The federal government debt rose from ₦23.3 trillion in 2019 to ₦32.92 trillion by the end of 2020. This crippling debt burden reveals Nigeria’s shrinking revenue base and an unbridled appetite for spending.
The events in 2020 were unexpected and shook the entire world. The coronavirus pandemic started slowly and gradually crippled the entire world economy. It changed the usual narratives and policies, as everyone tried to adjust to the situation. And Nigeria was not left out.
Nigeria fell into further crisis as crude oil prices crashed. This created acute revenue shortages for the government with respect to meeting budget expenditure which has already been passed into law. As a result, the Finance Minister hinted on a budget cut in the tune of ₦1.5 trillion due to expected revenue decline.
However, rather than effecting a cut, the budget was increased by ₦281.89 billion. While the circumstances that led to increased expenditure in the face of revenue shortfall in 2020 were different, this has been the trend in previous years. This begs the question, Is Nigeria’s overwhelming debt burden a result of insufficient revenue or the government’s uncontrollable urge to spend?
The Trend: Declining Revenues and Increasing Spendings
Dataphyte analysis of the budget implementation report revealed that between 2015 and September 2020, Nigeria spent ₦39.02 trillion whereas it generated ₦18.53 trillion revenue.
Source: Budget Office of the Federation (Note: As of Sept. 2020)
The government showed increasing optimism in generating revenues to finance the budget from 2015 to 2018. This budgeted revenue figure rose from 3.45 trillion in 2015 to 7.17 trillion in 2018. However, from 2019, the expected revenue declined. The situation reflects a decrease in expected revenue since then.
Within the six-year period under review, the government actually spent an average of 88% of their budgeted expenditure even though they realised just 64% of the revenue that was meant to finance the budgets.
Source: Budget Office of the Federation (Note: As of Sept. 2020)
Revenue and expenditure projections changed in the same direction. This shows that expenditure increases are inspired by expectations of higher revenue. There was a continuous decline in revenue actualization from 2015 through to 2018. In 2015, 80.42% of projected revenue was generated. This fell to 48.57% in 2018. Revenue performance then increased in 2019 and 2020 June to 61.50% and 63.10% respectively.
Each time the government’s revenue falls short of its expenditure, the budget deficit is financed by debts and other forms of asset forfeiture. Nigeria’s debt financing trend is not only unsustainable for the economy, but it has also shown not to yield its desired expansionary results. This calls for crucial dialogue by the government and all stakeholders to bridge the revenue-expenditure gaps of the country.