Nigeria will spend at least 16 times more on servicing its debt next year than on its social development and poverty reduction programmes. Meanwhile, more than 130 million of its population live in poverty.
President Bola Tinubu on Wednesday outlined the country’s 2024 spending plans projected at N27.5 trillion, of which 30 percent (N8.25 trillion) will go debt servicing. Spending on social development and poverty reduction will only get two percent (N534 billion) of the budget.
Education will consume 7.9 percent (N2.18 trillion) of the budget while healthcare gets five percent (N1.33 trillion) and infrastructure (N1.32 trillion).
In the first nine months of 2023, the nation spent N5.79 trillion servicing debt. That compares with N3.76 billion in 2022 and N3.0 trillion in 2021.
Experts say high debt-service costs may complicate Tinubu’s goal to double the size of Africa’s biggest economy to $1 trillion by 2030 and lift 100 million of its people out of poverty.
“If you look at the correlation between budget and development outcomes, you will see that they are not working together. The budget has been increasing yet poverty, inflation and unemployment has been increasing,” Adeola Adenikinju, a professor of economics and president of the Nigerian Economic Society, said.
He added that over the years, the budget has not been speaking to what matters to the people and that has to change.
“So, it is a sorry state to see that we are spending far more money to service our debt compared to reducing poverty.”
In an interview with Channels TV, Bismarck Rewane, MD/chief executive officer of Financial Derivatives Company Limited, said the amount of debt is not the problem, but what the government has done with it, is what matters.
“The debt service this year is 45 percent of revenue compared to when it was 75 percent or 95 percent,” he added.
According to Rewane, the people are not interested if the budget is balanced or not, but how it affects their day-to-day livelihood which is the key thing.
During the budget presentation, Tinubu told lawmakers that the proposed budget seeks to achieve job-rich economic growth, macro-economic stability, a better investment environment, enhanced human capital development, as well as poverty reduction and greater access to social security.
Africa’s most populous nation uses a larger part of its resources to service debt, and that has become of great concern to economists, especially in the wake of already lean revenues made worse by the COVID-19 pandemic.
In 2022, Nigeria’s debt service-to-revenue ratio was at 80.6 percent — a figure far above World Bank’s suggested 22.5 percent for low-income countries like Nigeria.
The International Monetary Fund had said Nigeria may spend almost 100 percent of its revenue on debt servicing by 2026.
The 2024 budget proposal has a N7.8 trillion debt component as deficit financing that is similar to the one of 2023, said Kelvin Emmanuel, chief executive officer at Dairy Hills Limited on X.
“Debt servicing is 94.8 percent capital expenditure. Debt servicing to revenue is 45 percent. Even though debt to GDP dropped from 6.1 percent to 3.88 percent, it is not only higher than the fiscal responsibility standard of three percent and below, it is still 30 percent of the entire budget size,” he added.
Nigeria’s surging inflation which is at its highest level in 18 years has pushed an additional four million Nigerians into poverty in the first five months of this year, putting it to 93.8 million, according to the World Bank.
“Inflation pushed an estimated four million more Nigerians into poverty in the first five months and average prices of locally produced staples have increased faster than average inflation,” it said.
The international organisation said in the immediate term, the removal of the petrol subsidy has caused an increase in prices, adversely affecting poor and economically insecure Nigerian households.
It added that the poor and economically insecure households will face an equivalent income loss of N5, 700 per month, and without compensation, an additional 7.1 million people will be pushed into poverty.
According to the National Bureau of Statistics (NBS), the country’s inflation, which measures the rate of increase of commodity prices, quickened to 27.33 percent in October from 26.72 percent in the previous month.
Last year, the NBS put the number of Nigerians living in multidimensional poverty at 133 million, compared to 82.9 million considered poor in 2019 by national standards.
The president in May scrapped a costly but popular petrol subsidy and lifted currency controls in June, which he said was to save the country from going under.
Rising inflationary pressures have weakened the purchasing power of consumers, even as businesses grapple with higher operating costs.
The removal of the petrol subsidy tripled the petrol price to N617 from N184, causing public transportation providers such as buses, tricycles and motorcycles to raise transportation fares.
The naira has plunged to record lows across markets since the central bank allowed it to weaken by as much as 40 percent against the dollar in June.
The high cost of dollars and the implementation of a 7.5 percent value added tax on diesel imports, which was suspended last month in September, pushed its pump price to as high as N1,200 per litre.
The latest monthly Purchasing Managers’ Index by Stanbic IBTC Bank showed that business activity contracted in October for the first time in seven months.
Nigeria saw its Gross Domestic Product (GDP) rise marginally by 2.54 percent (year-on-year) in real terms in Q3 from 2.51 percent in Q2 and 2.25 percent in the same period last year.
“The under-welling performance of the economy in Q3 2023 GDP figures did not come as a surprise and align with our expectation in various recent publications on the economy of continuous slow and fragile growth at or below population growth,” KPMG Nigeria, a professional services firm, said in a recent report.
“We had opined that the continuous slowdown in household consumption demand and private investment in the presence of high and rising double-digit inflation and the costs of production will conspire to keep growth slow,” it added.