By Adewale Sanyaolu
Nigeria’s huge debt profile appears to have attracted the attention of international business consulting firm, PriceWaterCoopers (PwC) which has warned that the development, including shrinking debt service to revenue ratio and foreign exchange liquidity constraints, already exacerbated by the COVID-19 pandemic have continued to impact government earnings.
The firm in its highlights of Nigeria’s 2022 Budget of Economic Growth and Sustainability released recently said while some of the revenue generating initiatives in the budget are commendable, it needs to explore avenues to diversify export revenue sources away from crude oil which currently accounts for more than 80 per cent of total foreign exchange receipts.
It explained that the 2022 budget has a deficit of about N6.25 trillion, which is approximately 3.39 per cent of GDP and slightly above the 3 per cent ceiling set by the Fiscal Responsibility Act 2007 (FRA).
‘‘However, the president alluded that the expenditure level was necessary to assist with overcoming current security challenges and accelerate post-recession growth. The President insists that Nigeria only has a revenue challenge and not a debt sustainability problem,’’ It said.
The deficit, according to PwC is expected to be financed by new borrowings, privatisation proceeds and drawdown on loans secured for specific projects.
It added that non-debt recurrent expenditure of N6.83 trillion is the largest expense item, with 60 per cent relating to personnel costs at N4.11 trillion.
The budget highlights explained that the capital expenditure budget of N4.89 trillion represents an increase of 18 per cent compared to 2021, and about 30 per cent of total 2022 expenditure while debt service expenditure is estimated at N3.61 trillion, representing about 35.6 per cent of the projected revenue for the year.
‘‘The President highlighted that the loans would be directed at financing critical development projects and programmes and highlighted plans to grow the revenue-to-GDP ratio from about about 8 per cent to 15 per cent by 2025,’’.
The PwC report advised government to also plug leakages in its spending, such as reviewing the current petroleum subsidy regime for total removal and ensure that it is targeted only at most vulnerable Nigerians.
In addition, it stated that concerted and coordinated efforts are required to improve the policy environment and address insecurity in order to boost domestic investment and attract foreign direct investments.
The government, it said, also needs to ensure speedy ratification and strategic implementation of the Africa Continental Free Trade Agreement (AfCFTA) to position Nigeria as a choice investment destination in Africa while it is expected that a robust implementation of the Petroleum Industry Act (PIA) would promote significant investment in the oil and gas sector, stimulate economic growth and sustainable development.