#2021 Budget: Nigeria to incur an additional debt of ₦6.98 trillion by 2022

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2021 budget projected revenue stands at ₦7.89 trillion, creating a deficit of ₦5.61 trillion;

Revenue generation over the past five years has not exceeded 60.9% of projected revenue, whereas expenditure attained 86.89% of the budget figure;

Further, budget deficit analysis shows an additional ₦14.19 trillion incurred, giving a 207.52% increase in four years;

Based on the analysis, the 2021 budget comes with a possible ₦6.98 trillion deficit.

Dataphyte bursts the bubble on the 2021 budget of Recovery and Resilience. While the Bill on paper promises to fix the harsh economic conditions of 2020, reality points to the contrary. Even the National Assembly’s (NASS) additional ₦505 billion to the proposed budget made things worse.

First, NASS approved the Budget amid several hidden repeated expenses. Instead, Nigeria’s legislators deemed it necessary to add half a trillion to a budget with an existing deficit of over ₦5 trillion. More so, this increment comes despite Nigeria’s poor revenue generation history. Without mincing words, the 2021 budget is another debt trap for Africa’s largest giant.

Budget Performance Analysis

Dataphyte analysis of the previous budget reveals varying differences in critical headings. Revenue generation matrix shows just 60.9% realisation projected in a five-year pool. Interestingly, the revenue generation took a downward trend from 2015 to 2018.

Worse, though, it has not risen beyond 62% mark after falling from 80.4% in 2015 to 76.45% in 2016. The performance for years after 2017 to 2019 is 52.26%, 48.56% and 61.5% sequentially. Within the first half of 2020, revenue performance was 61.52% of projected revenue.

However, the story is different for this administration’s spending. Total performance stands at 86.89% of projected spending. The entire expenses from 2016 to 2019 was never below 82%. Total expenditure proposed in 2016 stood at 84.8% of the budget. The next three years’ figures were 86.9%, 82.4% and 92.9% of the total budget.

Based on budget performance data, analysis shows a whopping deficit of 207.52%. In essence, from 2016 to 2019, Nigeria accrued ₦14.19 trillion in arrears. The deficit figure rose progressively all through the years. In 2016, the total budget deficit based on performance was ₦2.19 trillion. For the years after it, the country incurred a debt of ₦3.81 trillion, ₦4.03 trillion and ₦4.17 trillion.

2021 budget- Budget of shortfalls

Coming back to our 2021 budget of recovery. All indications point to it following the sounds of its predecessors; a trend of shortfalls. Dataphyte surmises Nigeria attains 86.89% of its projected expenditure, with just 60.9% of its estimated revenue realised. In clear terms, Nigeria will spend at least ₦11.78 trillion by the end of the year, having realised only ₦4.81 trillion; this leaves an additional deficit of ₦6.98 trillion.

What lies ahead?

Even more problematic are the dire economic implications of a mismatched expenditure performance to revenue generation. A disparity the government balanced through debt financing. It is thus no surprise the extent to which Nigeria’s debt burden has risen over the years.

But with a likely deficit of around ₦6.98 trillion in the 2021 budget, what lies ahead? What is the federal government’s (FG) game plan? Say FG borrows from local and international sources because let’s face it, there are not that many options at her disposal. What does this mean for Nigeria? It entails an increased debt burden, which historically finances recurrent expenses.

Borrowing is not a sign of weakness.

In truth, debt financing is not a sign of weakness on the part of the government. But when a country utilises such resources on less productive activities, it falls into a vicious cycle of continuous borrowing.

Similarly, there’s the issue of budget financing through arbitrary means and all its consequences. Economic consequences that Nigeria has not addressed. Some of which include inflation and currency depreciation.

Even more critical are how said funds are utilised.

As it stands, Nigeria spends 82% of her revenue on debt servicing. Accordingly, there is a need to reduce debt pressure on the economy. First steps can be ensuring improved public spending efficiency, development of local financial markets and local resource mobilisation in a transparent atmosphere.

Even more significant are the activities to which the government channels its revenue. Earlier, we said borrowing is not a sign of weakness; how FG spends said funds is of greater significance. Utilising her IGR on only social goods will not bring back yields. To that effect, investing in the industrial revolution is a way to go. Rather than the vicious cycle outlined earlier, Nigeria would step into a more productive cycle. A process where FG focuses borrowed funds on revenue-generating activities; this boosts the economy. And sooner eventually to Africa’s Giant reducing her debt burden, all the while providing jobs and improving welfare.

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