29 December 2015, Abuja – The Federal Government has proposed a sum of N1.475tn to service the nation’s debt in the 2016 fiscal period.
The proposal is contained in the budget document, which was submitted by President Muhammadu Buhari to a joint session of the National Assembly last Tuesday.
In the fiscal document, a copy of which was obtained from the website of the Budget Office of the Federation, the sum of N1.30tn was planned to be spent on servicing the domestic component of the nation’s debt, while the sum of N53.48bn was proposed for foreign debts.
In addition, N113.44bn was proposed to be set aside for a sinking fund that would enable the government to retire maturing loan obligations.
The 2016 budget has a fiscal deficit of N2.22tn, representing 2.16 per cent of Nigeria’s Gross Domestic Product.
The deficit, according to the President, will be financed from new borrowings of N1.84tn made up of domestic borrowing of N984bn and foreign borrowing of N900bn.
This, according to the budget document, is expected to increase Nigeria’s overall debt profile to 14 per cent of the GDP.
Buhari had said, “We have proposed a budget of N6.08tn, with a revenue projection of N3.86tn, resulting in a deficit of N2.22tn. The deficit, which is equivalent to 2.16 per cent of Nigeria’s GDP, will take our overall debt profile to 14 per cent of our GDP. This remains well within acceptable fiscal limits.
“Our deficit will be financed by a combination of domestic borrowing of N984bn and foreign borrowing of N900bn, totalling N1.84tn. Over the medium term, we expect to increase revenues and reduce overheads, and to bring the fiscal deficit down to 1.3 per cent of the GDP by 2018.”
Finance analysts, who spoke to our correspondent, expressed concern about the huge fiscal deficit contained in the budget proposal, stating that it might affect the rate at which the debts would be repaid.
For instance, the Lead Director, Centre for Social Justice, Mr. Eze Onyekpere said, “We are concerned about the fixing of the crude oil price benchmark at $38 per barrel when the commodity currently sells at $32 per barrel. The implication is that the resources to finance the budget may not be fully available.
“The huge deficit in the sum of N2.22tn, which is over one third of the overall revenue and which will complement the retained revenue of N3.86tn, is another area of concern. The fact that the country shall borrow about N1.84tn to finance the deficit and also have to set aside N1.36tn for debt servicing is not a welcome development. We are accumulating debts in geometric proportions, whilst our ability to repay is not growing as fast.”
Statistics obtained from the website of the Debt Management Office put the country’s total debt profile at $63.8bn.