FG spent 74% on debt servicing in the first 8months of 2021 – Finance Minister

…says borrowing by FG was instrumental to Nigeria’s exit from recession

The Federal Government has revealed that it spent the sum of N2.89 trillion on debt servicing between January and August 2021. This debt servicing figure is about 74% of the revenue when compared with the N3.93 trillion total revenue generated by the federal government within the period under review.

This was disclosed by the Minister of Finance, Budget and National Planning, Zainab Ahmed, during the public presentation and breakdown of the highlights of the 2022 appropriation bill held in Abuja on Friday, according to Punch.

Giving a further breakdown of the expenditure made within the first 8 months of 2021, Ahmed said out of the total expenditure of N8.14 trillion, the sum of N2.88 trillion had been spent on debt service, N2.75 trillion for personnel cost, including pensions, while N1.75 trillion had been expended on capital projects.

Ahmed said that the government generated a total of N3.9 trillion which includes, company income tax of N547.5 billion, Value Added Tax collections of N235.7 billion, customs collections of N338.6 billion and other revenues which amounted to N1.7 trillion.

Ahmed in her breakdown said, “For the 2021 performance, between January and August, revenue generated was N3.93tn which was 73 per cent of the prorated target. Out of this amount, CIT and VAT collections were N547.5bn and N235.7bn respectively representing 121 percent in the case of CIT and 148 per cent in the case of VAT of the prorated target.

“Custom collections 338.6bn represents 99 per cent of prorated target. Other revenues amounting to N1.7tn of which the federal government independent revenue of N691.36bn while GEOs revenue was N873.5bn.

“On the expenditure side, N8.14tn representing 84 per cent of the N9.71tn prorated expenditure from January to August has been spent. This performance includes expenditure estimates of Government Owned Enterprises (GEOs) but doesn’t include project tied loans

“Of the expenditure, N2.89tn was utilized for debt servicing, while N2.57tn was utilised for personnel cost including pension and gratuities. As at the end of August, N1.75tn has been expended for capital projects, of this amount, N1.723tn represents 81 per cent of the aggregate provision for Ministries Department Agencies’ capital prorated, while N36.01bn is expenditure from GEOs.

“So the story here is that the revenue performance aggregate is 73 per cent but the fact is that the non-oil revenue performing very well above the target, while the oil and gas revenue is lagging.’’

She pointed out that the government borrowed the sum of N3.65 trillion between January and August to finance its N4.3 trillion fiscal deficit.

She noted that the outstanding deficit was made up with proceeds from the sales of government assets through the privatisation process and a drawdown of bilateral and multilateral tied loans.

She said, “As at August we had a fiscal deficit of N4.29tn, this is against the prorated target of N4.61tn and we financed this deficit by utilization of N136.77bn from proceeds of the sales of government assets through the privatisation process, also by drawdown of bilateral and multilateral tied loans in the sum of N473.12bn and new borrowings of N3.65tn from both domestic and foreign sources.’’

The Federal Government had assured Nigerians that its rising debt portfolio is still within sustainable limits despite serious concerns raised by experts and multilateral organizations.

The Finance Minister, Zainab Ahmed, had said that though revenue currently remains the nation’s fiscal challenge, government remained committed to the effective implementation of the Strategic Revenue Growth Initiatives (SRGI).

The minister,  in her defence of Nigeria’s mounting debt has insisted that the Federal Government’s borrowings played a huge role in the country’s quick exit from recession.

This is as the government explained that it had to spend its way out of recession mostly in the form of capital expenditure for the provision of infrastructural development.

This was made known by Ahmed during a public presentation and breakdown of the 2022 Appropriation Bill on Friday in Abuja. The budget breakdown is coming a day after President Muhammadu Buhari presented the Appropriation Bill to the National Assembly.

Ahmed said, “Having witnessed two consecutive recessions, we have had to spend our way out of recession which contributed significantly to the growth of our public debts. It is unlikely that our recovery from these recessions would have been as fast without the sustained government expenditure funded partly by debt.”

Despite concerns raised by critics and opposition parties, the finance minister explained that borrowings have helped the government in providing infrastructure to boost the economy as well as help curb the country’s rising level of insecurity.

She said, “Borrowings are essential to enable us to deploy necessary capital expenditure and invest in human capital development.

“To compound matters, the country has technically been at war, with the pervasive security challenges across the nation.

“This has necessitated massive expenditures on security equipment and operations, contributing to the fiscal deficit; Defence and Security sector accounts for 22% of the 2022 budget!”

She further assured Nigerians that the federal government’s debt portfolio is still within sustainable limits.

It can be recalled that on Thursday, October 7, 2021, President Muhammadu Buhari presented a N16.4 trillion 2022 Budget of Economic Growth and Sustainability to a joint session of the National Assembly.

The finance minister had yesterday said that the Federal Government was ready to borrow from both local and foreign sources to finance the N6.258 trillion deficit in the proposed 2022 budget.

The move was greeted with controversy across the country. Critics and members of the opposition said the development, as well as other borrowings by the Federal Government, call for concern. (Nairametrics)