Not less than N1.11tn has been spent on debt servicing in the first half of 2019, the latest data from the Federal Ministry of Finance, Budget and National Planning revealed.
The ministry’s 2020 budget circular stated that the Federal Government’s aggregate revenue of N6.99tn was projected to fund the 2019 Budget of N8.92tn. This implies that a deficit of N1.92tn will be financed mainly by borrowing.
The circular showed that as of June 30, the total debt service rose to N1.11tn in just six months, while the Federal Government’s actual revenue was N2.04tn, which represents only 58 per cent of the N3.49tn pro-rata budgets.
Essentially, it was stated that a shortfall of 42 per cent is attributable to the under-performance of both oil and non-oil revenue.
The circular reads, “Seasonal factors, as well as the slow recovery in economic activities that drive consumption and the lingering security issues, contributed to the under-performance of the various revenue sources.”
According to the budget circular, the non-implementation of other revenue initiatives like the restructuring of Joint Venture oil assets and tighter performance management of Government-Owned Enterprises further explain the weak revenue performance.
The report further shows that of the total appropriation of N8.92tn and a prorated expenditure of N4.46tn, N3.39tn was spent by June 2019 (i.e. 76 per cent performance).
“A total of N2.05tn has been released for non-debt recurrent expenditure, including salaries, pensions and overheads, while N1.11tn has been released to cover debt service obligations during the period,” the report added.
In the effect, it was stated that a deficit of N1.35tn was incurred at end of June 2019, which is 70 per cent of the budgeted deficit for the full year.
Meanwhile, no capital expenditure release was made in the first half of 2019 under the 2019 budget provision.
According to the ministry’s report, the reason for this was because the 2018 capital budget was implemented until June 2019 as stipulated in the 2018 Appropriation Act.
The N1.11tn paid to service debt in half-year 2019 is exactly 54 per cent of the revenue made within the period. This further affirms that debt servicing takes a larger chunk of the country’s revenue.
The rising debt profile and its attendant cost have become worrisome, and the government shows no sign of slowing down, as it has already been stated that N1.7tn would again be borrowed to finance the 2020 budget.
While debt financing is not entirely bad, the latest disclosure implies that Nigeria’s debt challenge persists, and this may take the country’s debt profile to a new height in the coming year, while capital projects still face some major setbacks.