A Dataphyte analysis of the just presented 2022 Budget by President Muhammadu Buhari has revealed that 38% of it will be financed by loans.
Last week, October 7th, the Nigeria President, before the joint session of the National Assembly presented a total budget of N16.39 trillion for the year 2022.
Zainab Ahmed, the Nigeria Minister of Finance was quoted emphasising the Government’s need to borrow while speaking to the press.
“It was necessary that the government would continue to borrow in order to fund developmental and infrastructure projects as it does not get enough from its revenues.”
However, Dataphyte check of the Debt Management Office shows that the country is currently wallowing in N35 trillion debt. This means that before the end of 2022, the debt would climb to, at least, N41 Trillion.
In the last 6 years of President Buhari’s administration, governments at the Federal and State levels have accumulated borrowings to the tune of, at least, N23.34 Trillion.
Dataphyte also analysed that between 2015 and 2016, the debt increased by 34.4%, the increase in 2017 was 20% while 10% was the increase in 2018. In 2019, the debt of the country increased by 14.6%, 25.4% in 2020 and 10.1% in 2021.
Nigeria’s GDP as of 2020 stood at 152.32 trillion but Zainab Ahmed, the Finance Minister, justified the borrowing estimated to be N6.258 trillion on the basis that ‘it is just 23% of the country’s Gross Domestic Product’.
Zainab further noted that though FG’s revenues have increased, the operational expenditure of the government, including salaries and other overheads, swallow up the revenue.
In September, President Buhari sought a loan of $4bn (N1.6 Trillion) and another 710million pounds (396.9billion) totalling N1.42 Trillion. He said that the loan if approved will help to stimulate employment and stimulate the economy.
Debt Servicing may limit future infrastructural development – experts
Experts have argued that the amount the Federal Government spends on debt servicing due to its huge borrowing would only deny or limit the country’s further infrastructural developments.
It was reported that the Nigerian government spent N2.02tn on debt servicing in the first six months of 2021. This figure represents 90.58 per cent of the total revenue of N2.23tn generated by the FG within the period.
The Nigerian government is projecting a sum of N3.61 trillion to be spent on debt servicing in 2022, meaning that over 22% of the year’s budget is already projected to be earmarked for debt servicing. The continually rising budget of Nigeria on a yearly basis may not be unconnected with debt servicing with a projected N4.9 Trillion to be spent on debt servicing in 2023.
This may also explain President Buhari’s appeal at the United Nations General Assembly, for ”rich nations” and international financial institutions to consider outright debt cancellation for countries “facing the most severe challenges in the wake of the COVID-19”.
Corruption weakens the full return of debts and revenue spend
Despite borrowing to finance budgets and projects, Nigeria has been hit continually with allegations of corruption and poor execution of capital projects in the budgets.
A report by Dataphyte revealed that N15.45 billion remains unaccounted for at the Niger Delta Development Commission. The report also noted that many projects were done poorly and many were abandoned.
An analysis by Dataphyte also revealed that 65% of Zonal Intervention Programs (ZIP) in the country were unstainable. The report noted that of the 1,884 projects in the 2021 ZIP, 65% of these projects can be categorised as soft projects. Soft projects were projects such as training, cash grants, goods and supplies.
Soft projects are so-called because the outputs or outcomes are intangible or transient in value to individual beneficiaries or communities. Besides, such projects satisfy a few individuals, who are largely linked to the politicians doling out the ‘empowerment’ benefits, rather than the general populace who would have benefited equally from infrastructure projects.”
It was further revealed that 65 per cent of the projects do not benefit members of the communities equally, as capital projects do.
For instance, it was revealed that during COVID-19, Nigeria’s ministry of water resources awarded contracts worth N1.02 billion to ninety (90) inactive and twelve (12) unregistered companies, this is according to an investigation conducted by Dataphyte.
In another instance, N99 billion was reported unaccounted for from COVID-19 donations earlier this year. It was also reported that the National Assembly padded the 2021 budget with over 500billion naira.
While the debt burden continues to be a concern in the country, there continues to be an increase in projection for debt servicing for the next number of years.
Nigeria Debt Beyond N35Trillion, Streamlining Public Spending Key – Expert
A policy analyst, Samuel Atiku while weighing on the debt profile of Nigeria noted that the computation used for determining the size of Nigeria’s Public debt is inefficient and not expensive enough.
He told Dataphyte that, if the amount owed the Central Bank of Nigeria, totalling about N15 Trillion is added the public debt will rise to about N50 Trillion.
He also noted that debts owed at the local government level have been on the increase but the public debts computation does not reflect this.
While commenting on the way Nigeria can manage the debt situation, the policy expert advised that Nigeria should streamline its spending. He noted that instead of spending money on recurrent expenditures, monies should be spent on capital projects and investments.
While commenting on the statement that Nigeria’s debt is small compared to the country’s Gross Domestic Product. He noted that if the new additions are done, the debt will be about 50% to GDP which is above the benchmark for debt to GDP.
Speaking further, he stated that if the revenue to debt servicing ratio is compared, then serious concerns will be raised. While agreeing that on paper, Nigeria’s debt looks sustainable, in actual sense, if proper computations are done, questions will be asked.
Debt Rate Unsustainable, Has Not Shown In Infrastructural Development Of Nigeria- Odeh Friday, Accountability Lab
In the same vein the Executive Director of Accountability Lab, Odeh Friday, while speaking to Dataphyte on phone, noted that the debt rate of the country is not sustainable. He stated that even as Nigeria borrows to fund the budget, it has not translated to meaningful development in critical sectors.
“In other countries, we have budgets translating to development in sectors such as health, education and others but in Nigeria it is not the same, making it mean that the budget is a mirage”, Odeh said.
Odeh said he is concerned about the amount of debt in the country and disagreed that the current debt profile and debt servicing rate is nothing to worry about.