The federal government is considering borrowing an additional N7.24 trillion in 2024, according to a recent report. This proposed loan is part of the Accelerated Stabilisation and Advancement Plan (ASAP), aimed at enhancing economic stability and fostering growth,leadership reports.
Finance Minister and Coordinating Minister of the Economy, Wale Edun, unveiled this plan during a presentation on ASAP. The plan seeks to tackle critical challenges affecting reform initiatives and stimulate development across various economic sectors.
The 2024 approved budget shows a government deficit of N9.18 trillion, which is to be partially financed by N7.83 trillion in new borrowings. However, the ASAP indicates that the government plans to borrow N9.18 trillion to cover the deficit, with intervention financing contributing N7.24 trillion to the total, resulting in a combined borrowing of N16.42 trillion for 2024. Debt servicing is expected to cost N8.81 trillion.
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As per the Debt Management Office, Nigeria’s total public debt stood at N97 trillion as of December 2023. With the new borrowing, the total debt is projected to reach N113.4 trillion. This increase is attributed to expected revenue shortfalls, with the government warning that additional spending from intervention funding could negatively impact leverage metrics if solely funded through borrowing.
The government’s retained revenue for January and February was about 60% of the target, mainly due to lower crude oil production volumes, which were at 74.5% of the budget projection. If these shortfalls continue, annual revenue is unlikely to exceed N15.8 trillion.
Additionally, if tax waivers amounting to 0.25% of GDP are granted to support economic interventions, budgeted revenue could decrease by 3%. The government noted that additional borrowing and debt servicing costs for 2024 would increase by 79% and 7%, respectively.
The emergency intervention plan involves significant funding for key sectors such as agriculture, energy, business support, health, and social welfare, with an estimated cost ranging from N6.6 trillion to N5 trillion. Specifically, agriculture and food security will need N498 billion or N373.5 billion, energy N3.25 trillion or N2.44 trillion, health and social welfare N1.10 trillion or N825 billion, and business support N1.80 trillion or N1.35 trillion.
These interventions aim to make essential medicines more affordable, clear outstanding power subsidies and GasCo debt, and support MSMEs, manufacturers, entrepreneurs, and artisans. The government emphasized that these actions are crucial for sustaining bold reforms and that intervention spending should be prioritized to mitigate the impact on leverage metrics.
The debt-to-GDP ratio is expected to reach 47.6% if all intervention spending is financed through additional borrowing. The International Monetary Fund (IMF) reported that Nigeria’s debt rose to 46% of GDP at the end of 2023, driven by naira depreciation, and noted that Nigeria has one of the lowest revenue-to-GDP ratios globally at 9.4% in 2023.
In a recent assessment, the IMF rated Nigeria’s risk of sovereign stress as moderate, citing the long maturity structure of debt and moderate gross financing needs, but highlighted risks from global uncertainty, exchange rate depreciation, and weak revenue mobilization. The IMF warned that without policies to safeguard macroeconomic stability and improve the fiscal position, risks would increase.
During the 2024 budget presentation, Edun emphasized that the budget would rely less on borrowings, focusing more on promoting domestic and foreign investment and privatizing key government assets.
At the IMF and World Bank spring meetings in April, Edun announced that Nigeria had qualified for a $2.25 billion loan from the World Bank at a 1% interest rate.
