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The amount of money Nigeria expends in serving its debt and meeting obligations far exceeds the government’s capital expenditure spending, which undermines the country’s ability to maintain debt sustainability.
The debt servicing to capital expenditure ratio has risen significantly to 250 percent in the first quarter of 2022, from 140 percent as at December 2021, according to data gathered by United Capital Research.
While the nation’s debt to GDP ratio at 23 percent is below the fixed ceiling of 34 percent, there are concerns that the ailing revenue has cast a pall over the ability of a country reeling from inflationary pressures and foreign exchange scarcity to honor future obligations.
The country’s already fragile debt profile has been continually threatened by ailing oil revenue, which has been dragged by high importation cost of premium Motor Spirit (PMS) and oil production short fall resulting from reduced production, theft, and vandalism, according to analysts at United Capital.
“As a result, Oil revenue declined and stood at N1.2 trillion as against the projected N3.1 trillion in the first quarter of 2022,” said the analysts.
The underproduction due to the crisis in the oil producing area has hindered the country from meeting the OPEC quota, resulting in loss of a significant amount of revenue.
Latest data from the Nigerian National Petroleum Company Limited (NNPCL) indicated that in June, a whopping 9.425 million barrels were lost to the upstream challenges. This figure excludes the much-talked-about oil theft in the Niger Delta region, which is estimated to be 400,000 bpd.
As released by the Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF and FSP) revealed that Nigeria’s debt stock rose by N2.10 trillion to N41.60 trillion (excluding the Federal Government’s Ways and Means outstanding, currently estimated at N20.0 trillion).
Debt service amounted to N1.9 trillion, exceeding the budgeted amount by 47 percent between January and April.
It is worrisome that the money that ought to be expended on in shrinking the infrastructure deficit is being used to service debt in a country where over 50 percent of its population live on less than the World Bank’s bench-mark $1.98 a day.
Boss Mustapha, secretary to the government of the federation (SGF), says $2.3 trillion is needed to bridge the infrastructure deficit in Nigeria over the next 22 years.
The government is subsidizing the rich who own cars with its petroleum subsidy that is magnifying and becoming a liability on the country, and of course the money is better used to reduce interest payment and fund capital projects needed to spur economic growth.
Latest data on the amount spent in subsidising PMS or petrol, showed that the government subsidised the commodity with N1.593 trillion between January and June 2022.