Debt Servicing Gulps 76% Of Revenue

Obiajulu Joel Nwolu

The Federal Government on Wednesday disclosed that it spent N4.2tn on debt servicing between January and November 2021.

This sum represents 76.2 per cent of the N5.51tn revenue generated during the period under review.

The Minister of Finance, Budget and National Planning, Zainab Ahmed, disclosed this in Abuja during the public presentation of the details of the 2022 Appropriation Bill, signed by President Muhammadu Buhari on December 31, 2021.

The presentation, which included an overview of the 2021 budget implementation, revealed that oil revenue contributed N970.3bn to the total revenue generated within the period, while non-oil tax contributed N1.6tn. Other revenues amounted to N2.8tn.

Ahmed said, “As of November 2021, aggregate revenue was N5.51tn which is 74 per cent of target. Out of this sum, the share of oil revenues was N970.3bn, representing 53 per cent performance of the prorated sum in the 2021 budget while the share of non-oil tax revenues was N1.62tn, about 118.8 per cent over and above the target.

“Companies Income Tax and Value Added Tax collections were N718.58bn and N360.56bn, representing 115 per cent and 165 per cent, respectively of the prorated targets for the period. Customs collections were N542.11 billion, 104 per cent of the target.

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“Other revenues amounted to N2 .80tn, of which independent revenues was N1.10tn and government-owned enteprises retained revenues was N1.20tn.”

On expenditure, the minister noted that the government spent N12.56tn out of the N13.57tn prorated budget, within the review period.

She added that the performance was inclusive of expenditure estimates of the GOEs but exclusive of project-tied loans.

The total expenditure constitutes N4.20tn spent on debt servicing, N3.02tn on personnel cost, including pensions, and N3.2tn expended on capital projects.

She however stressed that the figures for 2021 were provisional and, as such, subject to updates and reconciliation.

Meanwhile, Ahmed also said the government recorded fiscal deficit of N7.1tn between January and November 2021.

She disclosed that the total revenue generated by the government within the 11-month period was N5.51tn while expenditure stood at N12.56tn.

This resulted in a budget deficit of N7.1tn, which is N1.14tn higher than the prorated budget of N5.9tn for the period under review.

She also revealed the items used by the Federal Government to finance the 2021 budget to include multilateral and bilateral loans valued at N369.93bn and new borrowings of N6.68tn.

Ahmed said that the N6.68tn was N1.65tn higher than the N5.05tn earmarked for fresh loans in the 2021 budget.

While defending government borrowing and the country’s debt level, the minister insisted the country had a revenue challenge, and not a debt problem, adding that the debt level was still within sustainable limits.

She said, “This is to restate, that the debt level of the Federal Government is still within sustainable limits. Borrowings are essentially for capital expenditure and human development as specified in Section 41(1)a of the Fiscal Responsibility Act 2007.

“Having witnessed two economic recessions we have had to spend our way out of recession, which contributed significantly to the growth in the public debt.

“It is unlikely that our recovery from each of the two recessions would have been as fast without the sustained government expenditure funded partly by debt

“To compound matters, the country has technically been at war with the pervasive security challenges across the nation.

“This has necessitated massive expenditures on security equipment and operations, contributing to the fiscal deficit; defence and security sector accounts for 22 per cent of the 2023 budget.

She revealed that Nigeria’s budget deficit to Gross Domestic Product stood at -4.3 per cent, while Debt/GDP ratio was 30 per cent as of November 2021, one of the lowest in Africa.

Conversely, Nigeria’s debt servicing to revenue ratio rose to 76 per cent as of November 2021, the highest among top economies in Africa, she said.

“This is proof that what we have is not a classic debt sustainability problem, but a revenue challenge”, she added.

Source: Punch

This post was written by Obiajulu Joel Nwolu.

The views expressed here belong to the author and do not necessarily reflect our views and opinions.

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