CSO: Allocating 24.73% of Budget to Debt Service is Indicative of Unsustainable Debt Profile

Ndubuisi Francis

A civil society organisation (CSO), Centre for Social Justice (CSJ) has expressed apprehension that dedicating 24.73 per cent of the 2017 aggregate budget of N7.441 trillion to debt service points to a direction that Nigeria’s debt profile is becoming unsustainable.

The National Assembly had last Thursday passed the 2017 Appropriation Bill, increasing the overall budgetary expenditure as presented last December by the executive arm from N7.298 trillion to N7.441 trillion.

Of the N7.441 trillion overall budget, 24.73 per cent or

N1.84 trillion is for debt service.

The breakdown shows that N1,488,002,436,547 is earmarked to service domestic debts; N175,882,993,952 for foreign debts, and 177,460,296707 for sinking fund to retire maturing loans.

In what it described as its preliminary reaction to the budget as passed by the legislature, CSJ said: “Dedicating 24.73 per cent of the overall budget to debt service is an indication that Nigeria’s debt profile is becoming unsustainable.

“The capital vote of 29.30 per cent is just a little higher than debt service. With a deficit financing of 2.35 trillion, the debt service is about 36 per cent of our expected revenue.

“This shows that we may soon be back to the debt situation pre the debt relief period.

The debt service compared to capital allocation of ten key ministries shows the opportunity costs of servicing debts,” the CSO said.

It also observed that the capital allocation to 10 key ministries as a percentage of debt service is 72.99 per cent while debt service is 84.49 per cent of the overall capital vote.

On financing items, CSJ expressed concern that with a benchmark oil price of $44.5 per barrel, which is close to the prevailing market rate and revenue assumptions, although not overtly optimistic, may not be realised based on prevalent economic realities.

It added that the sources of funding of the budget may not fully materialise.

“Although the benchmark production rate of 2.2mbpd is realistic, it is imperative to note that Nigeria is not yet meeting the benchmark as current production figures still fall short of the benchmark. The foregoing may lead to increased deficit financing over the implementation period,” CSJ said in the position paper issued by its Lead Director, Eze Onyekpere

Commenting on the exchange rate, the organisation noted that “with an approved exchange rate of N305 to 1USD, the budget still insists on a fixation that is not in tandem with reality. The gap between the approved rate and what is obtainable in the market is still very wide. A differential between N380 to 1USD and N305 creates multiple exchange rates in one country. “

CSJ also expressed its disapproval the failure to publicise approved Medium Term Expenditure Framework (MTEF 2017-2019)

“We note with regret the failure of the Budget Office of the Federation to publish the approved MTEF-2017-2019 on its website or on any other portal or otherwise making it available to the public. The MTEF on its website is the executive proposal which was amended by the legislature. Information about the revenue estimates available to the public have only been picked from the media.

“The right to access to information demands that this important document should be available to all Nigerians,” CSJ said.