In Four Months, Domestic Bond Investors Receive N190bn Interest

 

Investors in the bonds issued by the Federal Government received about N190bn as interest between April and June this year.

Investors that subscribed to domestic bonds issued by the Federal Government earned about N190bn as interest within a three-month period covering April to June, analysis of the government’s debt profile has revealed.

Based on the fiscal strategy of the Federal Government, the Debt Management Office usually issues bonds to raise money from the domestic market to finance government’s programme as contained in the national budget.

The financial instruments used by the government to raise money from the domestic bond market are the Federal Government bond, Treasury bill, savings bond, green bond, and Sukuk bond.

Investigations revealed that from the Nigerian Treasury bill instrument, investors earned a total interest of N45.71bn between April and June.

A breakdown of this amount showed that the government paid N14.89bn as interest in April while May and June had N14.7bn and N16.11bn, respectively.

For the FGN bond, the investors in this instrument received total interest of N128.99bn.

The interest was earned thus N69.18bn in April, N31.77bn in May and N28.02bn in June.

A further analysis showed that for the Treasury bill, the sum of N6.25bn was paid as interest by the government to investors.

This is made up of N3.12bn paid in the month of May while the balance of N3.12bn was for June

In terms of the savings bond, subscribers of this financial instrument received N310.62m as interest on their investments.

An analysis of the amount showed that they received N112.38m in April; N100.21m in May, and N98.03m in June.

For the Sukuk bond, investors earned the sum of N7.84bn as interest on their investments during the three-month period.

Findings also showed that for the green bond, a total of N718.53m was paid as interest by the government to subscribers of this debt instrument.

The Federal Government has in recent times been experiencing revenue shortfall, a development that has made it to fall back on borrowing from domestic and foreign sources.

The local and foreign debts, which stood at N25.7tn as of June ending, have been a source of worry to many Nigerians.

In the first six months of this year, the Federal Government recorded a revenue underperformance of N1.45tn.

The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, gave the figure during a public presentation of the 2020 budget submitted by President Muhammdu Buhari to a joint session of the National Assembly.

The Federal Government had proposed to generate the sum of N6.99tn in the 2019 budget.

Based on the budget document, the sum of N3.49tn was expected to be generated during the first half of this year.

But as of June ending, only N2.04tn had been earned by the government from all its revenue items; this is only about 58 per cent of the expected revenue.

Zainab had repeatedly said that the Federal Government had revenue but not a debt problem.

She said what the government needed to do was to increase its revenue generating capacity in order to boost its income to about 50 per cent of the Gross Domestic Product.

She said with Nigeria’s current revenue to GDP ratio standing at just 19 per cent, its underperformance was significantly straining the government’s ability to service its debt obligation.

The minister said, “Nigeria does not have a debt problem. What we have is a revenue problem.”

But experts said there was a need to be concerned about the nation’s debt as a huge chunk of government’s revenue was being spent on debt servicing.

Contrary to the position of the minister that the problem facing Nigeria was in the area of revenue generation and not debt, a professor of Economics at the Olabisi Onabanjo University Ago-Iwoye, Ogun, Sheriffdeen Tella, told our correspondent during a telephone interview that the country currently had a debt problem.

Tella said that with the Federal Government spending about 20 per cent of its budget servicing debt, it was practically impossible for Nigeria not to have a debt problem.

He called on the government to discontinue borrowing in order to address the situation where a huge chunk of the country’s annual budget was spent on debt servicing.

Tella said, “Currently, what we are still doing is debt servicing, using a huge proportion of the annual budget to pay debt. That is serious because the money that you would have used for other things is now being used to pay debt.

“The debt is still mounting and the servicing that we are doing is quite huge. We are using over 20 per cent of our budget to service debt. We have a serious problem with debt. We should not even accumulate further debt beyond what we currently owe.”

Also speaking, a former Director-General, Abuja Chamber of Commerce and Industry, Mr Chijioke Ekechukwu, said the rising debt signified danger for the economy.

“It is expected that the debt profile of a country would rise considering the fact that we have a deficit budget and even the deficit side of the budget was not met in the last budget year.

“The government would need to continue borrowing to meet the increased size of the deficit. Of course, the borrowing portends danger for the economy because our debt profile is rising and we do not know when we are going to scale it down,” he added.

Ekechukwu said rather than continue to rely on borrowing to finance its activities, the Federal Government should adopt other sources of funding the infrastructure needs of the country such as concession, privatisation and Public Private Partnership arrangement.

The Managing Director, Right Dev Limited, Mr Segun Showunmi, said the Federal Government had not taken adequate advantage of the potential of the Nigerian economy to turn the fortune of the country around despite various opportunities to do so.

He said instead of thinking outside the box to provide buffers in the right places for the Nigerian masses, the government chose to play politics with the economy.

He said, “The Nigerian government’s approach to growing the economy via taxes is too simplistic. It gives the impression that except for growing debts and increasing the burden on the people, we have not come to terms with the fact that you need to empower the citizens of the country to create the wealth you need for the nation.

“Government’s borrowing must be clear on issues of non-disclosure, negative pledges, lien and collateral. Certainties in trade relationship cannot also be haphazard.”