The Nigerian government announced plans to borrow an additional N7.24 trillion in 2024 to finance an ambitious intervention plan aimed at reviving the nation’s economy.
This disclosure was made by Wale Edun, the Minister of Finance and Coordinating Minister of the Economy, during the presentation of the Accelerated Stabilisation and Advancement Plan (ASAP).
The ASAP is designed to tackle critical challenges affecting Nigeria’s reform initiatives and to stimulate development across various sectors.
According to the minister, the 2024 approved budget includes a deficit of N9.18 trillion, which will be partially financed by N7.83 trillion in new borrowings.
However, to fully fund the intervention, the government intends to borrow an additional N7.24 trillion, bringing the total borrowing for the year to N16.42 trillion.
Nigeria’s Debt Management Office reported that the country’s total public debt stood at N97 trillion as of December 2023. With the new borrowings, this figure is projected to rise to N113.4 trillion.
The government acknowledged that the added debt could negatively impact leverage metrics if revenue shortfalls persist, as anticipated.
In the first two months of 2024, the government’s retained revenue was approximately 60% of the target, mainly due to lower crude oil production volumes, which were at 74.5% of the budget projection.
The government estimates that if these shortfalls continue, total revenue for the year will likely not exceed N15.8 trillion.
Also, if tax waivers equivalent to 0.25% of GDP are issued to support the economic intervention, budgeted revenue will decrease by 3%. Consequently, 2024 borrowing and debt service costs are expected to increase by 79% and 7%, respectively.
The ASAP intervention plan allocates substantial funding to crucial sectors such as agriculture, energy, business support, health, and social welfare, with an estimated cost ranging from N6.6 trillion to N5 trillion.
Specific allocations include N498 billion to N373.5 billion for agricultural and food security, N3.25 trillion to N2.44 trillion for energy, N1.10 trillion to N825 billion for health and social welfare, and N1.80 trillion to N1.35 trillion for business support.
These interventions aim to improve the affordability of essential medicines, clear outstanding power subsidies and GasCo debt, and support MSMEs, manufacturers, entrepreneurs, and artisans.
The government emphasized that these measures are necessary to sustain the bold reforms already undertaken 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 funded through additional borrowing.
According to the International Monetary Fund (IMF), Nigeria’s debt rose to 46% of GDP at the end of 2023, driven by naira depreciation.
The IMF noted that Nigeria had one of the lowest revenue takes globally at 9.4% of GDP in 2023.
In a recent assessment, the IMF warned that Nigeria’s risk of sovereign stress is moderate due to the long maturity structure of debt and moderate gross financing needs.
However, it flagged risks from global uncertainty, exchange rate depreciation, and weak revenue mobilization.
During the budget presentation, Edun stressed the importance of reducing reliance on borrowings and focusing more on promoting domestic and foreign investment, as well as the privatization of critical 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 one percent interest rate, recognizing the efforts to stabilize and grow the Nigerian economy.
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