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.

The Minister disclosed this at the ongoing 26th Nigerian Economic Summit organised by the Nigerian Economic Summit Group and the Federal Ministry of Finance, Budget, and National Planning.

She said the country would exit from the recession in the fourth quarter of this year or by the first quarter of 2021.

Nigeria, Africa’s biggest economy, entered its second recession in five years in the third quarter of this year as the Gross Domestic Product fell for the second consecutive quarter.

The GDP dropped by 3.62 per cent in Q3 and 6.10 per cent in Q2, according to the National Bureau of Statistics.

The finance minister said the COVID-19-induced recession followed the pattern across the world where many countries had entered economic recession.

“Let me remind us that before the impact of COVID-19, the Nigerian economy was experiencing sustained growth, which had been improving quarter by quarter until the second quarter of 2020, when the impact of the COVID-19 was felt,” she said.

Ahmed said other countries also in recession, including the United Kingdom and the United States, recorded much deeper contraction than that of Nigeria.

“Nigeria is not alone in this, but I will say that Nigeria has outperformed all of these economies in terms of the record of a negative growth.”

According to her, South Africa, which recorded a decline of -50 per cent compared to Nigeria’s -6.1 per cent in Q2, will also record a deeper negative growth in Q3.

“While the economy has entered into recession in the third quarter, the trend of the growth suggests that this will be a short-lived recession, and indeed by the fourth or, at worst, the first quarter of 2021, the country will exit recession.

“Our expectation of a quick exit, which will be historically fast, is anchored on the several complementary fiscal, real sector and monetary interventions that have been proactively introduced by government to forestall a far worse decline of the economy and alleviate the negative consequences of the pandemic,” Ahmed said.

Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, made this known on Friday at a virtual event titled Finance Bill 2020 public consultations.

The Minister said the current “inflation is driven by the cost of transport”.

According to her: “If you look at the rate at which our inflation is going, and you disaggregate the components, you will find that inflation is largely driven by transport cost”.

Government’s resolve, she said, “is to reduce transportation cost so that businesses will have ease and pass benefits to eventual consumers.”

The draft Finance bill 2020, she assured, will address measures to reduce the cost of transportation.

According to her, the bill will have some “interesting new proposals that will look into fiscal relief for mass transit”.

She explained it will be “designed to provide support for mass transit by reviewing the duties regime”.

This, she said, is because government recognises transportation as one of the major cost drivers in the economy.

Members of the committee inaugurated by Buhari include the Attorney-General of the Federation and Minister of Justice, Mr Abubakar Malami (SAN), the Minister of Finance, Budget, and National Planning, Mrs Zainab Ahmed; Minister of Power, Saleh Mamman; and Minister of Works and Housing, Babatunde Fashola.

This was contained in a statement by Dr Umar Gwandu, spokesperson to Malami.

Accroding to the statement, other members of the committee are the Director-General of Nigeria’s Bureau of Public Enterprise, Mr. Alex Okoh, and the President Nigerian Society of Engineers, Babagana Mohammed.

The statement added, “Inaugurating the Committee on Thursday, President Muhamamdu Buhari who described power sector as one of the most critical components of sustainable development, expressed commitment to improve the delivery of power in the country as his enduring and defining legacy.

“He said following the Federal Executive Council Approval, the coast is now clear and the SPV has the responsibility of executing the Presidential Power Initiative (PPI), providing project management for the implementation of PPI and serve as the key manager to ensure cohesion and seamless execution.”

The IMF had on April 28 approved Nigeria’s request for emergency financial assistance of $3.4bn to support the country’s efforts in addressing the severe economic impact of the COVID-19 shock and the sharp fall in oil prices.

The Washington-based fund also published the country’s letter of intent in a detailed report released on April 29.

In the letter, the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, and the Central Bank of Nigeria Governor, Mr Godwin Emefiele, pledged that fuel subsidy would not return.

The sharp drop in crude oil prices on the back of the spread of coronavirus saw the landing cost of petrol hit a record low in March, wiping off subsidy on the product. The Federal Government, on March 18, reduced the pump price of petrol to N125 per litre from N145.

The Federal Government told the IMF in the letter dated April 21, 2020 “The recent introduction and implementation of an automatic fuel price formula will ensure fuel subsidies, which we have eliminated, do not reemerge,”

In a report on August 17, Reuters quoted sources as saying that the World Bank was unlikely to approve a much-needed $1.5bn for Nigeria in August as planned due to concerns over desired reforms.

