FG Spends N1.57 Trillion on Debt Servicing in Six Months

President Muhammadu Buhari led administration spent a total sum of N3.18 trillion on debt servicing and personnel cost in six months, according to Mr. Clem Agba, the Minister of State for Budget and National Planning.

The minister’s special assistant on Media, Ojeifo Sufuyan, disclosed this in a presentation made available to the press on Sunday.

He said the Federal Government spend N1.57 trillion on debt service and another N1.61 trillion on personnel cost, including pensions in the first six months of the year.

The minister also disclosed that as of the end of June 2020, only N444.75 billion out of the N9.97 trillion appropriated for the year had been released for capital expenditure, largely due to the budget revision exercise.

This amount, he said rose to around N1 trillion by July 2020.

Nigeria has been struggling with its huge debt servicing cost since the global pandemic eroded the nation’s revenue generation in the first half of the year, bringing its debt service to revenue ratio rose to 99 percent this year. Indicating that Africa’s largest economy spends most of its revenue on debt servicing, leaving nothing for capital projects and infrastructural growth.

The minister said, “Crude oil prices declined sharply in the world market, with Bonny Light crude oil price dropping from a peak of $72.2 per barrel on January 7, 2020 to below $20 per barrel in April 2020.

“In effect, the $57 crude oil price benchmark on which the 2020 budget was based became unsustainable.

“Another key development in the international crude oil market is the massive output cut by OPEC and its allies (OPEC+) to stabilise the world oil market, with Nigeria contributing about 300,000 barrels per day of production cuts.”

Agba added, “The impact of these developments is about 65 per cent decline in projected net 2020 government revenues from the oil and gas sector, with adverse consequences for foreign exchange inflows into the economy.”

The International Monetary Fund had said Nigeria must up its tax collection efficiency to address its revenue shortage and drive growth across key sectors.

That was before the unemployment number showed that 21.8 million Nigerians are now jobless, up from 20.9 million people posted in the third quarter of 2018.

Also, the combined share of unemployed and underemployed citizens rose to 55.7 percent in the second quarter of 2020, up from about 44.3 percent in the third quarter of 2018.

Poor revenue generation amid rising debt cost, high inflation rate of 12.56 percent, low job creation and weak wage growth continues to weigh on Nigeria’s economic outlook in the second half of the year.