Dataphyte’s review of Nigeria’s 2023-2025 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) has revealed that the federal government will spend N6.31 trillion on debt servicing in 2023.
The proposed amount is 74.6% of the government’s projected revenue of 8.46 trillion for the year. This implies that for every N100 the government hopes to generate in 2023, at least N74 will be used to service debts.
It is no longer news that Nigeria cannot afford to fund its budget without recourse to borrowing. While borrowing is not peculiar to Nigeria alone and may not be entirely bad, the country’s increasing debt profile and high debt servicing have become a major concern to the citizens, especially when the debt service to revenue ratio is put into perspective.
For instance, in the first quarter of 2022, debt service gulped N1.94 trillion, N310 billion more than the N1.63 trillion total revenue generated in the quarter.
This situation is not likely to change next year as the government will still spend a chunk of its projected revenue on debt servicing, maybe even more as previous years have shown.
As noted in the MTEF and FSP, the projected expenditure for 2023 is N19.76 trillion. This is inclusive of the N1.68 trillion for Government Owned Enterprises (GOE), N40.52 billion for grants/donor-funded projects, and N1.77 trillion for multilateral/ bi-lateral loan-funded projects.
The projected expenditure is a 14.1% increase from the 2022 approved and amended expenditure of N17.32 trillion.
Of the N19.76 trillion projected expenditure for 2023, debt servicing is pegged at 6.31 trillion, accounting for 31.94% of the total expenditure for the fiscal year.
If the projections in the MTEF document are followed in 2023, the proposed amount for debt service will be the highest approved amount Nigeria will use for debt servicing alone since 2015.
The proposed amount for debt service in 2023 is a 71.21% increase over the amount for 2022.
Meanwhile, in the MTEF document, the projected revenue for 2023 is pegged at 8.6 trillion, suggesting a 15.13% decrease from the 9.97 trillion projected for 2022.
Aside from the expected revenue decline next year based on the government’s projection, the amount for debt service alone is 74.6% of the projected revenue for 2023.
There are fears that this might even be higher, given that the government has never met its revenue projections in the past in the period under review.
But for debt servicing, it was the opposite, as the actual amount the government spent on debt servicing every year has always surpassed the budgeted amount, except in 2018.
Economic experts have raised concerns about this situation, and the International Monetary Fund (IMF) has warned that if no adequate measures are taken by the Nigerian government, particularly on improving revenue generation, debt service might gulp the country’s entire revenue by 2026.
In fact, this situation has already started to play out as the 2022 fiscal performance report for the first quarter of the year showed debt service gulped the entire revenue for the quarter with a 301 billion deficit.