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Debt servicing gulps N13.17tn under Buhari, education suffers

Buhari Vows To Resist Any Attempt To Undermine Sports Development In Nigeria

• FG budgets N4tn for education in seven years, sector loses 837 days to strike

• Education underfunded, FG may borrow to fund sector, economists warn

The Federal Government spent nothing less than N13.17tn between 2016 and March 2022 under the regime of the President, Major General Muhammadu Buhari (retd.), an analysis by The PUNCH has revealed.

Findings by The PUNCH also showed that during the same period, the government budgeted N4.4tn for education amidst constant criticism by stakeholders, including the Academic Staff Union of Universities (ASUU), about the low funding of the sector.

According to the information from the Debt Management Office, from 2016 to March 2022, servicing local debts gulped N10.77tn, while the government spent N2.40tn ($7.84bn) to service external debts.

The amount spent on external debt servicing was converted to Naira at the CBN’s exchange rate for the year. For instance, the naira-dollar average exchange rate for 2016 was N197 and N305 in 2017 respectively. It was N305 in 2018 and N360 in 2019. It closed at N380 and N420 in 2020 and 2021 respectively.

From January to December, a total of N1.23tn was spent to service the country’s domestic debts in 2016, during the same year N369.60bn was budgeted for education.

The figure for domestic debt servicing rose to N1.48tn in 2017 while the budget for education in the same year was N550bn.

In 2018, the country’s domestic debt servicing bill rose to N1.8tn with education at N605.8bn.

The cost of domestic debt servicing came down a bit in 2019 to N1.69tn with N620.50bn budgeted for education.

In 2020, debt servicing rose again to N1.85tn with education gulping N671.7bn. By 2021, domestic debt servicing rose to N2.05tn with education gulping N742.52bn.

On the other hand, external debt servicing gulped $353.09m in 2016. It went up to $464.05m in 2017 and jumped up to $1.47bn in 2018.

In 2019, the country spent $1.33bn on external debt servicing. In 2020, external debt servicing gulped $1.56bn. By 2021, it became $2.11bn.

Between January and March 2022, Nigeria spent N668.69bn on domestic debt servicing, while it spent $548.79m on external debt servicing while education gulped N923.79bn.

The United Nations Educational, Scientific and Cultural Organisation (UNESCO) has recommended a benchmark of four to six percent of Gross Domestic Product or 15 to 20 percent of a country’s budget for education.

However, in the seven years of the Buhari regime, the highest allocation was in 2017 when a total percentage of 7.38 was allocated to education.

Experts lament

Commenting on the amount the government spent on debt servicing and low funding of education, experts, in separate interviews with The PUNCH, lamented that educational infrastructure was collapsing because of a shortage of funds.

They noted that the government failed to realise that education is the bedrock of national development.

A professor at the Adekunle Ajasin University, Akungba,  Victor Olumekun, in an interview with The PUNCH,  lamented the government had not focused on the education sector.

Also, the General Secretary of COEASU, Dr Ahmed Lawal,  said the government spent money on projects whose contract sums were inflated.

While commenting on the development, the ASUU Chairman at the Federal University of Technology, Minna, Dr Gbolahan Bolarin,  said the government did not care about education.

But a foremost economist, Bismarck Rewane, stated, “The debt service is necessary to finance the expenditure that was incurred. There is a crisis in the education sector, no question about it and the strike is only a symptom of the fundamental defect in the education system. I’m saying that the amount spent on education should be increased but because the revenues are down, we can only increase it by borrowing more so we cannot, on the one hand, criticise the government for borrowing more and at the same time criticise the government for spending less.”

On his part, the Director, Research and Strategist, Chapel Hill Denham, Tajudeen Ibrahim, stated that the future of education funding in Nigeria was bleak.

He stated, “I think the future of education funding in Nigeria is weak because it doesn’t seem like the government has a concrete plan for the education sector. In as much as that sector is not seeing inflows from investments,  what would happen is either the government borrows to finance that sector or they neglect that sector, just like they are currently doing. Education doesn’t bring much income as a sector, it is a sector that the government has to invest in for long-term benefits.”