It said the World Bank, which had said Nigeria could be heading towards its greatest fiscal crisis in 40 years, had aimed to bring the loan to its board for approval last month, but the sources said negotiations over what Nigeria would do to secure it were incomplete.

According to the report, World Bank loans are often contingent upon reforms, and it has not outlined any demands, but said previously that it was ‘recommending’ a more unified, flexible exchange rate.

Reuters said fuel subsidies and electricity tariffs were also being discussed, adding that a banking source said the loan could now not be approved until October.

Adesina was cleared of allegations of embezzlement, preferential treatment of Nigerians in senior appointments and promoting people accused or found guilty of fraud and corruption by an ethics committee of the bank, however, the US Treasury Department dismissed it and also wrote a letter urging the AfDB to carry out an independent investigation into the alleged ethics breaches by the bank’s President.

The Minister of Finance, Mrs Zainab Ahmed reacting to this, appealed to the chairman of the Board of Governors of the African Development Bank (AfDB) to dismiss the call for an independent investigation of Adesina.

The letter reads in part “The call for an ‘independent investigation’ of the President is outside of the laid down rules, procedures and governing system of the bank and its articles as it relates to the Code of Conduct on Ethics for the President. As Board of Governors (made up of the finance ministers of member countries), we must uphold the rule of law and respect the governance systems of the bank. If there’s any governance issues that need improvement, these can be considered and amendments proposed for adoption in line with laid down procedures. The Nigerian Government welcomes the conclusion of the Ethics Committee and the decision of the Chair of the Board of Governors. The Ethics Committee, following three months of work to examine the whistleblowers’ allegations made against the President, dismissed each and every one of the allegations of the whistleblowers against the President as unsubstantiated and baseless”

This directive is part of the palliative measures by the Federal government to cushion the effect of the COVID-19 pandemic in the country.

The Minister of Finance, Zainab Ahmed, announced this during a media briefing in Abuja on Monday morning.

She said “The President has approved grains from the Stategic Grains Reserves. The Nigeria Customs Service has in its custody a lot of rice that has been seized and there is one hundred and fifty trucks of rice that is now been handed over to the humanitarian ministry for distribution to the states across the country”.

The Minister of finance, budget and national planning, Mrs Zainab Ahmed confirmed the increment at the end of the cabinet meeting. The new rate which will take effect from 2020 is however subject to an amendment of the VAT act of 1994 by the national assembly.

She said: “We also reported to council and council has agreed that we start the process towards the increase of the VAR rate. We are proposing and council has agreed increase the VAT rate from five percent to 7.2 per cent. This is important because the federal government only retains 15 per cent of the VAT, 85 per cent is actually for the states and local government and the state need additional revenue to be able to meet the obligations of the minimum wage. This process involves extensive consultations that need to be made across the country at various levels and also it will involve the review of the VAT Act. So, it is not going to be implemented immediately until the Act is reviewed. So, accordingly, following these assumptions the total revenue estimate in the sum of N7.5 trillion for the year 2020 and N2.09 trillion that will be accruing to the federation account and the VAT respectively. There will of course be the distribution to the three tiers of government based on the statutorily revenue sharing formula as defined in the constitution and to this effect, it means the Federal Government will be receiving proposed aggregate of N4.26 trillion from the federal account and the VAT pool, while the states and the local government are expected to receive N3.04 trillion and N2.27 trillion respectively. The expenditure for the year 2020 is in the total sum of N10.07 trillion. This is three percent less than the approved expenditure in the 2019 budget that has been passed into law. The total expenditure includes statutory transfers, non-debt recurrent expenditure such as salaries and pensions and also the Social Intervention Programmes (SIPs).The 2020 budget has a debt service estimated at N2.45 trillion and a sinking fund to retire maturing obligations issued to local contractors and other creditors in the sum of N296 billion. So, there is a total sum of N3.43 trillion that is provided for personnel and pension cost inclusive of N218 billion for the top 19 government-owned enterprises in the country. This represents an increase of N453 billion over the 2019 approved budgetary expenditure. This also implies a 40 percent of this recurrent expenditure to the projected revenue. The budget deficit is projected at N2.15 trillion in the year 2020 and this is lower than what was approved in the 2019 budget which was N2.47 trillion. Let me state that these projections include draw downs on project tied loans and this represent 1.51 percent of estimated gross domestic product (GDP). This is well below what is allowed by the Fiscal Responsibility Act (FRA) of 2007 which is still put at three per cent. I want to add that council approved our presentation and so the next phase for us is to consult with the National Assembly and then the Medium Term Expenditure Framework (MTEF) to the National Assembly for its own view and subsequent approval.”