Nigeria may have spent a staggering 96.3 percent of its 2022 revenue to service its national debt currently standing at over N44.6trillion according to the World Bank.
This worrisome statistic was part of the Bank’s Macro Poverty Outlook for Nigeria: April 2023 brief, released by the Brittonwoods institution recently.
The report highlighted that Nigeria’s fiscal position deteriorated in 2022, with the cost of the petrol subsidy increasing from 0.7 percent to 2.3 percent of the country’s gross domestic product (GDP).
It further revealed that the country’s public debt stock remained at over 38 percent of GDP and the debt service to revenue ratio soared from 83.2 percent in 2021 to a staggering 96.3 percent in 2022. This means that almost all of Nigeria’s revenues in 2022 were utilised on debt servicing, with very little left to provide other critical infrastructure expenditures.
Accordingto the report , the nation’s fiscal deficit was estimated at 5.0 percent of GDP in 2022, exceeding the stipulated limit of 3 percent for federal fiscal deficit.
This also shows that Nigeria’s fiscal situation was far from ideal, as it was spending more than it earned and relying heavily on borrowing to fund its expenditures.
The report attributed Nigeria’s economic challenges to several factors, including declining oil production, costly fuel subsidies, exchange rate distortions, and monetisation of the fiscal deficit.
Before now, oil price booms had supported the country’s economy, but this trend changed since 2021. The report noted that Nigeria’s macroeconomic stability had further weakened, leading to a decoupling of oil revenues, fiscal deficit outturn, foreign exchange reserves, and economic growth from the cycle of higher global oil prices.
In 2022, Nigeria’s GDP growth decelerated from 3.6 percent in 2021 to 3.3 percent, driven by manufacturing, construction, and most services. However, the oil sector contracted by a significant 19.2 percent. The report revealed that growth was primarily driven by private consumption and investment from the demand side, while the deteriorating economic environment was pushing millions of Nigerians into poverty. The risks were tilted to the downside due to the lack of macro-fiscal reforms, the naira demonetisation, and an uncertain external outlook, according to the Bank.
These findings further paint a grim picture of the nation’s fiscal and economic health, as spent an overwhelming portion of its revenue on debt servicing amid significant challenges in sustaining economic growth and reducing poverty. The World Bank’s assessment underscores the need for urgent and comprehensive reforms to address Nigeria’s fiscal imbalances and restore macroeconomic stability to foster sustainable economic growth and poverty reduction in the country.