Nigeria’s government may borrow an additional N7.24 trillion in 2024 to fund an intervention plan aimed at reviving its economy.
This was revealed during a presentation by Wale Edun, the minister of finance and coordinating minister of the economy, on an Accelerated Stabilisation and Advancement Plan (ASAP). The plan aims to address critical challenges affecting the reform initiatives and stimulate development in various sectors of the economy.
In the 2024 approved budget, the government’s deficit was N9.18 trillion, to be partially financed by N7.83 trillion in new borrowings.
However, according to the ASAP, the government intends to borrow N9.18 trillion to fund its deficit in the year. The intervention financing will add N7.24 trillion to the debt, bringing the total for 2024 to N16.42 trillion. Debt financing is projected to cost N8.81 trillion.
According to the Debt Management Office, Nigeria’s total public debt was N97 trillion as of December 2023. With the new borrowing, total debt is set to rise to N113.4 trillion. This additional borrowing is anticipated due to expected revenue shortfalls, and the government acknowledges that the incremental spending from the intervention funding could negatively impact leverage metrics if entirely funded by additional borrowing only.
The Federal Government’s retained revenue for January and February was approximately 60.0 percent of the target, primarily driven by lower crude oil production volumes, which ran at 74.5 percent of the budget projection. The government notes that if these shortfalls persist, revenue will not likely exceed N15.8 trillion for the year.
It also highlighted that if tax waivers amounting to 0.25 percent of GDP are issued to support the economic intervention, budgeted revenue will decline by 3 percent. “Additional 2024 borrowing and debt service will increase by 79 percent and 7 percent, respectively,” it said.
The emergency intervention plan involves substantial funding into crucial sectors such as agriculture, energy, business support, health, and social welfare, with an estimated cost of N6.6 trillion to N5 trillion.
Agricultural and food security will require emergency funding of N498 billion or N373.5 billion, energy N3.25 trillion or N2.44 trillion, health and social welfare N1.10 trillion or N825 billion, and business support N1.80 trillion or N1.35 trillion.
These interventions aim to improve the affordability of essential medicines, clear outstanding power subsidies and GasCo debt, and support MSMEs, manufacturers, entrepreneurs and artisans.
The government noted that these actions are necessary to sustain the bold reforms already undertaken, and intervention spending should be prioritised to mitigate the impact on leverage metrics.
The debt-to-GDP ratio is expected to hit 47.6 percent if all intervention spending is funded by additional borrowing. According to the International Monetary Fund (IMF), the government’s debt rose to 46 percent of GDP at the end of 2023, driven by naira depreciation. It noted that Nigeria has one of the lowest revenue takes in the world at 9.4 percent of GDP in 2023.
In a recent assessment of Nigeria’s debt sustainability, the IMF said, “Staff assess Nigeria’s risk of sovereign stress as moderate, reflecting the long maturity structure of debt and moderate gross financing needs, but flag sources of risk, including from global uncertainty, exchange rate depreciation, and still weak revenue mobilisation. Absent policies to safeguard macroeconomic stability and improvements in the fiscal position, risks would be increasing.”
During the presentation of the 2024 budget, Edun, the coordinating minister for the economy, emphasised that the budget would be executed with less reliance on borrowings and more focus on promoting domestic and foreign investment and privatisation of critical government assets.
At the spring meetings of the IMF and the World Bank in April, Edun announced that Nigeria had qualified to process a loan of $2.25bn from the World Bank at a one percent interest rate.
