Nigeria's Rising Debt Stock, Low Infrastructure Remains Major Concern
President Muhammadu Buhari

“Nigeria’s Rising Debt Stock, Low Infrastructure Remains Major Concern”

Analysts at CSL Stockbrokers have said in a macroeconomic note that Nigeria’s rising debt with low infrastructure to show for it remains a major concern as government is face with revenue generation pressure.

It would be recall that detail of 2021 budget indicates that government will use 24% of the estimated expenditure to service the nation’s debt stock.

Meanwhile, total budget deficit for fiscal year 2021 escalated to about N6 trillion amidst weak revenue accretion from oil receipts.

Looking at growth prospect, investment experts expressed concern that Nigeria’s high recurrent costs, low revenue and escalating debt numbers is dragging economic growth.

As a result of quality of government uncoordinated policies, analysts put question market on the nation’s fiscal practice, saying it is not sustainable.

In the recently released third quarter of 2020 debt report by the National Bureau of Statistics, the total public debt hits N32.22 trillion.

However, local debt accounts for 62.18% of the total public debt in the period while external debt made up 37.82%.

CSL Stockbrokers noted that this is similar to the country’s debt structure in the same period of 2019 when domestic debt made up 68.45% of total public debt and external debt made up 31.55%. 

Whilst debt to gross domestic products, GDP, ratio remains within the acceptable threshold, analysts at the firm said they are increasingly concerned about the nation’s ballooning debt service to revenue ratio.

Recall that the Federal Government of Nigeria following a series of revisions to the 2020 appropriation bill arrived at a fiscal deficit of N4.98 trillion.

Based on the finance ministry data, an aggregation of debt monetization (N2.86trn) and new borrowings (N3.28trn) was used to finance the deficit.

The 2021 appropriation bill forecasts a budget deficit of N5.60 trillion which would be financed mainly by borrowings of N4.69 trillion, privatization proceeds of N205.15 billion and project linked bilateral & multilateral loans of N709.69 billion.

“The country’s financing structure is of concern when one considers that the budget is tilted more towards recurrent expenditure than capital expenditure and raises questions on the sustainability of the current fiscal practices”, CSL Stockbrokers said.

The significantly higher recurrent component of the budget continues to drag the country’s economic growth, resulting in poor infrastructural development, analysts explained.

“Spending more on capital projects can promote industrialization, improve local purchasing power and help the federal government’s diversification drive.

“Nigeria continues to face issues of poor revenue generation and lack of will to efficiently manage its expenditure. No significant cuts have been made to its overheads and statutory spending has continued to rise.

“Nigeria’s growing debt stock with little to show for it in terms of capital expenditure remains a major concern”, CSL Stockbrokers explained.

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“Nigeria’s Rising Debt Stock, Low Infrastructure Remains Major Concern”