The Chief Executive Officer of Financial Derivatives, Bismarck Rewane, has said that for the Nigerian government to create more breathing space in the economy, it should meet with the International Monetary Fund (IMF) and their other creditors to enable the government to restructure the country’s debt.
Rewane, who spoke with ARISE PRIME TIME anchors on Wednesday, also said that the federal government’s expenditure is declining due to exchange rate pressures and failure to optimize growth.
While discussing the budget that President Tinubu presented to parliament on Wednesday, Rewane said, “In terms of productivity, I do not think that this budget actually addresses the issue of productivity because you need to debottleneck the economy because there are constraints and impediments to growth, and these impediments include bureaucratic bottlenecks, civil service lethargy, obstacles to productivity, roadblocks, and many other things. But the reality is that the federal government finances public finances only about 52 to 54% of total fiscal financing in Nigeria. The state and local governments have another 48% so to speak.
“And if you think the federal government is even fiscally prudent, which I think they are compared to the state, the state governments finances are pretty much in a bizarre, what I would call extremely fragile and failing state than what is happening in the federal government. So, when you now begin to take the borrowing environment, we want to test these assumptions and tell you that if interest rates are going to increase, as I’ve heard the Central Bank governor said, then the debt service we are projecting today, I am not so sure that it has taken into consideration the fact that these interest rates will increase.
“But what gives me comfort is that I think eventually, we will come to the realization and have to accept it whether we like it or not, inconveniently for that matter, that we will have to meet with our creditors, including the IMF, to restructure our debt to give us some breathing room, because the economic frustrations that are going to be let out on the street by people who are paying higher prices for the problems that we see today may not be bearable. So, it is almost imperative, almost inevitable, that we have to restructure our debt, and that will give us some breathing room to invest, one, in capital expenditure, two, to increase productivity, and more than anything else, achieve accelerated and optimal growth.”
Going on to analyse the contents of the budget, he said, “There are five things you look at in a country’s budget. One, how much are you going to earn? This time, we are projecting to earn N18.32 trillion, up significantly from what it was in the past. Why? Because the price of oil, the exchange rate at which we are going to convert the oil processing, and then also, mobilising the corporate income taxes and all that. On the other hand, how much are we going to spend? We are going to spend 27.5 trillion. This is significantly higher, it’s about almost 25.9% I think up from last year. Then, how much is the deficit? The deficit is about 9.18 trillion, which actually is about 3.8% of GDP. Last year, the planned deficit was about 6 trillion, in actuality, we did about 7 trillion. So, this budget is a modest prudent budget to that extent.”
He then revealed that while there was a 25% increase in naira terms, there was a 14% drop in dollar terms between 2022 and today, as the peak in dollar terms in 2022 was $33 billion, while 2023’s peak was $23 billion.
He said, “In reality, Nigeria’s expenditure, and that’s Federal government alone, is actually declining because of exchange rate pressures and failure to optimize growth.”
He then referred to the exchange rate of N750 to a dollar in the budget, saying, “If that is the budget benchmark exchange rate that we are going to use throughout the year, it is hoped that with the reforms, the exchange rate will begin to move to where it is purchasing power per relative value. This is about almost N800 to a dollar. If that assumptions fails to naturalise and there is evidence to show that it might not naturalise, then you begin to create elements of macroeconomic instability. But having said that, the people that crafted the budget were pretty realistic in so doing.”