Spending on recurrent expenditures took a larger chunk of 88.5 per cent of Nigeria’s revenue in the last 10 years and about 50.6 per cent of the country’s total budget expenditure in the same period, according to a report by the Budget Office of Nigeria.
According to the data compiled from the Budget implementation report of the federal government, the country has spent N29.3 trillion on recurrent expenditure from the N32.2 trillion revenue generated within the period.
Nigeria has recorded a budget deficit every year since 2009 averaging about N1.1 trillion in the 5 years before the Buhari Administration came into power in 2015. However, since 2015, budget deficits have averaged N3.3 trillion.
The government budget deficits have meant increased borrowing, exacerbating the situation.
Last year, Nigeria borrowed N2.8 trillion from the central bank via the Ways and Means provisions. To service this borrowing about N3.2 trillion was spent in 2020, once again the highest on record.
A cursory review of the data shows that at N29.3 trillion, recurrent non-debt expenditure is about 3x more than the N10 trillion spent on capital expenditure in the last 10 years.
In the recently approved budget for 2021, Nigeria plans to spend N13.5 trillion in budgetary expenditure out of which N4.3 trillion is for capital expenditure and another N5.64 trillion on recurrent(non-debt) expenditure.
A recent Moody’s report indicates Nigeria needs to spend about $3.3 trillion in capital expenditure over the next 30 years or $1.1 trillion a decade to close its infrastructure deficit.
Nigeria is far from this goal and may not meet this target if it continues to spend more on recurrent expenditure compared to capital expenditure.
Also, the government will also need to explore new revenue sources other than oil to boost its revenues while relying less on budget deficits.
Doing this will require massive tax reforms that target the informal sector, block leakages and reduce wasteful incentives.
Unfortunately, the covid-19 pandemic has pushed back any immediate plans to aggressively tax revenue.
For example, in its 2021 budget, the government is projecting a tax revenue of N1.4 trillion down from N1.6 trillion a year earlier.
Another possible area of increasing achieving Nigeria’s infrastructure goals is via the private sector. But to do this, Nigeria will need to improve its capital formation policies that enable the private sector to invest in public infrastructure while delivering a legal path to recovering its investments and profits.
There is also the public-private partnership initiative pursued by the federal government towards funding infrastructure development in the country.
Just recently, the president approved the setting up of a $39.4 billion Infrastructure Company, wholly focused on critical infrastructural investments in Nigeria.
According to the president, “this Infrastructure company will raise funding from Central bank of Nigeria, Nigeria Sovereign Investment Authority, Pension funds, and local and foreign private sector development financiers.”
In addition, debt servicing for 2021 is budgeted at N3.1 trillion up from N2.6 trillion in 2020.
The dividend received from NLNG was a major bright spot in the government’s revenue performance for the year.
During the year, the government projected revenue of N5.36 trillion but only received N3.9 trillion in revenues representing a shortfall of N1.4 trillion or 27 per cent for the year.