By Jeph Ajobaju, Chief Copy Editor
Nigeria’s debt rose by N20.8 trillion to N32.92 trillion between July 2015 and December 2020, and to N33.11 trillion in the first quarter of 2021 (Q1 2021), according to figures from the Debt Management Office (DMO).
Servicing the debt cost N1.8 trillion between January and May, a source of concern to financial experts, including PricewaterhouseCoopers (PwC) which says the burden weighs on government revenue meant to build infrastructure.
PwC said in its report on ‘Nigeria Economic Alert: Assessing the 2021 FGN Budget’ in May that Abuja spends too much to service debt, noting that the debt-to-revenue ratio was about 83 per cent last year.
“Actual debt servicing cost in 2020 stood at N3.27tn and represented about 10 per cent over the budgeted amount of N2.95tn. This puts the debt-to-revenue ratio at approximately 83 per cent, nearly double the 46 per cent that was budgeted,” it said.
“This implies that about N83 out of every N100 the Federal Government earned was used to settle interest payments for outstanding domestic and foreign debts within the reference period.
“In 2021, the FG plans to spend N3.32tn to service its outstanding debt. This is slightly higher than the N2.95tn budgeted in 2020.”
Finance Minister Zainab Ahmed disclosed on July 2 that N973.13 billion was released between January and May 2021 to implement capital projects and N1.8 trillion was spent on debt servicing in the five months.
She made the disclosure at the presentation of the draft for the 2022-2024 Medium Term Expenditure Framework and Fiscal Strategy Paper in Abuja, per PUNCH.
As of May, Ahmed added, 92.7 per cent of the prorated budget had been spent, which amounted to N4.8 trillion.
She said out of this amount, debt servicing took N1.8 trillion or 37 per cent, personnel cost plus pension (N1.5 trillion), and capital projects (N973.13 billion).
The MTEF/FSP is pre-budget statement usually taken into consideration during the preparation of budget estimates for Ministries, Departments and Agencies (MDAs).
The MTEF/FSP presents the development priorities of the government for the period covered.
Ahmed says fuel subsidy wastes resources
Per PUNCH, Ahmed also disclosed that the government would spend N900 billion on fuel subsidy in 2022.
In response to a question on fuel subsidy, she said it could be redirected to more productive economic sectors such as health, education, and infrastructure.
Her words: “This is costing us big time. We are spending over N150 billion on subsidy. That means the NNPC has to use that amount of money to pay for PMS and distributing it. That is money that the federation account can share.
“This is money that could have been available for education, health and infrastructure. reduce our borrowing, increase the amounts that states and local governments are collecting.
“We are being penny wise pound foolish to think that by giving this subsidy, that citizens are benefitting. But by at the end of the day, the citizens are actually the ones that are carrying the brunt of the wealthy.”
Ahmed insisted that fuel subsidy should be removed completely because only the rich are benefiting from it.
“We are projecting we’ll be paying at least N900 billion subsidy next year. Imagine what we could have done with that amount.
“How many schools you can build, how many health centres. It is not wise; it is not wise because we are hurting our economy.”
Fuel subsidy vote greater than money for capital projects
Fuel subsidy of N900 billion is more than the budget for overhead costs for Government Owned Enterprises (N261.2 billion), pension and gratuities (N567.02 billion), and capital supplementation (N366.13 billion).
It also exceeds the budget for sinking fund (N292.7 billion), personnel costs for Government Owned Enterprises (N750.03 billion), and overhead costs (N335 billion).
