With national finances stretched, the government is ready to boost its borrowing in order to fund both current expenditures and its mooted grands projets. 

Relatively favourable financing conditions, shown by Ghana’s US$3 billion Eurobond issuance, have raised expectations that a Nigerian Eurobond of US$3 billion or more is being planned to boost declining foreign exchange reserves and spending capacity. 

This month the House of Representatives approved President Muhammadu Buhari’s request for US$2.7 billion — which had already been backed by the Senate — in low-cost borrowing from the World Bank and Brazil for a host of projects in Nigerian states. That is helping the outlook for near-term financing. 

After reporting an increase in 2020 revenues, the Nigeria Sovereign Investment Authority (NSIA) now plans Islamic sukuk bond fundraising to boost infrastructure spending. But the debt and debt servicing outlook remains problematic. 

Perhaps to meet political concerns, the Debt Management Office (DMO) has released a schedule of Nigeria’s debts to China that shows 15 available loans, most of them for 20 years, with a seven-year grace period at a modest 2.5%–3% per annum. They cover rail, roads, airport, ICT, hydropower and rice-processing projects, and US$3.26 billion has been drawn down so far. Six approved loans show no disbursements as of 31 December 2020. 

Chinese loans often come with strings attached and these reports will be scrutinised by the President Buhari’s critics. They are of added political interest after Buhari overruled the Department of Petroleum Resources (DPR) regulator on the confiscation and transfer of Sinopec subsidiary Addax’s oil licences (see Nigeria Focus, May 2021). 

The DMO release of the China loan schedule is presumably a riposte to suspicions over Chinese financing coming from the National Assembly and the members of the major political parties. 

On the plus side, first quarter data company income tax (CIT) and VAT that have been released by the National Bureau of Statistics (NBS) show an increase in both collections compared to Q1 of 2020. 

The year-on-year increase in Q1 VAT to ₦496 billion is less of a surprise, given that the higher 7.5% VAT rate applied only for part of the first quarter last year. The CIT results — an increase of almost ₦100 billion, to ₦393 billion (US$0.95 billion) — are a positive indicator on the economy and government efforts to improve revenue collection. 

Key sectors registering increases in CIT takings include the bottling and breweries sector, oil producers, manufacturing, and ‘foreign’ CIT overall. 

Yet the recent VAT and CIT boost falls far short of the doubling in overall revenues, across tax and non-tax sources, recommended by the International Monetary Fund (IMF). Nigeria still has one of the lowest rates of revenue collection to GDP in the world.