experts. One is Mukhtar Mohamed and Dr. Frank Abhagan, who is a political economist, Department of Political Science at Benway State University. We're going to take a short break and when we return, we'll be looking at our second hot topic and that will be how do you even start a business? Where are the tools that you can find to start this business? Stay with us.