The Federal Government’s spending on personnel costs and debt servicing exceeded total revenues in 2022, the World Bank has stated.
It disclosed this in the June 2023 edition of the Nigeria Development Update.
According to the Washington-based bank, this was the first time the Federal Government’s personnel costs and debt servicing surpassed its total revenue.
The bank added that as a result of this, spending on capital expenditures weakened.
Personnel costs and interest payments on loans made up 59 per cent of the government’s total expenditures.
The Federal Government spent 102 per cent of its revenues on personnel costs and interest payments during the period under review.
The report read, “The quality of spending weakened in the face of financing constraints and mounting debt. Capital expenditures have been volatile, including steep contractions such as in 2022 when fiscal pressure was acute, making it more difficult to close Nigeria’s large infrastructure gap and weighing on future growth. Overall, the rigidity of expenditure has increased, squeezing fiscal space for the discretionary spending needed to meet development objectives.
“Personnel costs and interest payments comprise a growing share of total general government expenditures (59 per cent in 2022) and for the first time in 2022 exceeded total government revenues (102 per cent).”
The PUNCH earlier reported that the amount budgeted for personnel costs has increased from N2.29tn spent in 2019 to N4.11tn in the 2022 budget, according to data obtained from the budget implementation report of the Federal Government.
This was an increase of N1.82tn or 79.48 per cent in three years, signalling a significant rise in recurrent expenditure.
According to data from the Debt Management Office, the PUNCH also reported that Nigeria’s debt servicing bill went up by 14.68 per cent to N3.36trn in 2022.
DMO said N2.93tn was spent on external and domestic debt servicing payments in 2021.
The PUNCH also reported that Nigeria’s debt servicing cost has increased by 55.71 per cent to N1.24tn in three months.
According to data obtained from the Debt Management Office, between October and December 2022, the country spent N406.77bn on domestic debt servicing, while it spent $312.27m (N143.74bn) on external debt servicing, giving a total of N550.51bn.
However, between January and March 2023, Nigeria spent N874.13bn on domestic debt servicing, while it spent $801.36m (N368.87bn) on external debt servicing, a total of N1.24tn.
The exchange rate of the DMO, which was $1=N460.3 was used for the external debt servicing.
The Lagos Chamber of Commerce and Industry expressed worry over the country’s debt burden, especially in the face of stunted revenue growth, the large presence of decaying infrastructure and the unsustainable burden of oil subsidy overhang.
In a recent statement, the chamber said the ratio of debt service to government revenue at about 90 per cent remained alarming and unsustainable.
It said both capital and interest payments on borrowed sums exposed the country’s fiscal vulnerabilities and that the government should, as a matter of urgency, emphasise strategies for revenue growth while blocking leakages.
The chamber further advised the government to shift focus to equity financing, divestment, or shedding of its equity holdings in state-owned enterprises, real estate, and infrastructure to reduce its debt commitments and improve its fiscal situation.