In the just concluded week, the Federal Government announced its intention to issue USD3.3 billion Eurobonds as part of its debt
financing mix needed to fund the 2020 budget deficit even as President Muhammadu Buhari approaches the National Assembly for its approval.
Also, the Debt Management Office
(DMO), which seeks to reducing debt service costs, hinted that cheaper funding options from multilateral and bilateral lenders would first be considered.
The proposed borrowings of USD3.30
billion is expected to increase the external debt stock to USD30.24 billion, given it balance of USD26.94 billion in 9M 2019.
Meanwhile, according to the National Bureau of Statistics (NBS), Nigerian States’ internally generated revenue (IGR) for the first 9 months in 2019 rose year on year (y-o-y) by 16.88% to N986.29 billion from N843.87 billion in 9M 2018.
A breakdown of the 2019 9M IGR into the various income sources (as contained in a recently published report by the NBS titled, “Internally Generated Revenue At State Level”) showed that Pay As You Earn (PAYE) amounted to N602.41 billion; Direct Assessment was N39.03 billion; Road Tax was N23.01 billion; Other taxes was N176.84 billion; and Ministry, Departments and Agencies (MDAs) was N145.01 billion.
Of the thirty-six states, thirty-three states grew their IGRs; with five states growing theirs by more than 75% in the period under review.
Specifically, Zamfara State grew its IGR by 137.90%, Ekiti (109.12%), Osun (88.48%), Kebbi (86.76%) and Benue (78.00%) to N10.59 billion, N8.31 billion, N14.16 billion, N5.93 billion and N14.93 billion respectively.
The increase in their IGRs were chiefly driven by higher revenues from income sources such as PAYE, Direct Assessment and MDAs. On the flip side, three states which recorded decline in IGR include: Bayelsa, Ogun and Enugu.
Their IGRs moderated by 16.90% to N8.37 billion, 16.21% to N52.87 billion, 9.49% to N14.88 billion, 12.29% to N6.98 billion and 10.85% to N2.03 trillion respectively in 9M 2019.
Further analysis of the report showed that 11 states (higher than 7 states in 9M 2018) generated IGR above N20 billion: Lagos state generated the highest IGR of N297.10 billion, while Rivers, Ogun, Delta, Kaduna, Akwa Ibom, Kano, Ondo, Kwara, Edo and Oyo states generated N107.03 billion, N52.87 billion, N49.51 billion, N28.15 billion, N26.62 billion, N25.81 billion, N24.54 billion, N24.00 billion, N22.26 billion and N20.00 billion respectively. However, Yobe, Gombe, Taraba, Ebonyi, Kebbi, Borno, Katsina and Adamawa states generated the least IGRs of N3.34 billion, N4.24 billion, N4.72 billion, N5.64 billion, N5.93 billion, N6.04 billion, N6.61 billion and N6.82 billion respectively.
We note the commendable double-digit growth in states’ total IGR as bulk of the increase was from PAYE which suggest that workers in the states either got higher salaries or more workers were engaged within the period under review.
Nevertheless, we still expect state governors to come up with the right policies that will further catalyse commercial activities in their respective states.
We expect the increased revenue to give the state governors headroom to improve on much desired capex needed to stimulate real sector activity as costs are reduced; although we suspect that most of the money will go into re-current expenditure as payment of minimum wage becomes imperative.
Meanwhile, the move by the Federal Government to secure foreign loan worth USD3.3 billion was in line with our expectation.
According to our outlook and investment strategy 2020 “We expect the Federal Government to seek more foreign borrowings, preferably from multilaterals at concessionary interest rates, although Eurobond issuance remains a viable option even at relatively cheaper cost.”
Notwithstanding, we believe government should seek private sector participation to speedily scale up the necessary infrastructure as government revenue appears threatened amid declining crude oil price and weaker consumer spending.