Nigeria Economy | |
Nigeria Economy | |
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Thursday, January
14, 2021 / 12:54 PM / by CSL Research / Header Image Credit: Ecographics
In the recently released Q3 2020 debt report by the National Bureau of
Statistics, the total public debt was N32.22trn as of 30 September
2020, with local debt making up 62.18% of the total public debt in the period
while external debt made up 37.82%. This is similar to the the country's debt
structure in the same period of 2019 when domestic debt made up 68.45% of total
public debt and external debt made up 31.55%. Whilst debt to GDP ratio
remains within the acceptable threshold, we are increasingly concerned about
the nation's ballooning debt service to revenue ratio.
Recall that the Federal Government of Nigeria following a series of
revisions to the 2020 appropriation bill arrived at a fiscal deficit of
N4.98trn. Based on the finance ministry data, an aggregation of debt
monetization (N2.86trn) and New borrowings (N3.28trn) was used to finance the
deficit. The 2021 appropriation bill forecasts a budget deficit of N5.60tn
which would be financed mainly by borrowings of N4.69tn, privatization proceeds
of N205.15bn and project linked bilateral & multilateral loans of
N709.69bn. The country's financing structure is of concern when one considers
that the budget is tilted more towards recurrent expenditure than capital
expenditure and raises questions on the sustainability of the current fiscal
practices.
The significantly higher recurrent component of the budget continues to
drag the country's economic growth, resulting in poor infrastructural
development. Spending more on capital projects can promote industrialization,
improve local purchasing power and help the federal government's
diversification drive. Nigeria continues to face issues of poor revenue
generation and lack of will to efficiently manage its expenditure. No
significant cuts have been made to its overheads and statutory spending has
continued to rise. Nigeria's growing debt stock with little to show for it in
terms of capital expenditure remains a major concern.
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