The federal government’s debt service to revenue ratio has increased to 183 percent in the first quarter of 2023.

This information was revealed in the budget implementation report for the same period.The report highlights that the government had initially budgeted for a revenue of N2.16 trillion, but the actual revenue generated was only N1.21 trillion.

This is a significant decrease compared to the N1.48 trillion revenue generated in the first quarter of 2022.The rising debt service to revenue ratio is a cause for concern as it indicates that a larger portion of the government’s revenue is being used to service its debt obligations.

Failure to do so could have severe implications for the country’s overall economic stability and development.

Meanwhile, debt service in the first quarter of 2023 was N2.2 trillion compared to N1.6 trillion budgeted for in the first quarter of the year.

This represents a debt service to revenue ratio of 183 percent.

Nigeria has been grappling with acute fiscal shortfall since the ruling APC government took over failing to meet its revenue targets while increasing its debt service.

In 2022, the total debt service was N5.65 trillion, which was an alarming 97.4 percent of the budgeted revenue.

During the same year, the federal government received a total revenue of N5.8 trillion down from N6.7 trillion received in the same period in 2021.

The government recorded a fiscal deficit of N7.5 trillion or 129 percent of actual revenue collected.

The trend appears to be continuing in 2023 with the government failing to meet its revenue targets but blowing past its expenditure targets. Its total expenditure (excluding GOEs) was N3.4 trillion higher than the N3.3 trillion budgeted.

However, recurrent non-debt expenditure was just N1.2 trillion compared to budgeted revenue of N1.63 trillion. The major contributory factor to the wider fiscal deficits remains the government’s rising debt service obligations.

A breakdown shows that while total debt service rose slightly to N1.3 trillion (budget N1.2 trillion).

However, Ways and Means, which is the overdraft lent to the government by the central bank recorded a debt service of N912 billion versus a budget of N300 billion.

Capital expenditure was N175 billion versus N841 billion targeted.

The government also performed poorly with its financing activities achieving just N2 trillion from domestic debts versus N2.695 trillion budgeted. Thus, it ended the first quarter of the year with a net deficit (excluding GEOs budget and project-tied loans) of N2.3 trillion.

Meanwhile, the federal government announced on Monday that it is proposing a N26 trillion budget for the 2024 fiscal year.

This compares to the N21.8 trillion budget currently running and approved under the administration of President Muhammadu Buhari.

The Nigeria Deposit Insurance Corporation (NDIC) has revealed that it has paid an insured sum of N1.084bn to 29,573 depositors of MFBs, MPBs.

The payment follows the revocation of licenses for 179 Microfinance Banks and 4 Primary Mortgage Banks by the Central Bank of Nigeria (CBN).

The Managing Director of the NDIC, Mr Bello Hassan speaking at the Abuja International Tradefair said the NDIC immediately commenced liquidation of the banks and began disbursing insured sums to depositors within just 7 days of the closure of these banks.

“It’s important to note that as at 22nd September 2023, the Corporation had paid a cumulative insured sum of N1.084 billion naira to 29,573 depositors of the closed MFBs/MPBs.

“It is however instructive to let you know that payments are still ongoing and depositors with funds exceeding the insured limit will receive liquidation dividends after recovery of debts and sale of physical assets of the closed banks,” he revealed.

Speaking further, Bello added that “indeed, Nigerian depositors are our priority and our foundation is built on ensuring the safety and security of their deposits.”

“This ideal is encapsulated in our strap line; ‘Protecting your bank deposits!’ This is crucial for financial inclusion because it gives Nigerians the assurance that their money is safe and accessible when needed.

“Furthermore, the Corporation’s activities through the supervision of banks, continuous monitoring and oversight serves as consumer protection for depositors which enhances confidence in the financial system. This acts as an incentive for the unbanked to access financial services of licensed banks.

“Over the years, we have grown stronger in fulfilling these responsibilities and have significantly enhanced our public policy objectives of establishing a robust deposit insurance scheme in Nigeria,” Bello noted.

By Sodiq Adelakun

The International Monetary Fund (IMF) has stated that Nigeria’s total debt of over N87 trillion is still at a moderate level compared to other countries.

The IMF Resident Representative in Nigeria, Ari Aisen, emphasized the need for Nigerians to address the underlying issues driving this high debt situation.

A recent report by the Debt Management Office (DMO) revealed that Nigeria’s total debt reached N87.4 trillion as of June 2023, causing concern among both Nigerians and foreigners who fear a lack of significant development amidst the country’s economic challenges.

Aisen highlighted the importance of implementing fiscal policies to reduce the government’s financing needs.

“As for now, the debt-to-GDP ratio is still at a moderate level in Nigeria. It is very important that policies are put in place, particularly fiscal policies, to reduce the financing needs of the government,” Aisen said.

“The removal of fuel subsidy was a very important step because fuel subsidy cost 2 percent of GDP last year and were adding to the financing needs and the stock of debt of the country.”

He urged that this new administration focus more on containing the needs of the government so that the debt stock does not rise any further.

Meanwhile, on President Bola Ahmed Tinubu’s GDP growth target of 7 percent annually, Aisen admitted that achieving that growth target may be very challenging, especially as the economy continues to face so much stress as a result of high living costs caused by the removal of fuel subsidy and higher prices of commodities.

“But we are in a transition period, and the initial move of the reforms shows that we are in the right direction. The removal of fuel subsidy and the unification of exchange rates,” he praised.

“These reforms need to continue to reach what we will call macroeconomic stability because if inflation can get lower and the exchange rate is more predictable, then investment can actually start coming to Nigeria.”

He advised that the reforms have to be well managed to avoid any reversal of subsiding fuel and controlling the exchange rate.

He explained that these reform transitions will, in the long run, lead to a better economy. Aisan reminded all that the Nigerian economy has in the past grown into double digits, and such growth can be repeated if the government continues with its right policies and provides a lot of support to the business sector. Growth of 7 percent can be achieved, he emphasised.

“We are going to see Nigeria again double its growth rate,” the IMF representative said.