Nigeria went bankrupt as debt payment exceeds revenue

Nigeria's fiscal position deteriorated in the first four months of the year as the cost of debt repayment exceeded government revenue in the first quarter of 2022.

According to the details of the Fiscal Performance Report 2022 from January to April, Nigeria's total revenue stood at N1.63 trillion while debt service stood at N1.94 trillion. which shows a discrepancy of over N300 billion.

Nigeria's Minister of Finance, Budget and National Planning, Zainab Ahmed, on Thursday warned that urgent action is needed to address the country's revenue and spending efficiency challenge at national and sub-national levels .

The report showed that the oil and gas federation's gross revenue for the first four months of the year was projected at N3.12 trillion, but as of April 30, only N1.23 trillion had been realized, which represents a performance of just 39%.< /p>

Despite rising oil prices, the report showed oil revenues underperformed due to large oil production shortfalls, such as shutdowns resulting from pipeline vandalism and theft of crude oil, as well as the high cost of gasoline subsidies due to the higher landing costs of imported products.

However, non-oil taxes were slightly below target, with an average performance of 92.6%.

"Revenue performance is expected to improve in the second half of 2022 thanks to concerted efforts to combat oil theft and pipeline vandalism, the report said. It added that there is also seasonality for some non-oil taxes, which means the country expects to collect significantly more in the second half of the year.

“Improved revenue collection should also moderate the debt service-to-revenue ratio, which is currently above our target level,” the report says.

The expectation of improved revenue collection should also moderate the debt service-to-revenue ratio, which is currently above the country's target level.

In the first quarter of 2020, Nigeria's debt service as a percentage of revenue rose to 99%, according to the Medium Term Expenditure Framework and Fiscal Strategy (MTEF/FSP) report released by the Federal Ministry Finance, Budget, and National Planning.

Data showed that in the first quarter of 2020, Nigeria incurred a total sum of N943.12 billion in debt servicing while the Nigerian government retained revenue at N950.56 billion. Indeed, Nigeria's debt service to revenue ratio was estimated at 99% during the period.

On Thursday, the new report showed that the Nigerian government's share of oil revenue in the first quarter of 2022 was 285.38 billion naira (representing a performance of 39%), while non-oil tax revenue totaled 632, N56 billion or 84%. Essentially, the government generated N401.8 billion from Corporate Income Tax (IRS) and Value Added Tax (VAT), with the recoveries of IRS and VAT being N298 respectively. .83 billion naira and 102.97 billion naira, or 99% and 98% of their respective targets.

Customs collections (composed of import duties, excise and fees, plus special levies on the federation account) tracked the target of N76.77 billion (25.42% ) while other income was N664.64 billion, of which independent income was N394.09 billion.

The report notes that for Nigeria, “fiscal risks are somewhat elevated,” following weaker-than-expected national economic performance and structural problems in the national economy. He warned that revenue generation remains the nation's main fiscal constraint and that the systemic problem of resource mobilization has been compounded by recent economic downturns.

Underlying factors also include the war between Russia and Ukraine, which the report says has taken on a new and worrisome dimension with serious implications for food and energy prices. He listed the resurgence of COVID -19 in some major economies, which has led to a slowdown in economic activities in these countries; as well as a resurgence of high inflation in most economies, causing monetary tightening in those economies with the inherent negative impact on capital inflows to emerging market economies.

The difficult national macroeconomic and trade environment and the negative impact of insecurity on the national economy were also identified as contributing factors.

“Efforts will, however, focus on improving tax administration and collection efficiency,” the report says.

"Crude oil production challenges and PMS subsidy deductions by NNPC pose a significant threat to the achievement of our revenue growth...