Isn’t it clear that our leaders are busy borrowing for consumption? Come to think of it, who will pay back this huge debt burden?
With the presentation of the proposed 2019 Federal Government Budget by President Muhammadu Buhari on the 19th of December, 2018 to the National Assembly for consideration and possible passage into law, various stakeholders in the country are on the lookout for what the budget holds for them. As much as we know that the Budget is not just a document containing mere figures but rather a fiscal document that aids the implementation and realization of government plans and visions within a fiscal year, therefore, much importance is placed on it because it shows in real terms what the economy will look like in a particular fiscal year; how much will be generated within the year; how much will be spent within the year; which sector within the economy will the government be spending more; how much will be borrowed to finance any shortfall or overrun in the projected revenue and expenditure respectively.
The President presented a total proposed Federal Government Budget of 8.827 trillion Naira tagged the Budget of Continuity. Of this amount, 492 billion Naira representing 5.58% of the overall vote is budgeted for Statutory Transfers, 2.264 trillion Naira representing 25.65% of the overall vote is budgeted for debt service, 4.038 trillion Naira representing 45.75% of the overall vote is budgeted for recurrent expenditure (non debt) and 2.032 trillion Naira representing 23.02% of the overall vote is budgeted for capital expenditure. The overall revenue projection for the year is 6.967 trillion Naira which results to 1.86 trillion Naira budget deficit to be financed by borrowing from domestic and foreign sources. The 2019 Budget of Continuity is 3.22% less than 2018 budget which stood at 9.120 trillion Naira. Despite the reduction in the total 2019 proposed budget, the recurrent budget is higher than the 2018 recurrent budget by 15% while the capital budget is less than the 2018 capital budget by 29.29%. The 2019 proposed budget has an increased debt service by 2.73% compared to 2018 budget.
From the above analysis, Nigeria will have to borrow more in order to finance the 2019 budget deficit of 1.86 trillion Naira which will automatically increase the overall present Nigeria’s public debt stock. On the 28 December, 2018 the Debt Management Office Nigeria through a press release revealed that the Nigeria’s Total Public Debt Stock comprising the External and Domestic Debts of the Federal Government of Nigeria (FGN), the 36 States and the Federal Capital Territory (FCT) stood at USD73.213 Billion or N22.429 Trillion. The 2019 budget deficit which the government planned to finance by borrowing the total sum of N1.649 trillion will further add to the total debt stock of the country and increase provisions for debt service repayment and servicing in subsequent fiscal years. It is true that the budget deficit which is 1.33% of the GDP is within the threshold stipulated in theFiscal Responsibility Act (FRA) 2007 but it is very important to state that debts are not paid back with GDP but with available revenue. The Projected debt service is 26% of the overall 2019 vote and 32% of the projected oil and non-oil revenue. It is pertinent to state that Nigeria hardly meets up with her revenue projection for each year as previous year records have always shown a big shortfall in the realization of projected revenue. Now when there is a shortfall in revenue, salaries and overheads will be paid, debt will be serviced and paid while capital project implementation will always suffer as the case has been.
What a heavy burden we bear as Nigerians resulting from the constant borrowing for each year both from the State and Federal Government without corresponding benefit to attest to the huge debt. When you add up the top 12 MDAs Capital Expenditure Allocations in the 2019 Budget which are Ministry of Power, Works and Housing, Defense, Agriculture, Water Resources, Interior, Education, Transport, Industry, Trade and Investment, Niger Delta Affairs, Health and OSGF, it will amount to N1.23 trillion which is below N2.264 trillion being the amount budgeted for debt servicing. When you further expand the analysis, the overall capital budget provision of all MDAs in the 2019 budget is 23% of the overall 2019 budget while the debt service is 26% of the overall 2019 budget. That means we are spending more to service debts while we spend less on capital project that has direct impact on Nigerians
Borrowing is not actually a bad economic practice especially when it is exclusively for investment based on the provision of the Fiscal Responsibility Act 2007 but it becomes a wrong practice when a country borrows for consumption. The increase in 2019 recurrent budget is mainly for the payment of personnel salaries and without any much resultant contribution to the economy of the county. The present ongoing strike of both Polytechnics and Universities in the country is a serious issue and when a county pays less attention to her educational sector then the country is bound to witness backward movement in the development of the right human resources that will advance the economy.
Where is the bulk of the debt being incurred by the Federal and State Government going into when Nigerians cannot enjoy good roads, affordable and quality healthcare, affordable and quality education, good accommodation, constant power supply and improved standard of living. Isn’t it clear that our leaders are busy borrowing for consumption? Come to think of it, who will pay back this huge debt burden? Is it the future generation that our present leaders do not care for? Is it those students seating back at home? Is it those graduates without job? Is it the imbalanced tax system?
When you even think of the plan put in place to finance the 2019 budget, you will be shocked to know that the government may not have planned for the specific sources from which the projected borrowing to finance the deficit will come from. Normal practice demands that just as the Executive present the 2019 budget, they will as well present the debt plan so that immediately the budget is passed, the debt plan will also be approved to kick start implementation of the 2019 budget from all sources. This is usually not done and it slows down the implementation of capital projects especially when there is substantial shortfall in the projected revenue.
Come to think of it, must we always have a budget deficit? Can’t we plan based on the available resources and ensure that all leakages in revenue are blocked? Can’t the Federal Inland Revenue Service ensure that all Nigerians get into the tax net? Can’t the Fiscal Responsibility Commission ensure that all MDAs that are supposed to remit operating surplus do so in 2019?
Abel writes from Lagos