The Debt Management Office of Nigeria has projected that President Buhari’s administration will leave a huge debt of N77 trillion naira for the incoming administration by May 2023 which means each Nigerian will owe N384,864.
Patience Oniha, head of the debt management agency disclosed that the 2023 budget presented at the National Assembly also includes new borrowing of N10.57 trillion, and if it is divided by the official exchange rate, which is N422, each Nigerian out of 200 million Nigerians owes N384,864 when this current administration expires.
Nigeria’s debt profile which keeps growing at an alarming rate has been a thing of concern since the beginning of President Buhari’s second term in 2019 and available data shows that 73 percent of the internal debt is, which takes about 60% of the total debt stock, is government bond, savings bond, treasury bills, Sukuk and Green bonds.
While of internal debt, 2.3% is the government’s promissory notes to companies, and issued export expansion grants. The industry analysts opine that the incoming administration in May 2023 would have tough choices to make regarding the economy as the 2023 budget was not designed to function without borrowing.
Kelvin Emmanuel, a development economist shared with the ICIR that “There is a strong link between ballooning debt, weak exchange rate, and Nigeria’s rising hyperinflation. This is already taking its toll on Nigeria’s assessment by global rating agencies like Fitch and Moody. The worst of it all is that indigenous companies quoted on the Nigeria Exchange Limited are also downgraded,” .
He also pointed out a huge concern on the high monetary policy rate which he says chokes business in the real sector due to high cost of funds which are caused by ballooning of debt stock, while adding that “There’s a problem of double-digit inflation. We are going to make our choice next month on who governs Nigeria and we must elect leaders who understand the economy,”.
Some top economists have released a warning to the Federal Government about the budget deficit and debt servicing which would starve the private sector of funds needed to develop the real sector of the economy.
The 2023 budget of N21.83 trillion shows that recurrent expenditure is now at N8.27 trillion and capital expenditure moves from N5.35 trillion to N5.9 trillion, while debt servicing increases from N6.31 trillion to N6.6 trillion.
Speaking with the ICIR, Johnson Chukwu, CEO of Cowry Assets Management Limited, cautioned that if the federal government refuses to checkmate how it funds the budget deficits the private sector will ultimately be weakened and will not bring any development to the economy.
When we talk of the budget deficit of N12 trillion, we are also talking of a national debt of more than N22 trillion. If the Federal government continues to borrow, the implication is that you are going to crowd out private sector funding for the real sector.
“The increase in projected revenue only gives incentives to spend more even when we haven’t met up with it in the last five years. Now, this has made us increase the budget deficit, which is putting lots of pressure on our funding of the private sector.” He said.
The economist also believes Nigeria may soon become like Ghana if it does not caution against its need to borrow money.
According to the Budget Office of Nigeria, recent data readings showed that the total budget deficit will hit N47.43 trillion under President Buhari’s administration.
According to the analysis which covers the actual budget deficit and projections from the 2015- 2023 fiscal year. Deficit financing rose by 370.54% which rose from N2.41 trillion in 2016 to N11.34 trillion in 2023, while in the third and fourth quarter of 2015, the total deficit financing totaled N841.48 billion. It rose to N2.41 trillion in 2016, N3.81 trillion in 2017, N3.65 trillion in 2018, N4.18 trillion in 2019, N6.59 trillion in 2020, and N6.44 trillion in 2021.
Although the 2022 total deficit has not been released, the Budget Office, however, believes the figure to be at N8.17 trillion despite the N6.37 trillion which had been spent iquartersn November 30, 2022, and the budget office also expects a high deficit financing of N8.17 trillion for 2023.
Third and fourth quarters of 2015, 2016, 2017, 2018, 2019, and 2020 and the first three quarters of 2021 as well as the first four months of 2022 saw the Federal Government spend N23.66 trillion on personnel costs, pensions, overhead costs, presidential amnesty programmes, and other special interventions.
It also used N14.13 trillion to service domestic and foreign debts while spending N10.47 trillion on capital expenditure.
Professor Akpan Ekpo, an economics professor, shared some thoughts on Nigeria’s government budget deficit. He said “This shows that expenditure has eclipsed the revenue, because they have to borrow, which is why there is a deficit.
“They can’t raise enough domestic resources to finance spending. That gap is a deficit. By the rules, it should not be more than a certain percentage of the gross domestic product (GDP), but it has exceeded that.”
Former Coordinating Minister for the Economy, Ngozi Okonjo-Iweala, explained the need for the budget deficit to be under 3% of the GDP because of the Fiscal Responsibility Act 2007, in accordance with the international norm. Nigeria’s budget deficit to the GDP ratio was above 1.69% in 2015 and rose to 2.37% in 2016, going further to 2.8% in 2018 and 2.92% in 2019. The government expects the deficit to GDP ratio is expected to be at 5.03% of the 2023 budget.
However, the Minister for Finance Budget and National Planning, Zainab Ahmed, admitted to the struggles the government has been going through trying to raise revenue for its expenditure and she admitted this in a document titled ‘Public Consultation on the Draft 2023-2025 MTFF/FSP’, she said “Revenue generation remains the major fiscal constraint of the federation. The systemic resource mobilisation problem has been compounded by recent economic recessions.”
In defense of the 2022 budget deficit, she added that “If we just depend on the revenues that we get, even though our revenues have increased, the operational expenditure of the government, including salaries and other overheads, is barely covered or swallowed up by the revenue.
“So, we need to borrow to be able to build these projects that will ensure that we’re able to develop on a sustainable basis. Nigeria’s borrowing has been of great concern and has elicited a lot of discussions. But if you look at the total size of the borrowing, it is still within healthy and sustainable limits.”