October 08, (THEWILL) – Notwithstanding the “bold” reforms introduced by the Nigerian government to address the lingering structural challenges impacting on the nation’s fiscal space, emerging facts reveal that the economy is headed for a bleak outlook as the debt burden worsens.
According to the 2022 FGN Budget Implementation report recently published by the Budget Office, the Nigerian government in 2022 spent a total of N5.65 trillion on debt servicing. This represents 106 percent of the total N5.30 trillion in revenue generated within the period.
The total revenue comprised N3.63 trillion from the Federation Account Allocation Committee (FAAC), and N1.67 trillion received from independent revenue sources. This indicates a decline from N11.045 trillion revenue in the 2022 approved budget.
On the other hand, the Federal Government’s total expenditure stood at N14.63 trillion, leading to a deficit of N9.30 trillion. This is also a decline, compared to the N21.82 trillion expenditure in the 2022 approved budget.
A breakdown of the total expenditure showed that statutory transfer accounted for N810.12 billion, while recurrent (non-debt) accounted for N5.03 trillion.
Capital expenditure gulped N3.13 trillion, and N1.24 trillion was spent on capital development funds.
Non-debt recurrent expenditure comprised personnel costs at N3.49 trillion, overhead costs at N371 billion, other service-wide votes at N715 billion, and CRF (consolidated retirement funds) pensions at N387 billion.
Earlier reports showed that the Federal Government deployed 99 percent of its revenues generated within the first half of 2023 on debt servicing. Figures showed that between January and June 2023, the total retained revenue of the Federal Government was N4.06 trillion, while it utilised N4.02 trillion on debt servicing within the same period.
The government revenues have remained below expectations as out of the N5.52 trillion targeted for the first six months of the year, about N4.067 trillion was generated, indicating N1.46 trillion shortfall.
According to the Budget Office, of the total N4.067 trillion retained revenue for the period, N604.1 billion was generated from the oil sector, while non-oil revenue was N1.14 trillion. company income tax (CIT) and value added tax (VAT) were N592.68 billion and N195 billion respectively.
Of the N7.76 trillion actual spending for the first half of the year, N4.02 trillion was spent on debt servicing and N2.28 trillion was spent on personnel cost, including pension.
By contrast, only about N475.98 billion had been released for capital expenditure as of June 2023.
The government in the second quarter introduced radical measures to address the deep structural challenges facing the economy which centres on mounting debt amid rapidly dwindling foreign exchange earnings. This has not shown any prospect of adequately addressing the problem. .
The Debt Management Office (DMO) has disclosed that Nigeria’s total public debt hit N87.38 trillion at the end of the second quarter of 2023.
The figure represents an increase of 75.29 per cent or N37.53 trillion compared to N49.85 trillion recorded at the end of March 202
According to DMO, the debt includes the N22.71 trillion Ways and Means Advances of the Central Bank of Nigeria (CBN) to the Federal Government.
It said, “Nigeria’s total public debt stock as at June 30, 2023, was N87.38 trillion ($113.42 billion). It comprises the total domestic and external debts of the Federal Government of Nigeria, the thirty-six states, and the Federal Capital Territory.
“The major addition to the Public Debt Stock was the inclusion of the N22.712 trillion securitized FGN’s Ways and Means Advances.”
The report also noted that other additions to the debt stock were new borrowings by the Federal Government and the sub-nationals from local and external sources.
It added, “The reforms already introduced by the present administration and those that may emerge from the recommendations of the Fiscal Reform and Tax Policies Committee, are expected to impact debt strategy and improve debt sustainability.”
The DMO had earlier projected that the country’s public debt burden may hit N77 trillion following the National Assembly’s approval of the request by former President Muhammadu Buhari to restructure the Central Bank of Nigeria’s Ways and Means Advances.
The Ways and Means Advances is a loan facility through which the CBN finances the shortfalls in the government’s budget.
The Director-General of the DMO, Patience Oniha, during a public presentation of the 2023 budget organised by the former Minister of Finance, Budget and National Planning, Dr Zainab Ahmed, noted that the debt would be N70 trillion without N5 trillion new borrowing and N2 trillion promissory notes.
However, the latest data showed that the current debt stock of N87.38 trillion exceeded the DMO’s projection by N10.38 trillion.
The analysis of the report revealed that Nigeria has a total domestic debt of N54.13 trillion and total external debt of N33.25 trillion.
While the domestic debt makes up 61.95 per cent of total debt, the external makes up 38.05 per cent.
From the report, the domestic debt increased by 79.18 per cent from N30.21 trillion while the external debt rose by 69.28 per cent from N19.64 trillion in Q1 2023..
Citing a combination of global and domestic impacts, the World Bank last week revised its economic growth outlook for Nigeria in 2023, to 2.9 percent.
This is lower than its earlier projection of 3.3 percent for Africa’s largest economy.
In the latest edition of its macroeconomic regional outlook titled ‘Africa Pulse’ released on October 4, the World Bank cited currency pressure, insecurity, and other challenges for its projection.
The multilateral institution noted that Sub-Saharan Africa’s economic outlook remained bleak amid an elusive growth recovery by Nigeria and Angola — leading oil producers in Africa.
It noted that rising instability, weak growth in the region’s largest economies, and lingering uncertainty in the global economy were dragging down growth prospects in the region.
Similarly, the PwC’s ‘October 2023 Nigeria (Bi-monthly) Economic Outlook’ released on Friday (October 6), noted that the impact of the global economic trends would worsen Nigeria’s unhealthy fiscal status.
“The rise in Nigeria’s import basket and the decline in crude oil exports relative to autonomous flows widened the gap between the parallel market and the official rate.
“Parallel market premium widened in 2023 with the rise in import bills and the decline in crude oil exports. Net flow through the CBN is negative, indicative of the decline in both oil sector receipts and non-oil sector inflows from autonomous sources,” the report stated.
The report stressed that decline in global trade growth may adversely affect Nigeria’s trade balance and forex inflows thereby worsening its trade balance and negative fiscal status.
The firm said, “Nigeria debt service to revenue ratio increased to 96% in 2022 raising concerns about its widening fiscal deficit, high debt servicing to revenue and rising debt to GDP ratios.
“This led to low credit rating (Moody, Fitch) which implies access to international funding will be costly and investors are likely to reallocate funds to other attractive and stable markets
“This is evident in the decline in capital importation from $24 billion in 2018 to $5.3 billion in 2022.”
An Economist and Sustainability expert, Marcel Okeke, said Nigeria must address the challenge of oil theft and step up oil production to meet the OPEC quota for the country, drastically reduce the cost of governance, fix the refineries and the power sector so that the economy would become productive.
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