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Loan Servicing Drains 80% of Nigeria's Revenues, Finance Minister Says

© AFP 2023 / BRENDAN SMIALOWSKINigeria's Finance Minister Zainab Ahmed leaves after a discussion about the global economy at the 2022 IMF/World Bank annual meeting October 13, 2022, in Washington, DC.
Nigeria's Finance Minister Zainab Ahmed leaves after a discussion about the global economy at the 2022 IMF/World Bank annual meeting October 13, 2022, in Washington, DC. - Sputnik International, 1920, 06.01.2023
At the beginning of last year, Nigeria announced that it spent 76.2 percent of its revenues generated between January and November 2021 on servicing its loans. At the time, the country's officials defended high government borrowing and debt levels, saying it "was still within sustainable limits". One year on, the situation has yet to improve. .
Nigeria’s federal government spent about 80 percent of its revenue on debt servicing between January and November 2022, Zainab Ahmed, minister of finance, budget and national planning said during the public presentation of the approved 2023 budget.
According to Ahmed, Muhammadu Buhari’s administration allocated 5.2 trillion naira ($11.3Bln) to servicing debt over the 11-month period which is equivalent to 80.6 percent of the 6.5 trillion naira revenues generated during the period.
She also noted that the government spent a total of 12.87 trillion naira over the period, almost twice as much as its revenues and 65 percent above the set target of 7.8 trillion naira for the year. More than 90 percent of the budget deficit was financed by local borrowing.
Africa's largest crude producer revenues were largely affected by low oil output and costly petrol subsidies. The government’s share of oil revenues generated within the period was 586.71Bln naira, which is 35.7 percent of forecasts. At the same time, non-oil tax revenues reached 2.09 trillion naira.
Delivering the budget, Ahmed said that the government was borrowing money to fund petrol subsidies, and emphasized that the subsidy regime had become unsustainable.

“The fuel subsidy cost was a very high one. We have been funding it from borrowing,” the minister said as cited by local media. The petrol subsidy will "remain up to mid-2023 based on the 18-month extension announced early 2022."

Servicing debt cost more than had been estimated in the 2022 budget. However, the government in its 2023 budget has promised to boost revenue collection partly by increasing oil production and thus reduce debt payments to 60 percent of revenues. Ahmed highlighted that this would be possible because of a recent increase in oil production from multi-decade lows and an end of the costly subsidies at the end of June.

“We will intensify our revenue mobilization efforts and intensify current efforts towards the realization of our crude oil production and export targets,” the minister said.

Even though the country is not going to restructure its debt, it will "continue to utilize appropriate debt-management tools to streamline the cost and risk profile in the debt portfolio,” according to the minister.
President Buhari, who will leave office in May this year, signed the 2023 appropration bill of 21.83 trillion into law on 3 January, which marked the eighth and final annual budget of the incumbent administration. The 2023 budget provides for aggregate revenue of 10.5 trillion naira and expenditures of 21.83 trillion naira with estimated debt service of 6.3 trillion naira, which will be 29 percent of total expenditure.
Last month, the president approved a 819.5 billion naira ($1.8Bln) supplementary budget to tackle food insecurity caused by floods. In 2022, the country experienced severe floods, which resulted in massive destruction of farm land. The funds are expected to be raised through domestic borrowing and spent on rebuilding damaged infrastructure and completing government projects, including irrigation facilities.
A woman pounds ingredients in a mortar as she prepares food in an internally displaced people's (IDP) camp, where flood evacuees are accommodated, at Community Primary School in Ihuike, Niger delta region of Ahoada, Rivers State, southern Nigeria, on October 21, 2022 - Sputnik International, 1920, 22.12.2022
Nigeria's President Buhari Approves $1.8Bln Extra Budget For Food Security Threatened by Floods
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