The Federal Government has assured citizens that its debt level is still within sustainable grounds and that its target over the medium term is to grow Revenue-to-GDP ratio from the current 8-9% to 15% by 2025.
This is according to the approved 2022 budget presentation by the Minister of Finance, Budget, and National Planning, Mrs. Zainab Ahmed, during the public presentation and breakdown of the 2022 budget held in Abuja, on Wednesday. The Minister also revealed that at N3.61 trillion, debt service is 21% of total expenditure and 34% of total revenues.
What the Minister is saying
On aggregate expenditure, the minister said the 2022 Aggregate FGN Expenditure which is inclusive of GOEs and project-tied loans is projected to be N17.13 trillion, which is 18% higher than the 2021 budget.
The Minister also added that recurrent (non-debt) spending, estimated to amount to N6.91 trillion, is 40% of total expenditure, and 20% higher than the 2021 budget. Also, Aggregate Capital Expenditure of N5.96 trillion is 35% of total expenditure.
For debt servicing, Ahmed revealed that at the rate of N3.61 trillion, it would represent 21% of total expenditure, and 34% of total revenues, citing that the provision to retire maturing bonds to local contractors/suppliers of N270.71 billion is 1.6% of total expenditure.
The Minister added that the budget deficit is N6.39 trillion for 2022 which represents 3.46% of GDP and would be financed mainly by borrowings, which are: Domestic sources: N2.57tn; Foreign sources:N2.57tn; Multi-lateral/bi-lateral loan drawdowns: N1.16tn, and Privatisation Proceeds of N90.7bn.
“This is to restate, that the debt level of the Federal Government is still within sustainable limits. Having witnessed two economic recessions, we have had to spend our way out of recession, which contributed significantly to the growth in the public debt,” she said.
She also revealed that Nigeria 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; Defence and Security sector accounts for 22% of the 2021 budget.”
“Nigeria’s Debt Service/Revenue ratio (76% as at November 2021) is the highest among some African top economies; This is proof that what we have is not a classic debt sustainability problem, but a revenue challenge,” she said.