We’ve entered another debt trap, Nigerians cry out
BY VICTORIA ONU, ABUJA
The Federal Government is to spend 43 per cent of its 2022 revenue servicing the country’s debt, analysis of the Medium Term Expenditure Framework and Fiscal Strategy Paper for 2022-2024 has revealed.
The preparation of the budget estimates for Ministries, Departments and Agencies usually take into consideration the Medium Term Policies/Strategies contained in the Expenditure Framework and Fiscal Strategy Paper, which is the Federal Government’s pre-budget statement.
The MTEF/FSP outlines the development priorities of the Federal Government for the period covered.
According to the 2022 MTEF, the Federal Government’s projected expenditure is estimated at N13.98trn, while the revenue expected to be raised to finance the budget is estimated at N8.35trn. This leaves a deficit of about N5.63trn.
To finance this deficit, the Federal Government is projecting to raise N4.89trn from domestic and external sources.
A breakdown of the amount showed that while N2.446trn would be borrowed from external sources, about N2.44trn would be raised from external loans.
Also, there are plans to raise the sum of N638.3bn through multilateral/bilateral project tied loans.
Further analysis of the MTEF showed that debt service is expected to gulp N3.6trn in 2022 as against N3.12trn in 2021.
The N3.6trn projected debt service figure represents about 43.11 per cent of the projected revenue of N8.35trn for the 2022 fiscal period.
The States and Federal debt stock data, total public debt portfolio, stands at N33.11trn ($87.23bn).
For the Federal Government, its domestic debt stock has risen to N16.51trn ($43.51bn), while external debt is N12.47tn ($32.9bn).
The Federal Government has been consistently criticised by analysts and Nigerians for its penchant for borrowing.
Under Buhari, the International Monetary Fund had given Nigeria $3.4bn in 2020.
In 2015, the World Bank borrowed the current administration $2.1bn to address the development challenges of Nigeria, including in the North East, and the North in general.
In 2020, a $2.2bn loan was approved by the World Bank for Nigeria to drive human capital and economic development across the country, while Nigeria currently owes the Export-Import Bank of China $3.3bn.
The Chairman, Chartered Institute of Bankers of Nigeria, Abuja Chapter, Prof Uche Uwaleke, described the huge debt service to revenue ratio as worrisome.
He said, “For me and many, the sustainability is better measured, not by debt to GDP ratio, but by debt service to revenue ratio. Out of the money you earn, how much do you spend on servicing debt? If you earn N1 and you spend as much as 80 kobo servicing your debt, that is the problem.
“Unfortunately, that is the situation in Nigeria. We are spending so much from our revenue to service debt and when that happens what is the implication?
“This means we will continue to borrow to even service the debts. This is another debt trap and informed Nigerians must demand a change of trend”
“You have very little for what you want to do. If you have N1 expenditure, what it means is that you have 20 kobo for it. So, it crowds out development of capital projects because that leaves you with very little and debt servicing you must do. That is why, every year, government has not defaulted.”
He added, “Government will always service debt, so it leaves us with very little and that is why you see us more like in a perpetual state of borrowing.
“You will need to borrow to survive because as you earn, you are using it to service debt and so you will end up even refinancing.
“Refinancing means you borrow to service your debt. So that is our situation and I will say, the debt service to revenue ratio is really a problem and that is why, sometimes, you hear the Ministry of Finance say that we have a revenue challenge.”
He said if the country was earning enough revenue, it would not have a challenge servicing its debts.
“We are not earning enough, because if we were earning enough, the amount we are spending on debt service would not be an issue but because the revenue is not as big as it should be, the little we are earning, we spend on debt servicing. So it is a challenge,” he added.
Other Nigerians have cried out over what they described as incessant borrowing and misdirected fiscal and monetary policies.
According to them, the administration of President Buhari is only stockpiling debts that will weigh heavily on subsequent administrations and Nigerians, now and in the future
“Imagine the amount they will use to service debt in one year alone, running into trillions; over 40 per cent of the revenue in one year. This means we will continue to borrow to even service the debts. This is another debt trap and informed Nigerians must demand a change of trend,” Managing Director of Hilbah Associates, Dr. Adeyanju Adebisi, told our correspondent.
“The economic direction must be retraced. Today, a dollar is about N500. Our economy is at the lowest ebb as a result of mismanagement,” Adebisi, an Economist, noted.
