Nigeria, will this year spend significant part of its revenue on debt servicing going by the 2017 budget proposal submitted by the presidency to the joint session of the lawmakers .
In specific terms, Nigeria will spend N33 out of every N100 earned in debt servicing.
Against this backdrop,the Nigeria business community, mainly formal sector Operators said they are worried about ‘debt to revenue position’ of the country, calling for a serious review of the situation.
Members of Business Club Ikeja(BCI), who made this observation at their business Luncheon organised in Lagos, said the above scenario, creates a fiscal time bomb that will diffuse in the medium term, if not addressed.
Guest speaker at the luncheon, Dr Omede Idris, who is also president of Association of Professional Bodies of Nigeria( APBN), presenting his paper on 2017 budget review said based on the year’s budget proposal, while fiscal policy makers often touted Nigeria debt to GDP ratio as a strong positive, implying greater borrowing capacity, a major concern is the nation’s debt to revenue position.
He therefore advised that government should much more look inwards than outwards in sourcing funds for its expenses.
” Drawing from these estimates, Nigeria will be spending as much as ₦33 of every ₦100 earned in debt servicing in 2017.
This scenario creates a fiscal time bomb that will diffuse in the medium term. At the moment, it also crimps the country’s capacity to plunge on infrastructure and also undertake other investments in social overheads”, he observed.
Idris, said as government intends to use the agricultural sector to diversify the economy, its policies, should focus on the integrated development of the agricultural sector through facilitation of access to inputs, improving market access, providing equipment and storage as well as supporting the development of commodity exchanges.
EwHe noted that investment into railway is one of the most important business/economic structures that will help stimulate productivity adding that in aviation, it is expected that ongoing intervention in some airports – Abuja, Kaduna, Port Harcourt, would improve much to the satisfaction of its users rand rake in more revenue through private sector investment in aircraft businesses and possibly concession the airports.
On health, Idris, noted that the budget, should expand healthcare coverage through support to primary healthcare centers and expanding the National Health Insurance Scheme.
“It should be noted that the total capital and recurrent expenditure for health in 2017, is N304 billion or 4.17 percent of total budget, being N51 billion for capital or 17 percent of sector and N253 billion or 87 percent of sector.
This compares with total of N221.7billion or 3.56 percent and N24.39 billion or 11 percent for total and capital in 2016 respectively.
” In 2017 however, it should be noted that N6.4 billion of the capital is for refund of previous counterpart by Global Alliance for Vaccine Initiative (GAVI) and Global fund for HIV/AIDS, Malaria and Tuberculosis, so the expressed capital is not truly fully available for health.
While vaccine procurement is put at N12.5 billion, there is a shortfall of N1.5 billion”.
He said the Provision of N11.2 billion for Specialist, Tertiary, and Quaternary excellence centers in various specialties including one stop cancer diagnostic and treatment center will reduce cost of medical tourism, which modestly put is US$2 billion annually to India Alone.
He said for broader Health Insurance coverage through Universal Health coverage, the inadvertent none provision for personnel, overhead and operation of the scheme, is worrisome, adding that there is hope that honoring the budgetary provision of the collective bargain will facilitate industrial harmony.
According to Idris,the 2017 budget tagged budget of Recovery and Growth was put at N7.298trillion representing 20.4 percent larger than N6.1trillion in 2016.
“Total revenue is projected at N4.9trillion, 28.0 percent higher than N3.9trillion in 2016 and fiscal deficit at N2.3trillion – implying a deficit to GDP ratio of 2.2 percent .
The deficit is to be financed by both domestic and foreign borrowings. The 2017 budget was based on assumptions of a 2.5 percent GDP growth in 2017, 20 percent income expansion in aggregate expenditure to N7.298 trillion”.
The year’s budget expenditure is split into: non-debt recurrent expenditure 41 percent, capital expenditure 31 percent , debt service 23 percent (N1.66trillion), being an 8.7 percent increase and 3rd largest component of total expenditure over N1.48trillion of 2016.
Idris, noted that the debt servicing is a consequence of increasing debt obligations while taking up 23.0 percent and 33.6 percent of gross expenditure and revenue respectively.