Nigeria’s rising debt, which is being accelerated by subsidy payments that have been compounding the nation’s economic situation, is increasingly becoming a cause for concern to both people and organizations. With the impact tearing through people and industries as inflation rises, more organizations are joining the call to the federal government to curtail it.
BudgIT has joined the chorus of organizations expressing concerns over the impact of borrowing and subsidy payments on the fiscal performance of the federal government’s 2022 budget.
On Monday, the civic-tech organisation said in a statement signed by Iyanu Fatoba, assistant head, media and communications, that Nigeria’s economic misfortune has deteriorated over the last eight months.
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Nigeria’s total debt, including the central bank’s Ways and Means Advance, stands around N61 trillion and is likely going to increase as the subsidy payments continue amidst dwindling revenue.
BudgIT said the most pressing concern is the debt service-to-revenue ratio, which has reached alarming levels within the first four months of 2022.
The organization cited the 2022 fiscal performance report released last week, which indicated that Nigeria is now borrowing to pay debt. The report noted that in the first four months of the year (Jan-April 2022), Nigeria generated N1.64 trillion, whereas it spent N1.94 trillion, N310 billion more than its generated revenue, on debt servicing.
According to the statement issued by BudgIT, “This is in spite of warnings given by the International Monetary Fund (IMF) that Nigeria would be spending over 100 percent of its revenue on debt service in 2026. Unfortunately, those predictions are Nigeria’s current realities.”
The organization lamented that debt servicing is not only worsening the nation’s poverty situation, but it is also gulping budgetary allocation for capital expenditures for key sectors such as education.
“Recall that BudgIT, in a consultation memo released in February 2022 titled: ‘Leveraging budget reforms for economic development,’ had articulated several reform issues bordering on Nigeria’s public financial management regime that affect the very core of governance, separation of powers, expenditure efficiency, and the livelihoods of millions of Nigerians; 83 million of whom live in extreme poverty.
“Four months later, some of those same challenges exist, with additional ones, if not properly managed, may spell fiscal crisis for an already impoverished nation. In particular, the debt service spending is only N93.6 billion less than the combined total personnel and capital expenditure for the period under review. Also alarming are the expenditure targets for the Tertiary Education Trust Fund (TETFund), which have only been 15 percent (of the total N5.10 billion naira) for the period under review.
“There is no gainsaying that the fortunes of the most populous black nation on earth, Nigeria, have worsened in the last 8 months after the 2022 budget was passed,” it said.
Gabriel Okeowo, BudgIT’s country director, said the government needs to discontinue indiscriminate borrowing to fully implement the budget that Nigerians have counted on to ease their economic woes.
“It is in light of the above that we call on all well-meaning Nigerians, CSOs, media, the private sector, the international community, and reformers to join the call for the federal government to do the following: discontinue indiscriminate borrowing through ways and means, which is creating a ballooning set of interest payments, running parallel to the external debt, as well as increasing the money supply and creating more monetary volatility; check the oil theft that is now commonplace in the petroleum industry, and has encumbered the country’s ability to meet its production quotas-the latter having fallen to 1.25 million barrels as at May 2022,” the statement added.
The civic-tech group also made recommendations for the government.
“Ramp up the remittance of operating surpluses by MDAs and GOEs to boost FG’s independent revenues, which is currently underperforming, and take considered action to reform subsidy, this achieves the twin objectives of having citizen buy-in and revenue savings that are channeled into priority areas,” it said.
While the current situation bites harder, the federal government is yet planning to take further N4 trillion loan to address subsidy-induced budget shortfalls. With the revenue plummeting due to government’s inability to cash in on the oil windfall, Nigeria is likely to continue borrowing to service debt