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Nigeria spends 41% of 2022 revenue on debt

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By Abiodun Okunloye

FG spent 41% of 2022 revenue on debt, delays budget execution till March 2023.

During the weekly ministerial briefing in Abuja, Zainab Ahmed, the Minister of Finance, Budget, and National Planning, disclosed that the federal government has spent 41% of its 2022 generated Revenue to repay its N44.06 trillion debt. It was also revealed that the government had postponed the 2023 budget execution by three months concluding March 2023, owing to the poor revenue performance over the past year. The minister also expressed displeasure at the recent downgrading in Nigeria’s credit rating.

Nigeria’s credit rating was lowered from B3 to Caa1 by US-based rating agency Moody’s Investors Service due to the government’s deteriorating budgetary and debt positions. With the deficit estimated at N8.17 trillion, domestic borrowing will cover a total of N18.1 trillion in spending in the amended budget for 2023. The minister also disclosed that revenue earned was used to service Nigeria’s debt is more alarming. Pension costs alone accounted for 31% of personnel costs, leaving only 15% available for capital projects.

Other revenues have outperformed the country’s oil revenues.

According to Ahmed, non-oil revenues are currently on the rise, with the Company Income Tax and VAT as the high performers achieving 129.8% and 93.3 % of their respective projections respectively in 2022, while oil revenue performance impacted the fiscal outcomes. As of the end of November 2022, total Federal Government revenues were N6.5trn, representing 66.7% of the 2022 goal. The federal government received N586.7bn in oil revenues, which is equivalent to a performance of 29.2 percent, while the overall non-oil revenues were N2.09trn, which is equivalent to an out-turn of 99.1 percent in comparison to the budgetary predictions.

More so, the total expenditure to Finance the 2022 budget was revised, and also the supplementary budget they had was predicted at N18.1trn, but spending has fallen short of the objective by 22.6% as of November 2022. So far in 2022, debt service has consumed 41% of the budget and others. She stated that it was expected that the overall fiscal deficit for 2022 would be N8.17 trillion and that 54 percent of the financing for the shortfall would be acquired from sources within the country.

The 2022 Finance Bill would support the 2023 budget implementation.

To deliver the FG’s budgetary strategy, she added the ministry established the Finance Act as a yearly tradition to complement the annual budget. She said that the Finance Bill 2022, which would help with the execution of the 2023 budget, had been sent to him by the legislature for his approval. According to the minister of finance, the president has yet to sign the measure because he is waiting for the National Assembly to reconsider two highly critical aspects of the bill. The National Assembly has been preoccupied with other matters, particularly the needs of its constituents.

Furthermore, she asserts that President Buhari has tasked the ministry with completing 40 deliverables across nine key areas. She disclosed that between 2021 and 2022, the Federal Inland Revenue Service’s (FINRS) revenue collection increased from N6trn to N10.1trn, supporting domestic revenue mobilization initiatives. These funds originate from the federation rather than the federal government. There are N4.1trn in oil revenues and N5.96trn in non-oil revenues, for a total of N10trn. This revenue is derived from the federations.

Nigeria’s debt was downgraded from B3 to Caa1 over poor oil revenue.

Due to falling oil revenue, the United States-based credit rating firm Moody’s Investors downgraded Nigeria’s government debt from B3 to Caa1. Moody’s also reviewed the ratings of nine of Nigeria’s largest banks, bringing them down to Caa1 from B3. As of September 2022, Nigeria has a total debt stock of N44.6trn ($101.9bn), of which N17.14trn ($39.66bn) is held by foreign holders. Experts have warned that the government’s borrowing from domestic sources is crowding out opportunities for businesses to acquire, making it impossible for the FG to borrow from foreign sources to close the budget deficit in 2022.


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