CEO Raises Concern Over High Debt Servicing Plan In 2020 Budget

Reactions have continued to trail the presentation of the 2020 budget by President Muhammadu Buhari.

Buhari had yesterday, October 8, 2019 presented a N10.33 trillion budget before a joint session of the National Assembly.

The 2020 budget which was described by Buhari as a budget of ‘fiscal consolidation’ makes it the first the president will be presenting before NASS since his re-election for second term on February 23, 2019.

Out of that amount, Buhari said his government will spend N2.5 trillion to service debts while capital expenditure in the budget is put at N2.14 trillion.

Nigeria’s debt stood at N24.947 trillion (US$ 81.274 billion) at the end of March 2019, according to figures published by the Debt Management Office.

According to the president, the budget is targeted at “strengthening the country’s macroeconomic environment, human capital development, critical infrastructure and the enhancement of the administration’s social investment programme”.

In an exclusive interview with THE WHISTLER, while reacting to the budget component which has debt servicing higher than capital expenditure, the Chief Executive Officer (CEO) of AV Parkers, Monday Michaels said the implication on the economy is that citizens will have to pay more, so that the government will be able to meet the obligation of servicing debt.

He said: “There are two components for it. You would find that there will be more stress on citizens to pay more so that the government can meet this obligation in terms of debt servicing. It means that our revenue stream will be focused more on servicing what we’ve already borrowed either through treasury bills, savings bonds, euro bond, bonds from the capital market.

“To service such, it means that government needs to eke out money from its oil revenue, increased taxes, people would have to pay more for services which the state provides. That is the implication.”

On the issue of the possibility of more taxation, Michaels said “that’s why government is moving for the review of value added tax from 5 percent to 7.5 percent. The whole idea of increasing such consumables tax is to shore up more money into the system.

“That strategy actually may not be the best strategy, if you ask me because in a system that is strangulated, government ought to pump in more money into the hands of people to spend more, stimulate the economy, generate more in terms of taxes, rather than increasing the taxes that have been levied on people without necessarily stimulating the system. The budget does not provide for, in what I have seen any component for stimulation of the economy through government spending since it reduced capital expenditure. It means that government spending has reduced,” he added.

Two senators, Enyinnaya Abaribe and Gabriel Suswam who spoke in similar vein, also described the budget as nothing but a “budget of taxation.”

Abaribe, who represents Abia South Senatorial District of Abia State speaking at the Senate plenary on Wednesday, told the Red Chamber, “This is nothing but a budget of taxation.

“I urge the Senate to look at that fact, as it is not a sustainable budget.”

He hinged his reason on the ratio of debt servicing, compared to that of capital expenditure.

Abaribe argued, “Debt servicing is higher than capital expenditure. We are still struggling.”

A former Governor of Benue State who now represents Benue North-East Senatorial District at the Senate, Suswam, supports Abaribe’s observation.

Suswam said, “I commend Mr. President for bringing an ambitious budget; the deficit worries me, there is a correspondence borrowing increase; we need to do something in this Chamber by way of legislation to address borrowing.”