Nigeria needs to fund 2021 budget through borrowing – Finance minister

• SEC worries over rising debt servicing

Minister of Finance, Budget and National Planning, Zainab Ahmed, says Nigeria has to borrow to finance its budget given the urgent need to build infrastructure required for creating an enabling environment.

But the Securities and Exchange Commission has expressed worry over the increasing amount being spent on debt servicing by Nigeria, saying it constitutes a major economic threat.

The minister stated this on Thursday at the 5th Annual Budget Seminar of the Securities and Exchange Commission with the theme, “Financing Nigeria’s budget and infrastructure deficits through the capital market”.

She said this was further underscored by the current global pandemic with its attendant effects to Nigeria’s daily economic and social activities.

She said, “In order to provide the necessary infrastructure and still continue to meet other immediate expenditure needs, government often adopts deficit budgets which have to be financed through borrowing.

“In this regard, the capital market is very key. Of course, experience has shown that the Nigerian capital market has been very supportive in providing the necessary funds to finance government programmes and projects.”

The minister also said, “The (2021) budget has a total aggregate capital expenditure of N4.37tn amounting to 32.2 per cent of the total expenditure. The budget also has an overall deficit of N5.6tn to be financed almost equally from domestic and foreign sources.”

Nigeria, according to her, needs to spend more now on infrastructure and other capital projects, as the benefits of spending has resulted in Nigeria coming out of recession after two quarters of negative growth recently.

SEC, in a report presented at the forum by Afolabi Olowookere, its Head of Economic Research and Policy Management Division, Office of the Chief Economist, stated, “Total public debt has increased from N5.24tn in 2010 to over N32tn in 2020; still fine at around 20 per cent of GDP (Gross Domestic Product). But rising debt service is a threat. Also shocks to commodities price (are) affecting revenue. And low tax to GDP ratio.

“Moving towards improved sustainability may require future debt tied to revenue-generating projects.”

It observed that Nigeria’s budget had more than doubled in the last 10 years, while the country’s deficit had increased several folds.

“But capital expenditure and infrastructure estimates have not increased much. Implying deficit is often incurred to finance short-term consumption (unproductive) items,” it stated.

The SEC report also stated that the Federal Government’s Economic Recovery and Growth Plan projections were largely unmet.