In the first four months of 2022, Nigeria’s debt repayment costs exceeded the government’s revenue.
Nigeria’s total revenue for January through April 2022 was N1.63 trillion, but debt servicing was N1.94 trillion, a difference of nearly N300 billion.
Nigeria’s Minister of Finance, Budget and National Planning, Zainab Ahmed, cautioned Thursday that urgent action is needed to address the nation’s revenue challenge and expenditure efficiency.
Gross oil and gas federation revenue for the first four months of the year was predicted at N3.12 trillion, but only N1.23 trillion was realized as of April 30.
Despite rising oil prices, oil revenue underperformed due to substantial oil production shortfalls, such as pipeline vandalism and crude oil theft, and high fuel subsidy expenditures due to higher imported product landing costs.
Non-oil taxes fell short, averaging 92.6%.
Revenue performance is predicted to improve in the second half of 2022 as oil theft and pipeline vandalism are addressed. Some non-oil taxes are seasonal, so the country expects to collect more in the second half of the year.
Improved revenue collection should lower the Debt Service to Revenue ratio, which is above target, the research added.
Improved tax collection should moderate the nation’s debt service to revenue ratio, which is above target.
According to the Medium-Term Expenditure Framework and Fiscal Strategy (MTEF/FSP) report, Nigeria’s debt service as a proportion of income soared to 99% in the first quarter of 2020.
In Q1 2020, Nigeria paid N943.12 billion in debt service while retaining N950.56 billion in income. Nigeria’s debt-to-revenue ratio was 99% during the time.
The Nigerian government’s share of oil revenues in Q1 2022 was N285.38 billion (39%), while non-oil tax collections was N632.56 billion (84%). CIT and VAT collections were N298.83 billion and N102.97 billion, respectively, representing 99 percent and 98 percent of their respective targets.
Customs collections (import taxes, excise and fees, and federation account special levies) behind by N76.77 billion (25.42%), while other revenues totaled N664.64 billion, of which independent revenue was N394.09 billion.
Nigeria’s “fiscal risks are slightly heightened” due to weaker-than-expected domestic economic performance and structural challenges. Revenue generation is the nation’s fundamental fiscal constraint, and repeated recessions have exacerbated the systemic resource mobilization challenge.
The Russia-Ukraine war has also contributed to rising food and energy prices, according to the research. It listed the reappearance of COVID -19 in some major economies, which has slowed economic activity in those countries, and reintroduced elevated inflation in most economies, driving monetary tightening in these economies with a negative impact on capital inflow to emerging markets economies.
The tough domestic macroeconomic and commercial environment and insecurity also contribute.
The report says tax management and collection will be improved.
“Crude oil production problems and PMS subsidy deductions by NNPC threaten our income growth expectations, as demonstrated in 2022 Performance through April.
“Bold, decisive, and quick action is needed to address national and subnational revenue underperformance and expenditure efficiency.”
Nigeria’s debt reaches N41.6trn
Nigeria’s entire public debt stock climbed from N39.56 trillion in December 2021 to N41.60 trillion ($100.07 billion) in the first three months of 2022 (January to March), according to the Debt Management Office (DMO).
The federal government’s domestic debt service commitments were N668,685,710,112.98 in Q1 2022.
According to the DMO, the country’s total public debt-to-GDP is now 23.27%, up from 22.43% on December 31, 2021.
The DMO noted in a statement on its website that the figure represented the Federal Government of Nigeria, the 36 state governments, and the Federal Capital Territory’s domestic and external debt stocks. December 31, 2021 statistics were N39.56 trillion or $95.78 billion.
The overall public debt stock includes new domestic borrowing by the FGN to partly pay the 2022 Appropriation Act deficit, the $1.25 billion Eurobond issued in March 2022, and multilateral and bilateral lender disbursements.
The federal government’s domestic debt on March 31, 2022, was N20.144 trillion, according to the DMO (N20,144,027,724,703).
The federal government’s domestic debt service of N668,685 billion was for Nigerian Treasury Bills (NTBs), Federal Government Bonds, FGN Savings Bond, and FGN Sukuk Rentals.
In January, N188,364,772,069.17, N103,883,183,876.20, and N376,437,754,167.61 were paid for debt service.
Federal government bonds accounted for N630,535,774,886.21, followed by NTBs and FGN Sukuk Rentals. FGN Savings Bond had N340,422,964.8 million. January NTB debt service was N3,220,890,038,78; February and March were N7,23,906,633.90 and N19,189,400,520.63.
In 2018, N185,026,886,879.94 was paid for Federal Government Bonds.
January, N96,527,951,065.07, and N348,980,936,941.20. DMO statistics showed that FGN Savings Bond consumed N116,995,150.45 in January, N123,326.177.23 in February, and N100,101.637.18.
In January and February, FGN Sukuk Rentals didn’t pay debt service, but in March they paid N8,167,315,066.60.
On March 31, 2022, Nigeria’s external debt was $39,969.19 billion.
Multilateral, bilateral, and commercial debts were included.
Nigeria owes international creditors $18,957.22 billion, including the World Bank Group, IMF, African Development Bank, European Development Fund Arab Bank for Economic Development in Africa, Islamic Development Bank, and International Fund for Agricultural Development (IFAD).
$12,229.43 billion and $486.10 million are outstanding to IDA and IBRD, two World Bank Group members.
It owes $3,395.08 billion to the International Monetary Fund (IMF) and $4,495.87 billion to bilateral creditors, including China Exim Bank ($3,667.65 billion), Agency Francaise Development of France ($567.89 million), and KfW of Germany ($164.04 million).
Nigeria’s second external debt was $15.918 billion in commercial loans. Eurobonds and Diaspora Bond were featured.