As debt servicing exceeds revenue

IN what amounted to terrible economic indications for Nigeria, the cost of debt servicing, for the first four months of this year, exceeded revenue earned even as the Federal Government said it would spend N6.7trillion on fuel subsidy in 2023. This was disclosed by the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, at the public consultation on the draft 2023 – 2025 Medium Term Fiscal Framework/Fiscal Strategy Paper (MTFF/FSP) recently in Abuja.  In the overview of the fiscal performance for the first quarter of 2022, Mrs Ahmed pointed out that the Federal Government’s total revenue for the period was N1.63 trillion, while debt servicing gulped N1.94 trillion.  She added that urgent action was needed to address revenue underperformance and expenditure inefficiency at national and sub-national levels. According to the MTEF document, the Federal Government’s share of oil revenues was N285.38 billion (representing 39 percent performance), while non-oil tax revenues totalled N632.56 billion, a performance of 84 per cent.

To be sure, the damning figures reeled out by the Finance Minister did not come as a suprise to discerning Nigerians. Time and again, we have sounded notes of warning regarding the Muhammadu Buhari administration’s extensively profligate spending.  Since coming on board in 2015, the administration has made it a point of duty to opt for loans with a view to funding recurrent expenditure. Against wise counsel, it resolutely refused to cut down governance costs. Thus, as we noted in previous editorials, while the Buhari administration likes to posture that, morally and philosophically, it symbolises a break from the past, its actions consistently show that it is cut from the same fabric as those previous dispensations it regularly distances itself from. For instance, in the 2020 budget, the Federal Government committed close to 90 percent of its net spending on recurrent expenditure, meaning that for every naira that the Federal Government spent, only 10 kobo went towards any kind of capital expenditure. The situation has in fact worsened since then.

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If you are earning N1.63 trillion revenue and you are expending N1.94 trillion on debt servicing, then you need no soothsayer to tell you that the country is not just broke but on a cliffhanger. In simple terms, this means there is no money to run the critical sectors of the economy. This is despite the regime of loans obtained by the government, which the government said would be injected into the productive sector so that with time, revenue would be generated to repay the loans. So, where is the projected revenue with which the many loans were expected and projected to be serviced? The government must stop spending money that the country does not have.

Nigeria is in dire straits. An earning profile of N1.64 trillion pitched against debt servicing expenditure of N1.9 trn  means that the country will have to take more loans now just for debt servicing. And that is a very distressing situation. It says so much about the Buhari government and its henchmen and officials who are wont to dismiss legitimate worries and complaints about the penchant and proclivity of the government to taking unnecessary and unsustainable loans as uninformed and baseless. They are always quick to say, without concrete evidence, that they are methodical about the loans they are taking as they are committing them to productive engagements and ventures which would expand the economy and thus make it easy to pay the loans back through expanded production and productivity and revenue.

So we ask again, where is the vaunted expanded production and revenue with which to pay back the loans? The country is not yet paying back the loans but does not have the revenue to pay just the interests on the loans! This government will easily go on record as having mortgaged the present and the future of the country with its profligate expenditure and mercenary management of the economy. We hope it would be restrained from doing more damage before leaving the reins of government even as we expect Nigerians to be critical enough in electing a more competent leader to take over at the expiration of its tenure.