Tough times are already here for the Federal Government, as its debt servicing surpassed retained revenue by as much as 310 billion in the first four months of 2022. This is the first time the country’s debt service to revenue ratio would hit or surpass 100 percent.
Detailed analysis of the overview of the fiscal position of the first quarter (January to April) indicated that the FG spent 1.93 trillion on debt servicing, which was about 20 percent higher than the retained revenue pegged at 1.63 trillion for the same period.
The document was disclosed at the 2023-2025 Medium Term Expenditure Framework and Fiscal Strategic Paper (MTEF and FSP) Public Consultation in Abuja, yesterday.
While giving updates on the budget performance, the Minister of Finance, Budget, and National Planning, Zainab Ahmed, said serious action is required to address revenue underperformance and expenditure efficiency at national and sub-national levels.
The retained revenue was also about 51 percent short of the prorated target for the four months as per the 2022 Appropriation Act, which target was 3.32 trillion.
The actual total spending for the period was also less than the calculated prorated spending, but with a far smaller margin than in the case of revenue performance.
The government spent N4.72 trillion, which was about four-fifth of the 5.77 trillion spending estimate for the period. The expenditure was about 190 percent higher than the earned revenue.
The data also showed that debt servicing alone took as much as 41 percent of the total spending, while personnel cost (including pensions) was approximately 27 percent or 1.26 trillion, leaving a meager 773.6 billion for capital expenditure (CAPEX) or 16 percent.
The amount incurred on debt servicing exceeded expert projections and previous records. Last year’s debt servicing to revenue ratio was 96 percent while Agusto & Co projected that the figure could exceed 80 percent this year.