The Federal Government plans to spend a total sum of N14.6tn on debt servicing between 2022 and 2024, an analysis of official data has shown.
Projections in the Medium-Term Expenditure Framework and Fiscal Strategy Paper for 2022 to 2024 show that the government intends to spend N3.6tn on debt servicing in 2022, N4.9tn in 2023 and N6.1tn in the 2024 fiscal year, amounting to N14.7tn.
The total projected expenditure for 2022 stood at N13.95tn, comprising N3.4tn for non-debt expenditure, N3.6tn for debt servicing and N3.61tn for the implementation of capital projects.
For 2023, the Federal Government increased its total projected spending to N15.54tn, with N6.49tn allocated for non-debt expenditure, and N3.61 for capital expenditure.
In the 2024 fiscal year, the government plans to spend N16.8tn to finance its budget, with debt servicing and recurrent expenditure constituting the largest shares, at N6.1tn and N6.4tn respectively.
Only N3.61tn was projected to be spent on capital projects in the same year.
The MTEF/FSP report said the 2022 and 2023 budgets would be prepared based on an oil production volume of 1.88 and 2.23 million barrels per day, respectively, with a benchmark oil price of $57 per barrel and an exchange rate of N410.15 to a dollar.
The parameters that would be applied in the preparation of the 2024 budget include an oil production volume of 2.2 million BPD, a benchmark oil price of $55 per barrel and an exchange rate of N410.15 per dollar.
The Federal Government had repeatedly defended the country’s debt level, describing it as sustainable.
The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, had on several occasions insisted that Nigeria does not have a debt problem.
She said what the government needed to do was to increase its revenue-generating capacity in order to boost revenue to about 50 per cent of GDP.
But several economic experts have said the government’s huge borrowings and debt servicing obligations posed a danger for the economy.
A financial expert and the Chief Executive Officer of Flame Academy Consulting, Orji Udemezue, said, “Nigeria is sliding into a serious debt trap. Looking at our debt servicing to revenue ratio, Nigeria is having it very horrible because we are not getting enough revenue from our huge economic activities. Therefore we spend almost everything we get from revenue in servicing our debt, and that is a major liquidity problem. And that will lead to very imminent inability to meet our debt obligations and possibly begin to live at the mercy of our creditors: multilateral, bilateral and commercial creditors.”
A financial analyst and professor of Economics at the Olabisi Onabanjo University Ago-Iwoye, Ogun, Sheriffdeen Tella, had expressed worry over the current debt servicing to revenue ratio of the country and the government’s tendency to continue borrowing.
“The trend is hampering economic development and advancement,” he added.