The Director General of the Budget Office of the Federation, Ben Akabueze, during the induction of the newly-elected lawmakers of the 10th National Assembly expressed that Nigeria is rapidly surpassing its constrained borrowing capacity and could face trouble if Nigeria exceeds its borrowing limits. While Nigeria’s debt-to-GDP ratio is still healthy, he highlighted that the country’s debt-to-revenue ratio is not.
Akabueze says that while the size of the FG budget for 2023 created some excitement, the aggregate budgets of all governments in the country amount to about 30 trillion Naira. That is less than 15 percent in terms of ratio to GDP. Even on the African continent, the ratio of spending is about 20 percent. South Africa is about 30 percent, Morocco is about 40 percent and at 15 percent, that is too small for our needs.
He explains that this can determine how much we can relatively borrow as we now have very limited borrowing space; not because our debt to GDP is high, but because our revenue is too small to sustain the size of our debt. That explains our high debt service ratio as once a country’s debt service ratio exceeds 30 per cent, that country is in trouble and we are pushing towards 100 per cent, and that tells us how much trouble we are in.
He reiterates that when they take how much they can generate in terms of revenue and what they can reasonably borrow, that establishes the size of the budget. The next thing would be to pay attention to government priority regarding what project gets what. He says the budget is not a shopping list. In the end, the budget only contained expenditure.
