THE Civil Society Legislative Advocacy Centre (CISLAC) says Nigeria faces a severe fiscal crisis marked by a consistent decline in Federal Government revenue over the past half-decade.
The crisis reflects the government’s overreliance on unsustainable debts caused by a backlog of loans, over-bloated budgets, weak revenue mobilisation, misplaced spending priorities, and lack of transparency and accountability in public finance management.
The Executive Director of CISLAC, Auwal Ibrahim Musa, highlighted this on Wednesday, April 3, at the presentation of ‘Research on Tax Expenditure and Debt Management in Nigeria,’ organised by CISLAC in support of the Christian Aid (UK) Nigeria under its debt justice project.
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He said the alarming trend was evidenced by substantial shortfalls in revenue, with deficits ranging from 31 per cent to as high as 50 per cent from 2018 to 2023.
Nigeria’s overall debt burden skyrocketed to N97.34 trillion in the fourth quarter of 2023 from N87.9 trillion as it allocates most of its budgeted revenue to debt servicing at the expense of investing in more critical social sectors and infrastructural development.
In November 2023, the Federal Government signed a $2.8 billion supplementary budget that included funding new bulletproof cars for the President and First Lady and renovations of the President’s residential quarters amid a nationwide cost-of-living crisis.
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This coincided with a Presidential request to the Senate to approve an external loan facility of $7.86 billion and 100 million euros.
The government has also mortgaged its crude oil reserves in debt for future crude arrangements, notably the Project Eagle in 2020 and the recent Afrexim pre-export finance facility worth $3.3 billion at an 11.85 per cent per annum interest rate, Musa recalled.
He lamented the increasing role of private creditors in Nigeria’s debt crisis, whose human costs are of concern, hinting that 37 per cent of Nigeria’s total external debt figure is owed to private creditors.
“The government will spend six times more on servicing debts than building new schools and hospitals in 2024,” he said.
According to him, assessing debt sustainability using the debt-to-GDP (gross domestic product) ratio puts Nigeria at a moderate risk of debt distress at 41.15 per cent above the Debt Management Office (DMO) self-imposed threshold of 40 per cent.
However, the debt-to-revenue ratio at 73.5 per cent and above the DMO’s 50 per cent self-imposed threshold for 2023 shows Nigeria’s real debt crisis.
Musa also pointed out that the government needed to utilise the money borrowed for the purpose for which the loans were granted.
He said, “The 2020 annual audit report published by the Auditor-General of the Federation revealed there was no document to show the movement and spending of the $3.4 billion COVID-19 emergency financing package loaned to Nigeria in April 2020 by the International Monetary Fund (IMF).”
The CISLAC boss, therefore, submitted that compounding Nigeria’s fiscal woes were significant revenue losses attributed to tax expenditures, encompassing incentives, exemptions, credits, and waivers.
According to the 2021 Tax Expenditure Statement (TES), revenue foregone due to tax expenditures accounted for approximately four per cent of GDP, about N6.8 trillion.
He said, “This substantial revenue leakage underscores the urgency of addressing tax expenditure and debt management issues with utmost priority.”
He stressed a pressing need for a comprehensive review of existing tax incentives to ensure their effectiveness, efficiency, and alignment with national development priorities.
He called for thorough assessments of existing tax incentives to identify areas of inefficiency, duplication, or inequity.
He also called for an investigation into the movement and spending of loans received by past and present governments, including but not limited to the $3.4 billion loan obtained from the International Monetary Fund (IMF) as reported in the 2020 annual audited report by the Auditor-General of the Federation.
Musa called on the government to prioritise spending to ensure efficient allocation of resources and maximise developmental impact, urging the National Assembly to scrutinise budget proposals to ensure alignment with national priorities and fiscal sustainability.
He also urged the lawmakers to ensure loan approvals undergo rigorous legislative scrutiny, with public involvement and transparent disclosure of terms and conditions, among other suggestions.
“We believe that governments at all levels need to acknowledge the critical importance of formulating, implementing and monitoring fiscal policies that are technically sound, widely acceptable and administratively feasible.
“With a focus on tax expenditures, debt management, revenue mobilisation reforms, and the prioritisation of spending, the government should be committed to enacting measures that promote fiscal transparency, accountability, and sustainability,” he stated.
