Debt Service Gulps N11.679tn in Five Years

Ndubuisi Francis and Folalumi Alaran in Abuja

The federal government committed a total of N11.679 trillion into debt servicing while N8.31trillion was expended on capital/development expenditure between 2015 and 2020. A breakdown of the amount showed that in 2015 and 2016, N953.620 billion and N1.475 trillion, respectively, were spent on debt service, while N1.841 trillion and N2.203 trillion went into same line item in 2017 and 2018, respectively.

The figures were unveiled in the “Analysis of the 2022-2024 Medium Term Expenditure Framework and Fiscal Strategy Paper,” presented in Abuja yesterday by the Centre for Social Justice (CSJ).

The sums of N2.254 trillion and N2.951 trillion went into debt service in 2019 and 2020, respectively.

The N11.679,845,205, 997 five-year debt service profile (2015-2020) also translated to a yearly average of N1.386 trillion.

At the presentation, the Lead Director of CSJ, Eze Onyekpere, whose organisation has been in the forefront of the campaign for fiscal discipline and transparency in public affairs, stated that Nigeria’s debt had also been increasing in double digits year-after-year since 2015, with the highest increase recorded between 2015 and 2016.

Citing the Debt Management Office (DMO) statistics, Onyekpere observed that public debt stock stood at N12,603 trillion in 2015, N17.360 trllion in 2016, and N21.725 trillion in 2017.

In 2018, 2019 and 2020, public debt stood at N24.387 trillion, N27.401 trillion, and N32.915 trillion, respectively.

The highest increase was occurred between 2015 and 2016.

Between 2015 and 2020, Nigeria’s public debt increased by 161 per cent, indicating a yearly average increase of 37.74 per cent.

The CSJ chief executive stated that the debt service figures provided the factual background to the presentation of the Medium Term Expenditure Framework (MTEF’s) position on consolidated debt.

He said, “The Consolidated Debt Statement affirms the Medium-Term Debt Management Strategy (MTDS) 2020-2023 as the governing policy strategy. The MTEF states that the MTDS focuses on the development of an optimal borrowing structure to fund the government’s financial gap and needs, taking into consideration borrowing options, cost of borrowing and the associated risks with borrowing.

“Under the MTDS, the proposed portfolio composition is 70 per cent for domestic debt and 30 per cent for external debt while total debt as a ratio of the GDP has been increased from 25 per cent to 40 per cent; average tenure of debt portfolio is a minimum of ten years.

“It proposed up to five per cent of the GDP in sovereign guarantees for private companies executing public projects and Promissory Notes is to be issued to settle government arrears, Ways and Means Advance at the Central Bank of Nigeria (CBN), and the debt stock of 5 state owned enterprises (SOEs.”

Onyekpere recalled that the Consolidated Debt Statement setting out and describing the fiscal significance of the debt liability of the federal government was expected to process measures to reduce any such liability.

However, he regretted that the MTEF’s proposals were about measures to increase the liability, noting that debt as ratio of GDP increased from 25 per cent to 40 per cent and up to five per cent of GDP in sovereign guarantees for private companies executing projects, among others.

He said Nigeria would continue borrowing in the medium term to finance expenditure, adding that the borrowing projections in the 2022-2024 MTEF contradicts the provisions of the Medium Term Debt Strategy (MTDS), which sets a portfolio composition of 70 per cent for domestic debt and 30 per cent external debt.

The trajectory, he noted, was leading to a 50:50 ratio, adding that debt service to revenue would be increasing in the medium term while capital expenditure as a percentage of total federal government spending would be decreasing in the medium term.

Similarly, he pointed out that from available facts, recurrent expenditure as a percentage of total FGN spending, would be increasing in the medium term.

Onyekpere pointed out that in the FGN Revenue Framework, the share of oil revenue to FGN overall revenue was projected at 43 per cent in 2022, 51 per cent in 2023 and 46 per cent in 2024 while the share of non-oil taxes (VAT, CIT and Customs collection) to FGN overall revenue is projected at 29 per cent in 2022, 28 per cent for 2023 and 34 per cent for 2024.

He stated that the FGN Expenditure Framework showed that statutory transfers as a percentage of total FGN budget amounted to 4.31 per cent, 5.15 per cent, 5.23 per cent and 4.96 per cent for the years 2021, 2022, 2023 and 2024, respectively.

Onyekpere stated, “Debt service, including Sinking Funds to total FGN budget is 29 per cent, 33 per cent, 39 per cent and 44 per cent respectively for the years 2021, 2022, 2023 and 2024.

“Recurrent non-debt expenditure amounts to 48.94 per cent, 52.11 per cent, 47.81 per cent and 44.29 per cent respectively for the years 2021, 2022, 2023 and 2024.

“The high level personnel costs as a component of recurrent non debt expenditure (66.4% in 2021; 68% in 2022; 67.9% in 2023 and 67.9 per cent in 2024) is further evidence of the imperative for reducing the cost of governance.

“Special interventions funds amounts to 3.04 per cent, 2.94 per cent, 2.61 per cent and 2.39 per cent respectively for the years 2021, 2022, 2023 and 2024.

“Capital expenditure (excluding Government owned Enterprises and statutory transfers) amounts to 32.87 per cent, 23.82 per cent, 20.22 per cent and 18.50 per cent for the years 2021, 2022, 2023 and 2024 respectively.”

CSJ recommended that MTEFs should be prepared on the strength of high-level overarching national policy instruments, pointing out that a clear successor to the Economic Recovery and Growth Plan (ERHP) should be articulated and made available to Nigerians.

According to the organisation, there are references in the MTEF to a Medium Term National Development Plan (MTNDP), which is neither in the public domain nor a product of the popular participation by Nigerians.