Dipo Olowookere
**Faults Use of Bond Proceeds for Recurrent Expenditure
By Dipo Olowookere
A notable professor of Capital Market, Mr Uche Uwaleke, has wondered why the federal government would use proceeds of sovereign bonds for recurrent expenditure.
The lecturer of Economics at the Nasarawa State University described this as an anomaly, arguing that funds from the debt instruments should be tied to a project.
He noted that bond issuance should be used to generate funds to put projects in place that could trigger economic activities and not for paying salaries or running office needs and others.
Mr Uwaleke, therefore, advised the government to look into issuing infrastructure/revenue bonds for the sole purpose of financing projects in the country instead of the general-purpose bonds.
The economic expert was speaking at the Chartered Institute of Stockbrokers (CIS) 2020 economic review and 2021 economic outlook.
During his presentation, Mr Uwaleke highlighted how the government can explore the capital market to raise funds and finance the budget deficits.
The professor, while speaking on Financing the FGN’s N5 trillion Budget Deficit in 2021, also noted that, “Special Purpose Vehicles can be set-up to raise funds from the capital market via securities issued to investors, through securitizing receivables in infrastructure, real estate amongst others.”
He also said the government can raise funds to bridge the infrastructure deficit by selling some national assets like the Nigerian National Petroleum Corporation (NNPC) through the stock exchange.
According to him, “If the government can list at least 10 per cent of the NNPC on the stock exchange, it can generate about $5 billion revenue as proceeds to improve its revenue.”
Business Post reports that President Muhammadu Buhari in December 2020 signed the 2021 budget into law. The central government intends to spend N13.6 trillion in this fiscal year.
The 2021 budget, tagged the Budget of Economic Recovery and Resilience, was touted as the legacy of the Buhari-led administration in ensuring security, economic growth, and implementing health and emergency measures to counter the spread of the COVID-19 pandemic.
It was initially put at N13.1 trillion but the National Assembly increased by N506 billion, with the capital expenditure at N4.1 trillion and N5.6 trillion for recurrent expenditure, while the fiscal deficit was pegged at N5.2 trillion and debt service at N3.3 trillion.
Nigeria expects to produce 1.86 million barrels of crude oil per day to sell at an average price of $40 per barrel, with the exchange rate left at N379/$1 and the gross domestic product (GDP) at 3.00 per cent. On Monday, the price of crude oil jumped to $63 per barrel, indicating that the country is making an excess of $23 for each barrel of oil sold.
