Abuja and Lagos — Nigeria's debt burden will hit N32.91 trillion as the federal government has notified the National Assembly of a fresh plan to borrow N4.28 trillion to fund the 2021 budget.
Daily Trust reports that the country's debt stocks currently stood at N28.63trn at the first quarter 2020.
This is even as just only about 30 percent of the 2020 budged has been implemented so far.
The planned borrowing of N4.28trn was contained in the Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) forwarded to the Senate Tuesday by President Muhammadu Buhari for approval.
The final draft of the budget would be prepared based on the parameters and fiscal assumptions of the approved 2021-2023 MTEF/FSP.
In the fiscal document, the government projected the sum of N12.65 trillion for the 2021 budget.
It also projected the sum of N5.16 trillion as budget deficit for 2021 up from N4.98trn in the 2020 budget.
The N5.16 trillion deficit represents 3.62 per cent of estimated GDP, well above the threshold of 3 per cent stipulated in the Fiscal Responsibility Act 2007, according to the document.
The government noted that the deficit would be financed by new foreign and domestic borrowing of N4.28trn; N205.15bn from privatization proceeds and N674.11bn draw-downs on existing project-tied loans.
It said that the projected debt service/revenue ratio at 47 percent (actual for 2019 was 58 per cent) raises some concern about the sustainability of FGN debt.
According to the government, the country is faced with a serious revenue problem rather than a classic debt problem.
A political economist and faculty member at the Lagos Business School, Professor Bongo Adi, said: "It is not about borrowing money, somebody has to play, and the burden of payment will be burned by the ordinary citizens.
When the money is borrowed, we don't have the institutions to guarantee conversion to value.
"Our currency keeps losing value. We become a highly indebted country and poverty becomes endemic.
The result is that the funds that we need to provide social services will go to debt service."
According to him, the real question before the fiscal managers is: what are the options if the federal government chooses not to borrow?
He said: "If the kind of money people are wasting in government agencies is anything to go by, it means we are borrowing to waste, so how can we be justifying borrowing in the first place."
A fellow of the Institute of Chartered Accountants of Nigeria and the Chartered Institute of Taxation of Nigeria, Mustapha Hussain Olanrewaju, noted that borrowing to fund a budget is not bad in itself, it has to be a function of the nation's revenue capacity.
"A point where our revenue is unable to support our borrowing and this is largely because Nigeria borrows mostly for consumption.
"If a borrowed fund is not applied to projects that can generate revenue in return, there is no way the fund will be able to fund itself.
"So, any extra borrowing without improving on our revenue sources will amount to excessive gearing," he said.
He advised the Federal Government to expand its tax bracket by bringing more taxpayers into the tax net.
"A lot of Nigerians do not pay tax, so there is a need to drive more non-oil taxes."
Prof. Ndubisi Nwokoma, Director, Centre for Economic Policy Analysis and Research, University of Lagos, expressed concern over what he called "the penchant by the current administration to borrow money at the slightest provocation."
He said the government had not made serious efforts to reduce the cost of governance and block leakages.
The economist recalled that the 2020 budget had about N2.9 trn allocated for debt servicing.
He disagreed with the excuse by the government on shrinking revenue, saying, "It is only when you want to maintain your level of expenditure that the government becomes a serious problem but if you cut down on your expenditure, the revenue will not be a serious problem."
Nwokoma is also concerned about the country not getting value for money with the projects being undertaken with the loan, noting that the government in the last five years had tripled the level of public debt.
"They met about N12.1trn debt in 2015, now we are talking of over N36trn and they are borrowing more.
"But we cannot see the trickling of infrastructure," he added.
Also reacting, Muhammad Ali, an Economics lecturer at Prince Abubakar Audu University, Anyigba, Kogi State, said over the years, Nigeria's budget had always been with borrowing as part of sources of financing the budget.
He noted that 2021 budget could not have been different in view of the yawning development gaps within limited resources and the impact of the coronavirus pandemic which has slowed down economic activities and reduced global energy demand resulting in downfall in the prices of crude oil which contributes 70% of government revenue.
He said the debt component of 2021 budget has both negative and positive implications.
"Looking at the proposed debt figure, N4.28bn, that is around 33.8% of the total budget.
"The debt will be financed into the future which implies giving more burdens to posterity thereby undermining the need for sustainable development which is the development that takes care of the present without undermining the welfare of the future generation.
"It is clear that the debt being above 3% of proposed GDP has legal implications.
"But away from that, it is not the issue of debt to GDP ratio.
"It is the issue of debt sustainability ratio" he added.
"There is need for reduction of recurrent expenditure and making the informal sector a major part of the sources of national savings in Nigeria" he said.
An Abuja-based financial economist, Samson Simon Galadima, said Nigeria's level indebtedness had reached unsustainable heights stressing that the problem was not debt to GDP ratio (even though that is above the level set by the fiscal responsibility act) anymore, but a debt service to revenue ratio problem.
"And at present, debt service consumes virtually everything generated as revenue.
"If we continue to borrow ( which is clearly the case as we intend to embark on deficit spending), then our problem would likely become worse," he said.
'We want 2021 budget by September'
The Senate yesterday urged President Muhammadu Buhari to expedite work on the 2021 budget estimates to ensure its timely presentation to the National Assembly by the end of September.
Senate President, Ahmad Lawan stated this in his remarks after referring the 2021 - 2023 Medium Term Expenditure Framework and Fiscal Strategy Paper request to the Senate Committees on Finance; and National Planning for further legislative work.
The Senate president charged both committees to engage the Ministry of Finance, Budget and National Planning on the MTEF/FSP request.
He also asked the committee to support revenue-generating agencies towards meeting expected revenue targets.
"We need to ensure that they have all the support that they require from the National Assembly, particularly the Senate, to meet their targets.
"Meanwhile, the executive should continue to work on the preparations for the 2021 budget, and by this we are also equally committed to ensuring that we receive the budget estimates at the end of September and that we are able to consider the budget and get it passed before the end of December to repeat what we did for budget 2020," Lawan said.
The committees are expected to report back to the Senate in four weeks.
Abdullateef Salau, Francis Iloani, Zakariyya Adaramola, Chris Agabi and Lateefat Opoola, Sunday M. Ogwu, Christiana T. Alabi & Abdullateef Aliyu