The Nigerian federal government spent a total of N1.8 trillion on debt servicing in the first five months of the year, representing about 98% of the total revenue generated in the same period.
This is according to the budget implementation report presented by the Minister of Finance, Budget & National Planning, Mrs Zainab Shamsuna Ahmed.
A cursory look at the data revealed that the total aggregate revenue generated by the federal government between January and May 2021, stood at N1.84 trillion, representing a shortfall of N1.48 trillion compared to the expected revenue of N3.32 trillion.
Nigeria’s debt servicing in the period represents 37% of the total N4.86 trillion expended by the federal government year-to-date, while N1.5 trillion was spent on personnel costs, including pensions.
Breakdown of expenditure
- A total of N4.86 trillion was spent by the federal government between January and May 2021, from which N206.89 billion was spent as statutory transfers.
- Recurrent expenditure in the review period, stood at N3.67 trillion, while debt service was N1.8 trillion.
- As of May 2021, N978.13 billion had been released for capital expenditure by the federal government.
- In terms of revenue, N1.49 trillion was realized from oil and gas, representing a 69% performance compared to the prorated N2.16 trillion.
- It is worth noting that the gross oil and gas revenue for 2021 was projected at N5.19 trillion.
Recall that Nairametrcs reported a surge in Nigeria’s debt service to revenue ratio in the first quarter of 2020 to 99%, characterised by the rising cost of debt profile and dwindling oil revenue.
The cut in Nigeria’s oil production quota has also significantly affected Nigeria’s revenue. The nation currently maintains a crude oil production of 1.4 mbpd despite a production capacity of 2.5 mbpd.
The report highlighted that Nigeria continues to be exposed to risk aversion in the global capital markets, which is expected to put further pressure on the foreign exchange market as foreign portfolio investors are yet to return to the Nigerian market, a situation further compounded by sustained perceptions about the value of the Naira.
What the minister is saying
According to the minister, non-oil revenue performance has been impressive and heading in the right direction. She assured that effort will be sustained in that regard.
She also mentioned that “high costs, including PMS under-recovery and cost of securing oil pipelines, are weighing down on oil revenues.” These issues must be addressed wholesomely to free up much-needed fiscal space, she highlighted.
Overall, she stated that fiscal risks are somewhat elevated, following weaknesses in the economy and slower than expected recovery.
What this means
The Nigerian government’s increase in the debt service fee, despite low government revenue, indicates that the country is spending practically all of its revenue on servicing debts, opening the nation up to more loans in the future, especially in the area of funding for capital projects.
The recent positive rally in the global oil market has not yielded substantial growth in government revenue due to Nigeria’s reduced production quota. However, Nigeria will hope that the OPEC+ in their ongoing meeting will agree on easing the cut on oil production levels.
