FG’s debt service-to-revenue ratio hits 183% in Q1 2023

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FG's debt service-to-revenue ratio hits 183% in Q1 2023
FG's debt service-to-revenue ratio hits 183% in Q1 2023

The Nigerian federal government’s debt service-to-revenue ratio surged to 183% in the first quarter of 2023, as revealed by data from the Budget Office.

A review of the budget implementation report for the same period indicated a total budgeted revenue of N2.16 trillion, compared to an actual revenue of N1.21 trillion.

In the corresponding quarter of 2022, the government generated an actual revenue of N1.48 trillion.

During the first quarter of 2023, debt service amounted to N2.2 trillion, surpassing the N1.6 trillion budgeted for the same period, resulting in a debt service-to-revenue ratio of 183%.

Ongoing fiscal challenges

This continued a trend of acute fiscal shortfalls in the country, with revenue targets consistently unmet and debt service obligations on the rise.

In 2022, total debt service reached N5.65 trillion, representing 97.4% of the budgeted revenue.

During the same year, the federal government’s total revenue dropped to N5.8 trillion from N6.7 trillion in the previous year, resulting in a fiscal deficit of N7.5 trillion, which was 129% of the actual revenue collected.

This trend appears to persist in 2023, with the government consistently failing to meet its revenue targets while exceeding its expenditure targets.

Total expenditure (excluding Government Owned Enterprises) exceeded budget by N3.4 trillion, and recurrent non-debt expenditure was N1.2 trillion compared to a budgeted revenue of N1.63 trillion.

The primary contributing factor to the widening fiscal deficits remains the government’s increasing debt service obligations.

A closer look at the figures shows a slight rise in total debt service to N1.3 trillion, while “Ways and Means,” the overdraft provided to the government by the central bank, recorded a debt service of N912 billion compared to a budget of N300 billion.

Capital expenditure amounted to N175 billion versus a targeted N841 billion.

The government underperformed in its financing activities, achieving only N2 trillion from domestic debts versus a budget of N2.695 trillion.

This resulted in a net deficit (excluding Government Owned Enterprises budget and project-tied loans) of N2.3 trillion for the first quarter of the year.

Meanwhile, the federal government announced its proposal for a N26 trillion budget for the 2024 fiscal year, in contrast to the current N21.8 trillion budget approved during President Muhammadu Buhari’s administration.