An economic expert and seasoned academic at Pan Atlantic University, Dr Olusegun Vincent, explained that the moment there was a debt obligation, it becomes a first line charge in revenue, irrespective of other priorities whether education, agriculture, or defence.

Varsity lecturers, others

The spending on debt servicing and the education sector came to the fore on Thursday as findings by our correspondents showed that lecturers in universities, polytechnics and colleges of education had embarked on no fewer than 837 days of strike since the inception of the regime of the President, Major General Muhammadu Buhari in May 2015.

ASUU is currently on strike in protest against members’ poor welfare and lack of adequate funds for universities among others.

The members of the Colleges of Education Academic Staff Union recently suspended strike for a period of 60 days which,  according to the union, will give the government enough time to meet the demands tabled while the Academic Staff Union of Polytechnics suspended its strike on May 29, 2022.

The analysis by one of our correspondents revealed that in January 2017, ASUP, under the then national president, Usman Dutse, embarked on a seven-day warning strike from January 30, 2017, to February 5, 2017.

Also, ASUU declared an indefinite strike on August 17, 2017, over unresolved and contentious issues with the Federal Government. The strike was called off on September 17, 2017.

A few days after the suspension of the strike by ASUU, lecturers in polytechnics on November 11, 2017 announced another strike which lasted for 15 days. The strike was called off on November 29, 2017.

In 2018, lecturers in Colleges of Education took the lead when COEASU embarked on a strike on October 9, 2018. The strike was called off on December 5, 2018.

ASUU embarked on a three-month nationwide strike on November 4, 2018, due to the Federal Government’s alleged inaction. The strike was suspended on February 7, 2019.

Similarly, ASUP embarked on strike again on December 12, 2018 and also called off its strike on February 13, 2019.

In 2020, ASUU initially embarked on a two-week warning strike.

The warning strike was followed by the longest strike in Nigerian history.

The strike which commenced in March 2020 lasted for a total of 270 days.

The pandemic, according to some stakeholders,  added to the extension of the strike which was called off in December.

In 2021, while other academic unions took a break from industrial actions, ASUP embarked on 65-day strike. The strike, which commenced on April 6, 2021,  was called off on June 9, 2021.

So far in 2022, ASUU has been on strike for close to 186 days with no end in sight.

While ASUP went on strike for just two weeks, COEASU strike lasted for two months before it called for a suspension.

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UK’s Truss defends economic plan that sent pound tumbling

UK’s Truss defends economic plan that sent pound tumbling

British Prime Minister Liz Truss on Thursday defended her economic plan and shrugged off the negative reaction from financial markets, saying she’s willing to make “difficult decisions” to get the economy growing.

In her first public comments since the government’s announcement of billions in uncosted tax cuts roiled markets and drove the pound to record lows, Truss said Britain was facing “very, very difficult economic times.” But she said the problems were global and spurred by Russia’s invasion of Ukraine.

She spoke after the Bank of England took emergency action Wednesday to stabilize U.K. financial markets and head off a crisis in the broader economy after the government spooked investors with a program of unfunded tax cuts, sending the pound tumbling and the cost of government debt soaring.

Truss told BBC local radio that “we had to take urgent action to get our economy growing, get Britain moving and also deal with inflation.”

“Of course lots of measures we have announced won’t happen overnight. We won’t see growth come through overnight,” she said. “What is important is that we are putting this country on a better trajectory for the long term.”

In a series of interviews, Truss said her government’s decision to cap energy bills for households and businesses would help tame inflation and help millions of people facing a cost of living crisis.

But it was not that decision that alarmed the markets. It was the government’s announcement on Friday of an economic stimulus program that included 45 billion pounds ($48 billion) of tax cuts and no spending reductions — without an independent economic assessment of the cost and impact.

