NATIONAL ECONOMY: Suffering In The Midst Of Affluence
In a report, titled, 5 years of Effective Sub-National Debt Management in Nigeria, The Debts Management Office listed Lagos State as the largest borrower, with a contingent liability of N238.262 billion, comprising local debt of N157,536 billion and a foreign component of N80.726 billion. Lagos is followed by oil-rich Bayelsa State, with a contingent liability of N167.173 billion, made up of a domestic debt stock of N162.822 billion and a foreign debt liability of N4.350 billion, while Cross River State places third with a total public debt of N113.598 billion, consisting of a local debt component of N96.544 billion and foreign debt of N17.053 billion.
Next to Cross River is River State, which as at June 2014, had contracted a total public debt of N112.229 billion made up of N106.880 billion local debt and N5.349billion foreign debt. The state is followed by Delta State with a Public debt of N93.304 billion, comprising a local debt of N90.843 billion and foreign component of N2.46 billion. Imo and Kaduna states are next with total debt of N69.979 billion and N53.808 billion respectively.
Insecurity states of Borno and Yobe emerged the least indebted, with Borno polling the least public debt of N3 billion, consisting of N1.684 billion local debt and N1.894 billion foreign debt. Yobe on the other hand has only contracted a debt toll of N6.939 billion, made up of N2.088 billion local debt and N4.851 billion external debt.
However, on a debt solvency and liquidity ratio analysis relative to revenue inflow to states, Cross River State is the heaviest debtor, as it scores the highest burden rating of 138.86 per cent as at December 2011, representing its total public debt to total revenue ratio.
The state’s public revenue is put at N77.489 billion, while its public debt is far above the figure at N107.600 billion. Also, on a scale of domestic debt stock analysis relative to Internally Generated Revenue (IGR) Cross River polls 584 per cent, next to the highest ranked state, Bayelsa, which polled 1,712 per cent.
While Cross River’s domestic debt stock as at December 2011 stood at N90.750 billion, its IGR at the period was only N16.553 billion.
On the total public debt sustainability score, Bayelsa is next to Cross River with a burden score of 104.93 per cent with a debt stock of N167.123 billion relative to its revenue base of N159.278 billion, while it has the highest domestic debt burden score of 1,712 per cent relative to its IGR. The state’s local debt stock at the time of the analysis was N162.822 billion, while IGR was a paltry N9.510 billion.
Lagos State placed third risky state in the total public debt solvency analysis, as it polled 73.21 per cent after Cross River and Bayelsa. Lagos State’s public debt at the time was N234.608 billion, while its revenue base was put at N320.474 billion. It equally scored a ranking of 61 per cent on the domestic debt solvency analysis, as its domestic debt stock was N157.536 billion, relative to its IGR base of N257.419 billion
The DMO, however, noted that the total public debt comprising Federal and states as at March 31, is now N12.062 trillion, made up as follows: Foreign debt for both Federal Government and states, $9.464 billion or N1.864 trillion; Federal Government’s domestic debt, N$43.185 billion or N8.507 trillion, while the states’ domestic component is standing at $10.856 billion or N1.690 trillion. Add up together, the total public debt stock comes to $63.506 billion or N12.062 trillion.
The implication of this huge debt exposure is that government at both the Federal and states level would be expending much of their finances on debt servicing, which, in some instances, like the Federal Government, is always higher than what goes into capital implementation for the delivery of services for people who are outside government.
The CBN, in one of its reviews, gave an insight into how the Nigerian government manages its generated income. The 2013 fiscal year is hereby presented to give a peep: “ Total federally-collected revenue fell by 8.4 per cent to N9,759.8 billion in 2013 and constituted 12.0 per cent of GDP. The development was attributed to the decline in receipts from oil sector resources.
Of the total receipts, oil revenue (gross) accounted for N6,809.2 billion representing 69.8 per cent of the total (and 8.4 per cent of GDP), and posted a decline of 15.2 per cent from the level in 2012. A further breakdown showed that revenue from crude oil and gas exports, domestic crude oil sales, petroleum profit tax (PPT) and royalties fell by 12.5 per cent to N1,559.0 billion,19.4 per cent to N1,510.3 billion and 14.8 per cent to N3,719.0 billion, respectively. The development was as a result of pipeline vandalism, which adversely affected crude oil production and lifting operations.
The sum of N1,030.9 billion was deducted from the gross oil receipts for Joint Venture Cash (JVC) calls and N1,047.4 billion in respect of excess crude/PPT/royalty proceeds and “others”, leaving a net balance of N4,731.0 billion for the distribution to the three tiers of government.
The sum of N193.2 billion was deducted from the non-oil revenue as cost of collection, leaving a distributable balance of N2,757.3 billion.
