FG’s borrowings exceed budgeted amount by 28.3%

By the time the National Assembly approves the recent request by the federal government to borrow additional fund, external borrowings would exceed budgeted amount for 2021 by 28.3 per cent, analysts have warned.

They said, external borrowings, which include the Eurobond and the fresh request will be much higher than what was agreed on in the budget.

“Using the US Fed average Dollar-to-Euro exchange rate of $1.18/€1.00 to harmonise the Euro-denominated component of the loan request, the sum of the external borrowings would amount to US$8.0bn, as against the $6.2 billion budgeted.

In naira term, this will translate to N3.3 trillion at the new official rate of N411.50/$1 and N3.0 trillion the old official rate of N379.00/$1. Sadly, the effect of the bloated borrowing would have a material impact on the size of Nigeria’s debt-service allocation in the subsequent fiscal budget”, said analysts at Afrinvest.

Nonetheless, while the current size of both the national and FG’s debt stock as a percentage of Gross Domestic Product (GDP) using 2020 nominal GDP of N152.3 trillion) remain at a sustainable level of 23.3 per cent and 19.4 per cent respectively compared to the International Monetary Fund (IMF)’s threshold of 35.0 per cent (for Low-Income Countries) and Debt Management Office (DMO)’s fiscal sustainability threshold of 40.0 per cent, the debt service-to-revenue ratio paints a different picture.

In 2020, the FG expended 82.9 per cent of her N3.9 trillion retained revenue on debt servicing. This ratio further worsened to 97.7 per cent according to the January to May 2021 budget implementation report, as FG spent N1.80 trillion of her N1.87 trillion realized revenue on servicing debt.