THE Nigerian government is currently facing the twin dilemma of subsidy payment running into billions of naira and its inability to meet about 1.679 million quota production for October allotted by the Organisation of Petroleum Exporting Countries, OPEC.
Also, a record of the Nigerian National Petroleum Corporation, NNPC, showed that the country records about 400 000 daily pipeline vandalism.
This development, analysts say, remains a significant hindrance to Nigeria’s ability to meet up with its budget funding since the government largely hinges its budget cash-backing to oil proceeds.
To worsen the concern, Nigeria still retains subsidy payment to the tune of about N120 billion monthly, despite passing the Petroleum Industry Act in August, which puts the economy in a precarious situation forcing its economic managers to embark on borrowing spree across the globe.
On Thursday, Nigeria plans to borrow N6.26 trillion to fund the deficits from the 2022 budget estimates presented to the National Assembly by President Muhammadu Buhari.
Despite concerns raised by economic analysts on Nigeria’s borrowing, Zainab Ahmed, Nigeria’s Minister of Finance, justified the federal government’s borrowing noting that it is still within a healthy threshold.
“We must borrow to fund our capital budgets. We have heard several concerns raised by people, but we boldly say that these borrowings are necessary to fund our capital projects- mainly the infrastructure that affects the people. Our borrowing is still within a healthy threshold, and it is only 23 per cent of the GDP,” said Ahmed at Wednesday’s Federal Executive Council meeting.
Economic watchers say the federal government must ensure it grows its Gross Domestic Product, GDP beyond its current state and drive a productive economy that creates wealth for the people in critical sectors of the economy.
They insist that borrowing could be avoided if the government fixes its macro-economic fundamentals, drives a productive economy, and stops bad foreign exchange management.
Economist Muda Yusuf told the ICIR that the federal government’s persistent borrowing and overdraft from the Central Bank affect the Nigerian economy.
“As at the moment, the CBN overdraft to the federal government is currently in trillions of naira, and this has vast effects on inflation and overall pressure of the economy.
“There is a need for the coordinating team for the economy; this would bring in better policy realignment.
Investment analyst at Chapel Hill Denham Omotola Abimbola regrets that the government spent half of its revenue in servicing debt, making a case for a productive economy.
“The economy is growing below a much population growth of 2.7 per cent currently which shows we are performing below our ca[acity, and we must grow at a faster rate to expand our current GDP and grow at the level we could create jobs for our people,”
“We still need more efforts from the fiscal and monetary authorities to boost productivity in the economy. In every economy all over the world, the growth is based on population and productivity.
Industry analysts note that the Petroleum Industry Act holds the key for Nigeria’s economic diversification if well implemented.
Speaking in a monitored webinar on Thursday on the topic:’ Petroleum Industry Act: A reset, Setback or status quo’ Partner at Templars Yemisi Awonuga said gas holds lots of keys for Nigeria’s industrialisations and energy transition.
“Our strength in the energy transition is gas, and gas must be seen as a commodity for industrialisation. At this point, focused leadership in understanding the benefits of gas is critical to driving investment in the midstream sector and Nigeria’s diversification through the gas.
She noted that the federal government must win investors confidence in the first three years of implementing the PIA.
Also speaking, Gbite Adeniji, Managing director of ENR Advisory, urged Nigeria to heed the ticking time in Energy Transition and gas industrialisation since several other African countries are into oil and gas.
“The way we implement the midstream sector-the gas aspect of the PIA will go a long way in our achieving set objectives and economic diversification. The gas flare regulations are also captured in the midstream regulations complying with climate change global adoption and ensuring commercialisation of gas flare.”
Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.