Federation Account Distribution
THE sum of N7,488.3 billion accrued to the Federation Account, indicating an increase of 14.1 per cent over the level in 2012. Of this amount, N763.8 billion, N274.4 billion and N461.5 billion were transferred to the VAT Pool Account, the FG Independent Revenue, and ‘other transfers’1, respectively, leaving a net revenue of N5,988.7 billion. In addition, N781.3 billion, N91.4 billion, N464.2 billion and N426.6 billion were drawn from the excess crude account for budget augmentation, NNPC refunds to state and local governments, excess crude revenue sharing and SURE-P, respectively. These amounts were added to the federally collected revenue (net) to raise the distributable balance to N7,752.2 billion. Analysis of the distribution among the three tiers of government, showed that the Federal Government (including Special Funds) received the sum of N3,597.2 billion; state governments, N1,869.4 billion; and local governments,
Cumulatively, the three tiers of government and the 13 per cent Derivation Fund shared the sum of N8,515.9 billion from the statutory revenue and VAT during fiscal year 2013. This was above the preceding year’s distribution by 10.3 per cent.
Provisional data showed that at N9,590.3 billion, the aggregate revenue of the three tiers of government in 2013 comprised N5,988.7 billion from the Federation Account, N781.3 billion from budget augmentation, N464.2 billion from excess crude revenue-sharing, N426.6 billion from SURE-P, N91.4 billion as NNPC refunds to states and local governments, and N763.8 billion from the VAT Pool Account. Others were N274.4 billion from the Federal Government Independent Revenue, and N54.4 billion from ‘other funds’4. Revenue exclusive to the sub-national (state and local) governments included N602.4 billion, N112.7 billion, N17.7 billion and N12.8 billion, respectively, from internally generated revenue, grants, the stabilization fund, and state allocation to local governments.
At N11,103.5 billion, aggregate expenditure of general government increased by 10.0 per cent from the level in 2012. As a proportion of GDP, it represented 13.7 per cent, compared with 13.9 per cent in 2012. A breakdown showed that recurrent expenditure, which stood at N6,177.2 billion (7.6 per cent of GDP), accounted for 55.6 per cent of the total, and capital expenditure at N3,721.4 billion (4.6 per cent of GDP), represented 33.5 per cent. Transfers and ‘others’ at N1,035.7 billion (1.3 per cent of GDP) and N169.1 billion (0.2 per cent of GDP), respectively, accounted for 9.3 and 1.6 per cent of the total.
The fiscal operations of general government resulted in a primary deficit of N648.2 billion (0.8 per cent of GDP), and an overall deficit of N1,513.1 billion (1.9 per cent of GDP), compared with N1,168.1 billion (1.6 per cent of GDP) in 2012. The deficit in the review year was financed, largely, with borrowing from domestic sources, namely, the banking system, non-bank public and other funds.
Consolidated expenditure on key primary welfare sectors
CONSOLIDATED general government spending on key primary welfare sectors indicated that expenditure on education and agriculture rose by 17.6 per cent from the level in 2012 to N1,308.7 billion and accounted for 11.8 per cent of the total expenditure. Also, expenditure on agriculture rose by 3.7 per cent relative to the level in 2012 to N320.1 billion. However, expenditure on health dropped by 4.7 per cent from the level in 2012 to N531.4 billion. Aggregate expenditure on key primary welfare sectors amounted to N2,160.2 billion, or 2.7 per cent of GDP, and accounted for 19.5 per cent of the total.
The current balance in 2013 showed a surplus of N342.8 billion, or 0.4 per cent of GDP, compared with the N304.4 billion, or 0.4 per cent of GDP in the preceding year. The primary balance recorded a deficit of N325.4 billion, or 0.4 per cent of GDP, relative to N296.6 billion or 0.4 per cent of GDP in 2012. The overall fiscal operations of the Federal Government resulted in a deficit of N1,153.5 billion, or 1.4 per cent of GDP, compared with the deficit of N975.7 billion, or 1.3 per cent of GDP, in 2012. Thus, the deficit was within the WAMZ primary convergence criterion target of 4.0 per cent. The overall budget deficit was financed mainly from domestic sources, with bond issuance accounting for N768.2 billion, or 66.6 per cent of the total domestic financing.
Total expenditure of the FG
THE provisional aggregate expenditure of the Federal Government rose by 12.6 per cent to N5,185.3 billion in 2013. As a proportion of GDP, it stood at 6.4 per cent, compared with 6.3 per cent in the preceding fiscal year.
The non-debt expenditure fell from the level in 2012 by 11.0 per cent. Total debt service payments amounted to N828.1 billion, representing 16.0 per cent of the total expenditure, or 1.0 per cent of GDP.
At N3,689.1 billion, recurrent expenditure rose by 10.9 per cent from the level in 2012 and accounted for 71.1 per cent of the total expenditure. However, as a percentage of GDP, it remained at 4.6 per cent, the same as fiscal year 2012, reflecting the sustained policy stance to rationalise recurrent expenditure. Interest payments increased by 21.9 per cent and the goods and services component fell by 0.6 per cent. Analysis of the goods and services component, at N2,386.8 billion (64.7 per cent of recurrent), showed that personnel cost and pensions amounted to N1,861.0 billion (50.4 per cent), while overhead cost was N525.8 billion (14.3 per cent). Furthermore, interest payments5 rose to N828.1 billion (22.4 per cent).
