By the end of 2021, the world was just recovering from the impact of the COVID-19 pandemic. This motivated capital injection into the economy during the budget planning for 2022. Compared to other countries that budgeted considerable capital to develop their country, Nigeria had the lowest budget per capita.
With a proposed population of over two hundred and seventeen million, the federal government under President Muhammadu Buhari announced a $40 billion budget. In correlation to the population, the government planned to spend $200 on each citizen in 2022.
Compared to other developing African countries such as South Africa, with a budget of $423 billion ($2,444) and Egypt, with a $158 billion ($1,504), the Nigerian budget is not feasible considering the state of the economy, the effect of the pandemic. This exposed the financial condition of the most populous country in Africa.
From the analysis made by Nairalytics, the research arm of Nairametrics, it is possible to assume that 70% of the budget will be used for recurrent expenditure despite the unfeasibility of the process. With this, $56 will be left for each Nigerian for infrastructural development.
Coupled with the budget deficit, what is left in the country is meagre. With the financial state of Nigeria, the budget per capita is insufficient.
Let’s consider some of the possible effects on the country.
The Power sector
One thing synonymous with the power supply in Nigeria is its epileptic nature. The industry has been challenged with transmission and distribution despite the partial privatisation of the industry in 2013.
In 2021, the Nigeria Electricity Regulatory Commission (NERC), in a report by KPMG, reported that the power distribution in 2021 averaged 4,094.09 megawatts (MW), despite the available generation capacity of about 8,000 MW.
This ineffectiveness can be attributed to weak infrastructure and a high occurrence of significant technical and non-technical challenges. Since the economy depends on electricity to function, this has seen the use of alternatives such as industrial power generating plants and generators.
With the need for significant capital to put some things in place in the power sector, the government is contemplating the sale of the Transmission Company of Nigeria to complete the full privatisation of the industry. This was made known by the Bureau of Public Enterprises (BPE), the government body overseeing privatisation. Though details are still unknown, the unbundling of TCN and eventual sale will be between January 2021 and November 2022.
Poor infrastructure is one of the socio-economic problems affecting Nigeria. Some of which are roads, railroads, airports, and communication networks. Despite the importance of these structures to the country’s development, they are in bad condition.
To this, the government launched a road infrastructure development, Refurbishment Investment Tax Credit Scheme (RITCS), in 2019 to use private sector capital and expertise to construct, repair and maintain critical road infrastructure in key economic corridors and industrial clusters in Nigeria.
Its commencement saw the presidential approval of 19 Road Projects covering 769.16 km in 11 states across the six geopolitical zones. With extra 14 additional roads to the list, thirty-three (33) road projects, covering a total length of 1,564.95 km as of 2021, were being handled by RITCS. From 2019 to 2021, the RITCS issued about N78 billion in tax credits to investors.
In the first quarter of 2022, Zainab Ahmed, the Minister of Finance, Budget and National Planning, announced that it would spend N3.53 trillion on infrastructure and human capital development.
To improve the infrastructures such as roads and houses, N1.42 trillion was allotted to infrastructure and N2.11 trillion to human capital development.
In 2015, Nigeria marked its highest debt portfolio at $63.8 billion since 2007. The lack of sustainability of the 2022 budget to sustain the economy has resulted in more loan acquisitions by the government to finance projects in the country.
In September 2022, the Debt Management Office (DMO), the government agency managing the national debt in Nigeria, released a press that “The total public debt stock, representing the domestic and external debt stocks of the Federal Government of Nigeria, the 36 state governments, and the Federal Capital Territory, was $103.31 billion (N42.84trillion) as of June 30, 2022. The comparative figures for March 30, 2022, was $100.07 billion (N41.60trillion).”
The external debt as of June 2022 was $40.06 billion (N16.61trillion). 58% of the external debt are concessional and semi-concessional loans from multilateral lenders, such as the World Bank, the International Monetary Fund (IMF), AfreximBank, and African Development Bank (AfDB), and bilateral lenders, such as Germany, China, Japan, India, and France.
On the other hand, the domestic debt stock was $63.24 billion (N26.23 trillion). This was due to new borrowings by the FGN to part-finance the deficit in the 2022 Appropriation (Repeal and Enactment) Act and new borrowings by state governments and the FCT.
With the country’s current state, this begs the question of how low the 2023 budget per capita will be and how sustainable the rising debt is in Nigeria. However, the sustainability might be slim as the federal government is now suggesting debt relief.
Nigeria’s Afrobeat singer Oladapo Oyebanji with the stage name D’Banj has been arrested an…