THE NUMBERS BEHIND NIGERIA’S UNPRODUCTIVE DEBT BINGE
In the period under review, Nigerian government spent N28 trillion on recurrent expenditure, which includes personnel, overhead and debt service costs. To uncover the truth behind Nigeria’s unproductive debt binge, BusinessDay tracked what the government spent money on since the beginning of 2016, using data obtained from the budget implementation report available on the website of the Budget Office.
Between 2016 and 2020, the Federal government spent a total of N34 trillion. BusinessDay’s analysis of the numbers show recurrent expenditure accounted for the bulk with 82.35 percent while capital expenditure, which is critical for a developing country with a gaping infrastructure deficit like Nigeria, accounted for a mere 17.65 percent.
In the period under review, the government spent N28 trillion on recurrent expenditure, which includes personnel, overhead and debt service costs. Personnel costs accounted for the single largest expenditure item under recurrent expenditure bringing into perspective the ever-contentious issue of Nigeria’s high cost of governance which has drawn the ire of several Nigerians.
Having spent so much on personnel costs and debt servicing, the federal government could only spend N6.22 trillion in the same period on capital expenditure. Twelve economists surveyed by BusinessDay all said the country’s focus on recurrent expenditure is the reason the economy has seen slow growth despite huge amounts spent annually. They warn that Nigeria is flirting with financial ruin if the trend continues.
“Debt service is increasing and total productivity is flat, it tells you there’s a problem somewhere,” one economist who did not want to be quoted criticising the government told BusinessDay on condition of anonymity.
“Every other government borrows to fund things that can repay its debt in the future but Nigeria is borrowing to pay salaries that can never translate to economic growth” the economist said. Every Nigerian budget since at least 2016 has prioritised recurrent expenditure over capital expenditure in terms of allocation but the data reveals that the actual sums end up even lower due to unrealistic revenue targets which force the government to cut down on capital spending.
Nigeria’s flailing revenues is the reason economists continue to urge the government to cut down the size of government and downsize the recurrent budget but that counsel has fallen on deaf ears. Nigeria has spent no less than 70 percent of its money on recurrent expenditure on average since 2016 while infrastructure investment or capital expenditure has accounted for 30 percent.
In that period, oil revenues, which used to the bulk of the budget have tanked, and the government has resorted to borrowing. That has shot up the debt servicing component of the government’s recurrent expenditure. Since 2016, the federal government has spent N10.1 trillion on debt servicing, nearly double the amount that was spent on capital projects.
“For a developing country like Nigeria, a lot is to be spent on capital projects to improve the citizens’ lives but looking at the trend of capital expenditure actuals compared with debt servicing actuals shows that the FG is spending way more on debt servicing than on capital expenditure (Capex),” said Oluseun Onigbinde, who runs BudgiT, a non-governmental organisation that tracks official spending of the government said.
Read more at: https://businessday.ng/business-economy/article/the-numbers-behind-nigerias-unproductive-debt-binge/