The Bank of England warned that crumbling confidence in the economy posed a “material risk to U.K. financial stability,” and said it would buy long-term government bonds over the next two weeks to combat a recent slide in British financial assets.

The bank’s former governor, Mark Carney said that the government and the central bank appeared to be pulling in different directions.

“Unfortunately having a partial budget, in these circumstances — tough global economy, tough financial market position, working at cross-purposes with the Bank — has led to quite dramatic moves in financial markets,” he told the BBC.

The pound traded at around $1.08 on Thursday, above its record low of $1.0373 on Monday. It has lost some 4% of its value since Friday.

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Stimulus Packages Provided During Pandemic Triggered Inflation- CBN

The Central Bank of Nigeria (CBN) has attributed the rising inflationary rates to the stimulus packages provided to citizens during and after the pandemic.

It added that although this increased spending, it also created global supply challenges.

CBN’s director, Monetary Policy Department, Hassan Mahmoud, said this on Wednesday at a post-MPC briefing tagged: “Unveiling Facts behind the Figures’’.

The Monetary Policy Committee had on Tuesday, unanimously voted to increase interest rate to 15.5 per cent.

“A lot of households and small businesses were injected with stimuluses; the U.S did two trillion dollars, Nigeria did about five trillion Naira, these increased the ability of people to spend.

“But the supply side could not meet up with the demand because that volume of injection was far more than the regular intake for those economies, this made prices go up,’’ he said.

Mahmoud also blamed the Russian-Ukraine war, as well as the resurgence of COVID-19 in China for the rise in global inflationary trend.

“That region accounts for more than 50 per cent of global commodity supply and 38 per cent of global oil and gas supply. The war resulted in some shortages which made prices go up.

“Then the COVID-19 lockdown in China. The country is the largest importer of commodities across the globe,’’ he added.

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China’s yuan slides to 14-year low against US dollar

China’s yuan slides to 14-year low against US dollar

China’s yuan fell to a 14-year low against the dollar Wednesday despite US central bank efforts to stem the slide after U.S. interest rate hikes prompted traders to convert money into dollars in search of higher returns.

A weaker yuan helps Chinese exporters by making their goods cheaper abroad, but it encourages capital to flow out of the economy. That raises costs for Chinese borrowers and sets back the ruling Communist Party’s efforts to boost weak economic growth.

The yuan fell to 7.2301 to the dollar, its lowest level since January 2008. One yuan was worth about 13.8 cents, down 15% from its March high.

The yuan has exceeded expectations it might fall to 7 to the dollar after the Federal Reserve started aggressive rate hikes to cool inflation that is at a four-decade high. The Fed has raised rates five times this year and says more increases are likely.

By contrast, the People’s Bank of China has cut interest rates to boost growth that fell to 2.2% over a year earlier in the first six months of 2022 — less than half the official 5.5% target.

The yuan is allowed to fluctuate up or down 2% from its starting price each day in tightly controlled trading. That prevents big daily swings, but down days can add up to a big change over time.

To shore up the exchange rate, Beijing cut the amount of foreign currency deposits Chinese banks are required to hold as reserves to 6% from 8% as of Sept. 15. That increases the amount of dollars and other foreign currency available to buy yuan, which should push up the exchange rate.

Still, that reserve cut is unlikely to stop a slide that is driven by “a strong U.S. dollar and the expectation of more Federal Reserve hikes,” said Iris Pang of ING in a report.

“Less aggressive rate hike talk” might help the yuan rally, but it might weaken further “if the Fed maintains its very hawkish tone” into next year, Pang wrote.

Chinese officials have previously promised to avoid “competitive devaluation” to gain an advantage in trade.

The yuan sank in 2019 during trade tension with then-President Donald Trump. That prompted suggestions Beijing was trying to reduce the impact of U.S. tariff hikes, but there was no official confirmation. The currency later strengthened.

Other governments also are struggling to manage capital flows under pressure from Fed rate hikes. On Friday, Vietnam’s central bank raised a key interest rate in what economists said appeared to be an effort to stop an outflow of money in search of higher returns.

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