Nigeria’s public debt profile is expected to rise to over N44 trillion as the Federal Government has made provision for a borrowing of N6.39 trillion to finance the budget deficit in the 2022 appropriation Act.
The Minister of Finance, Budget and National Planning, Mrs Zainab Shamsuna Ahmed said this on Wednesday during the presentation of the details of the 2022 budget to the public.
Ahmed said the borrowing is shared equally on a fifty-fifty basis between domestic and external sources.
According to the minister, “The Budget deficit is to be finance mainly by borrowings:
Domestic sources accounts for N2.57 trillion while another N2.57 trillion will derived from external sources. N1.6 trillion is to be sourced from multilateral and bilateral loan downloads and the remaining N90 billion is expected to come from privatisation proceeds”.
Ahmed while justifying the high debt profile incurred by the government said the president Muhammadu Buhari-led Government has had to borrow to get the nation out of recessions it experienced in quick succession.
She said, “having witnessed two economic recessions, we have had to spend our way out of recession which contributed significantly to the growth in public debt.
“It is unlikely that our recovery would have been so fast without the sustained government expenditure funded partly by debt.
“To compound matters, the country has technically been at war, with the pervasive security challenges across the nation; this has necessitated massive expenditures on security equipment and operations, contributing to the fiscal deficit; defense and security sector accounts for 22% of the 2021 budget”.
Despite Nigeria’s debt service to revenue ratio estimated to be the highest in Africa, the minister said there was no cause for alarm, as the issue of the nation is revenue and not debt.
“Nigeria’s debt to revenue ratio of 76% as at November 2021is the highest among some African top economies. This is a proof that what we have is not a classic debt sustainability problem but a revenue challenge.
“Tax rate and compliance ratios are significantly higher in these comparator countries. For instance, Nigeria’s VAT rate is the lowest in African, and has less than 50% of the average rate”.
She hinted that cutting expenditure is not a viable option as the nation’s public expenditure to GDP ratio is the lowest among same Africa’s leading economies.
She further said the target if the economy managers is to grow the Revenue-to-GDP ratio from about 8-9 percent currently to 15 percent by 2025.