Mayowa Benson’s decision to buy a brand-new car last month after a lucrative one-off deal sparked outrage among his family.
Mayowa was two years behind on rent and struggling to keep his four children in school after his income plummeted a few years ago. Even after moving to a smaller apartment and transferring the kids to a more affordable school, the family remained in dire straits.
The new car, however, was equivalent to 10 years of rent or five years of his children’s school fees. When Mayowa drove it home, his family’s reaction was a mixture of shock and anger. His wife, in particular, was stunned, having been constantly reminded of the need for frugality to weather their economic hardships.
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Like Mayowa, like Nigeria
Mayowa’s actions mirror those of the Nigerian government.
Recently, the government spent $100 million on a new Airbus A330 aircraft for President Bola Tinubu, even as the country grapples with a growing fiscal deficit due to declining revenues.
The N150 billion ($100 million) spent on the aircraft represents more than a third of the meagre N420 billion which the Federal Government earned in April 2024, according to the latest data.
April’s revenues hit an eight-month low, resulting in a fiscal deficit of N824.8 billion.
The figures reveal an even bleaker picture: the government didn’t generate enough revenue to cover its debt obligations.
Despite a slight 2 percent dip, debt service costs totalled N563.8 billion, leading to a debt service-to-revenue ratio of 134 percent.
Actual revenue for April was also 74% percent below the budgeted amount of N1.6 trillion. From January to April, the Federal Government collected approximately N2.0 trillion in revenue but spent around N4.9 trillion, resulting in a fiscal deficit just shy of N3 trillion.
Rising Fiscal Deficits Lead to Escalating Debt
A fiscal deficit occurs when a government’s expenditure surpasses its revenue within a fiscal year. Nigeria has consistently faced this problem, with expenditures outstripping revenues year after year. The only exceptions were 1995 and 1996, with surpluses of N1 billion and N32.05 billion, respectively.
The government has a history of overestimating revenue projections to justify proposed expenditures. This problem has worsened over the past nine years as government spending increased while oil revenues, once over 70 percent of the budget, dwindled. To cover these deficits, Nigeria has relied on borrowing, pushing the nation’s total debt stock to N121.67 trillion as at the end of 2023, an increase of N24 trillion from the previous year, with naira devaluation further exacerbating foreign debt costs.
Read also: Nigeria’s fiscal deficit drops to N6.9trn as devaluation boosts revenue
In 2023, the Federal Government recorded a N13.50 trillion fiscal deficit, generating only N5.99 trillion in revenue but spending N19.50 trillion.
According to analysts at FBNQuest, the persistent underperformance of the oil sector, due to pipeline vandalism and theft, has significantly contributed to these revenue challenges.
“For context, a closer look at the composition of federally collected revenue receipts shows that revenue from oil sources fell by 33 percent month-on-month to N494.8 billion in April 2024,” said Tunde Abidoye, an analyst at the Lagos-based FBNQuest.
Oil revenues were significantly below the monthly budgeted benchmark of N1.8 trillion.
Once Africa’s top oil exporter, Nigeria’s oil production has slumped by nearly 50 percent from its peak in 2005, largely due to insecurity and lack of investment, preventing the country from meeting its Organization of Petroleum Exporting Countries (OPEC) quota. Recent OPEC data indicates that Nigeria produced 1.3 million barrels of crude oil per day in July 2024, highlighting the ongoing decline in one of the country’s critical revenue sources.
A new aircraft for the pain?
The government’s purchase of a new aircraft is the latest of a long list of occasions where the government has demonstrated “fiscal recklessness and dishonesty” as Oby Ezekwesili, former education minister, put it when describing the purchase.
The government’s decision to purchase a costly new presidential aircraft has only deepened the frustration and disillusionment felt by many Nigerians contending with soaring inflation and rising poverty.
The cost-of-living crisis, which has ignited widespread protests, is the worst the country has seen in a generation.
Despite being Africa’s most populous nation and rich in oil reserves, Nigeria’s economic woes have plunged millions into hardship. By 2050, Nigeria is projected to become the third most populous country in the world, tied with the United States after India and China. Yet, this demographic boom is overshadowed by severe economic challenges.
Critics point to the government’s economic policies, which were intended to save more money and attract foreign investment but have instead exacerbated the crisis.
These measures have driven the inflation rate to a 28-year high, while the naira has plummeted to record lows against the dollar. Today, at least 63 percent of Nigerians live below the poverty line, struggling to afford basic necessities.
The government’s inability to create sufficient job opportunities has further fuelled public discontent. Compounding these economic difficulties is the ongoing conflict in the North-East, where Nigeria has been engaged in the world’s longest-running war against militancy.
Analysts say as the gap between the government’s spending decisions and the lived realities of Nigerians widens, the leaders will face a difficult time convincing people to tighten their belts any further.
For Mayowa Benson, he has since put his new car up for sale.
