Many Nigerians are now afraid of their future, as the country’s debt servicing surpassed her revenue by N310 billion within a period of four months.
According to the Debt Management Office (DMO), which released the Federal Government’s four-month fiscal report, Nigeria recorded total revenue of N1.63 trillion.
The report, which covers revenue-related activities and debt payments from January 2022 to April, also has it that no less than N1.94 trillion was used to settle the country’s debt obligations.
With this reality, BizWatch Nigeria understands that a deficit of N310 billion was recorded.
Speaking on Nigeria’s budget performance, the Minister of Finance, Budget and National Planning, Zainab Ahmed suggested to the President Muhammadu Buhari-led government to swiftly take action.
According to the minister, urgent action is needed to address Nigeria’s revenue underperformance and expenditure efficiency.
Her words: “The aggregate expenditure for 2022 is estimated at N17.32 trillion, with a prorata spending target of N5.77 at end of April,” the report reads.
“The actual spending as of April 31st (sic) was N4.72 trillion. Of this amount, N1.94 trillion was for debt service, and N1.26 trillion was for personnel costs, including pensions.
“As at April, N773.63 billion has been spent on capital expenditure.
“As of April 2022, FGN’s retained revenue was only N1.63 trillion, 49 percent of the prorata target of N3.32 trillion.”
DMO explains why Nigeria’s debt servicing is high
Prior to the release of this report, the President of the Lagos Chamber of Commerce and Industry (LCCI), Asiwaju Michael Olawale-Cole had lamented that Nigeria’s current debt-to-GDP threshold is not good.
According to him, it was an unreliable means of calibrating Nigeria’s current debt burden.
Olawale-Cole, therefore, said the government must review its borrowing parameters on the basis of the country’s debt-to-revenue ratio.
Addressing the LCCI chief, DMO explained that Nigeria can lower its debt service-to-revenue ratio, but if only it generates higher revenue like that of Ghana, Kenya, and Angola.
According to the debt office, while Nigeria has a revenue-to-Gross Domestic Product ratio of 9%, Ghana, Kenya, and Angola have a revenue-to-GDP ratio of 12.5%, 16.6%, and 20.9%, respectively.
“The primary reason for the high debt service-to-revenue ratio is because Nigeria’s revenue base is low. Furthermore, the Government is largely dependent on the sale of crude oil, as a major revenue source. If Nigeria, with a revenue-to-GDP ratio of 9%, generated revenues close to countries such as Kenya, Ghana, and Angola with revenue-to-GDP ratios of 16.6%, 12.5%, and 20.9% respectively, then, its debt service-to-revenue would be lower,” the DMO clarified.
