Nigeria 2018 Budget Shortfalls Raises Debt To N25 Trillion
Nigeria 2018 Budget Shortfalls Raises Debt To N25 Trillion.
• Budget real capital expenditure less than 27%
• Deficit financing to exceed N2 trillion
• Nigeria is gradually slipping into monumental debt overhang
Shortfalls in the 2018 budget may worsen the Nation Nigeria debt to N25 trillion by the end of the year. It is three times more than the 2017 (N7.4 trillion) figure and about four times that of 2016 (N6.1 trillion). Notably, it costs about 45 per cent of the nation’s revenue.
According to FSDH Research, the budget deficit financing activities of the Federal Government may lead to an increase in yields in the domestic market from current levels. Already, the government has struck a deal with the World Bank worth $2.1 billion for projects contained in the budget, aimed at improving electricity, governance and empowering women. This comes with a potential to raise the borrowing above $3 billion, even from other sources.
Recently, Nigeria’s debt was put at N22.7 trillion for the first quarter of 2018. This means that debt deals in the second quarter of the year are yet to be aggregated. Put together, these may plunge the country to an all-time high of N25 trillion. For the Head of Research at FSDH Merchant Bank Limited, Ayodele Akinwunmi, the continued debt programmes at both international and domestic ends would mean that corporate bodies and governments may soon start borrowing at higher interest rates, particularly from the domestic market.
Besides, with Nigeria’s foreign exchange earnings still hugely dependent on crude oil, the country remains predisposed to price shock, while international lenders will be pricing our debts, based on our existing weak revenue base. This is costly. Nigeria’s total public debt increased to N22.71 trillion in Q1 2018 from N12.6 trillion in Q4 2015. But it was mainly driven by external debt accelerated by the devaluation of the naira in the last three years.
At N15.96 trillion, he said the domestic debt accounts for 70.28 per cent of the total public debt. But with the deficit debt plan of N793 billion, domestic components of the borrowing, as well as the unknown value of the supplementary bill, it is obvious that both the debt stock and debt service bill will be significantly impacted. He noted that the company’s research analysis showed that the ratio of domestic interest payment to the Federal Government’s revenue from the Federation Account Allocation Committee (FAAC) was 79 per cent at Q1 2018, against 60 per cent average in the last two years.
The Director, Research and Advocacy, Lagos Chamber of Commerce and Industry (LCCI), Dr. Vincent Nwani, said the comparison of the country’s debt with the GDP and international debt threshold is deceitful. Expressing worry that the nation is gradually slipping into monumental debt overhang, he advised that attention should be on the ratio of interest payment to revenue, which currently is “over 50 per cent, yet we pride ourselves as having a low debt.”
He also flayed the situation where the capital component, particularly that of the 2018 budget, is almost at par with the amount for debt service bill.According to Nwani, it is difficult to believe that the country is really investing in infrastructure when access roads to ports for the purposes of exporting and importing products are in deplorable conditions.