As the National Assembly commences work on the 2019 budget, Economic experts have raised concerns over the increased debt service ratio for the appropriation bill presented by President Muhammadu Buhari in December 2018.
For the 2019 budget, the federal government has proposed N2.14 trillion representing 24.29 percent of the total proposed expenditure, which is a 6.3 percent increase from the N2.01 trillion(21 percent) recorded in 2018 budget.
More worrisome, according to the experts is the fact that allocation for debt service over the years has remained higher than even what is earmarked for capital expenditure amid high poverty levels and underdevelopment.
In 2014, FGN spent N941.67 billion to service debts while deploying only N585.61 billion to capital expenditure. In 2015, N1.060 trillion was spent to service debt whilst investing only N384.07 billion for capital expenditure, in 2016, N1.384 trillion was spent to service debt while N1.219 trillion was capital expenditure, 2017 N1.8223 trillion was spent on debt servicing and N1.563 for capital expenditure and as at December 2018, N1.769 trillion has been spent on debt service while capital expenditure got N820 billion.
The President, in December 2018 assured that the national debt was within sustainable limits, though he stressed the need to increase domestic resource mobilization to bring down the debt-revenue ratio over the medium term, adding that 80 percent of the total debt service is to service domestic debt which accounts for about 70 percent of the total debt.
However, Eze Onyekpere, Lead Director, Centre for Social Justice, has raised concerns that the high debt service is an undue burden for the Nigerian economy adding that it becomes more worrisome when it is considered that some of the expected sources of revenue may not likely materialize.
“The debt service is on the increase, it is 24.29 percent of the overall expenditure; it also becomes 25.65 percent of the overall expenditure when the sinking fund for the retirement of maturing bonds is added to it. This is marginally above one quarter of the proposed budgetary expenditure for 2019,” he said.
He lamented further that capital projects would be made to suffer in the case of revenue shortfall as experienced in past years. “The trajectory of debt service and capital budget implementation over the years shows that capital projects are always made to suffer in case of revenue short fall.”
Abdul Ahmed, an economist based in Abuja also told BusinessDay that the debt service is quite high, and even worse when added to the amount proposed for sinking fund N120 billion (1.36 percent) adding that a side by side comparison of the proposed retained revenue (N6.967 trillion) and the sum of debt service and sinking fund (N2.264 trillion) create a picture of a feeble economy .
“The sum of debt service and the sinking fund is 32.48 percent of the retained revenue, while it is 25.6 of the overall budgetary expenditure of N8.826 trillion, this is on the high side”.
“Also, further borrowing as projected in the 2019 appropriation bill would increase the stock of public debts which would require additional resources to service in the coming years”, he added.
Cynthia Egboboh, Abuja
