Senate okays N572bn local borrowing for 2014 budget financing

The Senate on Wednesday endorsed the executive’s planned new domestic borrowing of N572 billion to partly finance the 2014 budget deficit with reservations that such borrowings could further over-bloat the nation’s debt profile.

In a report by the Senate joint committee on finance and appropriations on the 2014-2016 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP), the lawmakers noted that the N572 billion additional borrowing proposed by the executive if approved would raise the nation’s profile to an all-time high of N8.25 trillion, excluding the contingent liability of the Asset Management Corporation of Nigeria (AMCON) which could run into trillions of naira.

The lawmakers further raised concerns that the high level of domestic borrowing was pushing up interest rates and if not checked could crowd out the private sector considering that the central bank has kept its benchmark rate at 12 percent for long now.

They noted that if this trend is not checked, the nation’s debt profile could soar as high as $15 billion by 2015.

“The current debt profile of N7.53 trillion and budget deficit of 1.9 percent proposed for 2014 which would be partly funded through borrowing is not the best approach to economic development”, their report stated.

Meanwhile, the lawmakers raised the benchmark oil price proposed in the 2014-2016 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) by the executive for the 2014 budget from the $74 per barrel $76.50 per barrel.

But they adopted the average exchange rate of N160/US$1 proposed by the executive as reasonable considering the volatility in the world economy and strong demand for dollar as they advised that efforts should be made to continue to keep the naira stable.

They also okayed proposals by the executive on daily crude oil production of 2.3883 million barrels per day, 2.5007mbpd, and 2.5497mbpd for 2014, 2015 and 2016, respectively.

The executive, in its MTEF & FSP sent to the National Assembly since September had proposed prudent benchmark prices of $74, $75 and $76 per barrel for 2014, 2015 and 2016, respectively, based on current global oil prices as well as the discovery of shale oil and recent discovery and supply of oil in some African countries that depended on Nigeria for crude oil supplies.

In the report, the lawmakers explained that they raised the proposed oil benchmark price by $2.50 per barrel in order to take care of some aspects of pension arrears and critical projects of economic importance.

They, however, argued that the actual benchmark proposed by the executive in the MTEF is about $80 per barrel (pb) and not $74pb when put into consideration the proposed distribution of N666.9 billion from the Excess Crude Account to the three tiers of government built into the revenue and expenditure framework within the period.