Nigeria’s dwindling oil revenue and rising debt profile have continued to raise growing concerns among industry experts in the country.
According to the latest figures from the Debt Management Office (DMO), the country’s total public debt stock increased by N1.21 trillion in 2020 Q1 to N32.22 trillion amid revenue shortfalls.
Analysis of the figures, however, showed that not less than N1.99 trillion was spent on debt servicing between January and September 2020, leaving less amount in the 2020 budget for developmental projects.
Some experts, who spoke to The Daily Times in a telephone chat, pointed out that the continuous surge in Nigeria’s debt without a robust repayment architecture which would include accountability and proper use of borrowed funds could create a debt web that will continue to hobble the economy.
For instance, Chief Economist/Head, Investment Research of Pan African Capital Holdings Ltd, Moses Ojo, emphasized that fiscal deficit of N5.60 trillion was budgeted for 2021, which is expected to be financed by both domestic and external borrowing and asset sales/proceeds of privatisation.
“According to the Debt Management Office (DMO), the total public debt (sovereign and sub-national) increased by N6.00 trillion to N32.22 trillion in September 2020. This is an increase of 22.9 per cent compared with the N26.22 trillion in September 2019.
“The increase in the total public debt was a result of revenue shortfall in the period. For example, a sum of N2.68 trillion was the budgeted revenue for the half-year 2020; however, the actual revenue in the period stands at N1.65 trillion. This was a negative variance of 38.5 per cent.
“Also, the total actual expenditure for the same period was N4.46 trillion. This threw up the fiscal deficit of N2.81 trillion which was financed with borrowings. Also, the actual fiscal deficit could have been more than that but for the fact that only 35.8 per cent of the budgeted capital expenditure was implemented as of June 2020.
“Furthermore, the fiscal deficit of N5.60 trillion was budgeted for 2021, which is expected to be financed by both domestic and external borrowing and asset sales/proceeds of privatisation.
Considering the low level of revenue budget performance in 2020, the actual fiscal deficit in the current year might overshoot the budget at the end of the year if the budget was to be fully implemented.
“One of the solutions to the rising public debt is to reduce non-debt recurrent expenditure which was as a result of over-bloated structure and high cost of governance across all the arms of government.”
In his response to an enquiry by The Daily Times, a public reform expert, Mr Olamide Okunade, said, “A consistent rise in Nigeria’s debt without viable repayment options as lead to a reduction in the inflow of FDIs & FPIs, thereby worsening credit ratings, unemployment, the national misery index, and domestic productivity.
“Given that the Nigerian economy is sliding into a second quarterly contraction in 2020 and bouncing off the size of the fiscal budget for 2020, borrowing becomes inevitable to spur growth and initiate a quick rebound.
“Given the dire impact of the COVID-19 pandemic on Nigeria and other frontier economies, the World Bank has recently advised that these countries spend more to cushion their economies against the effects of the virus.
“But, given its slim budget, the Nigerian government’s fiscal planners may need to concentrate on targeted spending to increase productivity despite its shrunken wallet, as it focuses on capital expenditure.
“The government must inevitably come to terms with the need to significantly trim the cost of governance. Unfortunately, that bitter conversion may not happen anytime soon.”