A breakdown indicated that N55.7 billion was expended on external debt service and N772.4 billion on domestic debt service. Transfers to the special funds (FCT, stabilization fund, development of natural resources and ecological funds), and others, accounted for N474.1 billion (12.9 per cent of the recurrent expenditure).
Provisional data on the functional classification of recurrent expenditure showed that the outlay on administration fell by 4.1 per cent to N1,111.8 billion and accounted for 30.1 per cent of the total.
However, transfer payments rose by 25.9 per cent to N1,442.0 billion and constituted 39.1 per cent of the total. Similarly, expenditure in the economic sector, at N291.2 billion, rose by 26.6 per cent and accounted for 7.9 per cent of the total recurrent expenditure.
Within the economic sector, agriculture absorbed 13.5 per cent, while transport and communications as well as roads and construction, collectively, absorbed 38.0 per cent. The expenditure in the social and community services sector accounted for 22.9 per cent of the total recurrent expenditure, with education and health gulping 67.6 per cent of the total outlay for the sector.
CAPITAL expenditure rose by 26.7 per cent to N1,108.4 billion, or 1.4 per cent of GDP, and accounted for 21.4 per cent of the total expenditure, reflecting the fiscal stance of capital spending.
As a proportion of Federal Government revenue, capital expenditure was 27.5 per cent, exceeding the stipulated minimum target of 20.0 per cent under the WAMZ secondary convergence criteria. A functional analysis of capital expenditure showed that outlays in the economic sector accounted for N505.8 billion, or 45.6 per cent of the total, compared with 36.7 per cent in the preceding year.
Agriculture/natural resources and roads/construction absorbed 33.0 per cent of the sector’s outlay. Public investment in social and community services accounted for 14.0 per cent of the total capital outlay, while administration and transfers accounted for 25.6 and 14.8 per cent, respectively. Within the social and community services sector, education and health accounted for 43.9 per cent of the total outlay.
As a ratio of capital spending, expenditure on education fell to 3.2 per cent in 2013 from 5.4 per cent in the preceding year, while that on health also fell, from 5.1 per cent in 2012 to 2.9 percent.
Consolidated federal government spending on key primary welfare sectors indicated that expenditure on education rose by 7.5 per cent from the level in 2012 to N425.8 billion and accounted for 8.2 per cent of the total expenditure. However, expenditure on roads & construction, health, and agriculture dropped by 14.5, 12.5 and 0. 9 per cent, respectively, relative to their levels in 2012 to N203.0 billion, N212.4 billion and N95.8 billion. Aggregate expenditure on key primary welfare sectors amounted to N937.0 billion, or 1.2 per cent of GDP, and accounted for 18.1 per cent of the total expenditure.
States and FCT
PROVISIONAL data on state governments’ finances (including the FCT) showed that the overall deficit increased from N272.5 billion in 2012 to N276.1 billion in 2013. As a ratio of GDP, the deficit was 0.3 per cent. The deficit was financed largely from internal sources.
Total revenue of the state governments and FCT increased by 7.4 per cent to N3,836.9 billion, or 4.7 percent of GDP, compared with N3,572.6 billion or 4.9 per cent of GDP in 2012. The analysis of the sources of revenue indicated that allocations from the Federation Account (including the 13.0 per cent Derivation Fund) was N2,104.3 billion, or 54.8 per cent; the VAT Pool Account was N389.5 billion, or 10.2 per cent; while the share of excess crude (including budget augmentation, refund to the state governments by the NNPC, and SURE-P) was N677.4 billion, or 17.7 per cent.
The IGR increased above the level in 2012 by 6.9 per cent, indicating an improvement in the drive for internal revenue.
In terms of tax effort, measured as the ratio of IGR to total revenue (IGR/TR), Lagos State ranked highest with 53.4 per cent, followed by Kano and Ogun states, with 35.4 and 31.7 per cent, respectively, while Benue state ranked the least with 1.9 per cent. In terms of state governments’ effort at improving internally generated revenue (IGR), Rivers State topped, as the IGR/TR ratio increased from 24.3 per cent in 2012 to 26.6 percent, followed by Cross River and Delta States in the second and third positions, respectively. Overall, the consolidated IGR/TR ratio of state governments remained at 15.3 per cent the same as in 2012.
PROVISIONAL total expenditure of State governments increased by 7.0 per cent to N4,113.1 billion, or 5.1 per cent of GDP. A breakdown showed that, at N1,723.9 billion or 2.2 per cent of GDP, recurrent expenditure was 3.6 per cent higher than the level in the preceding year and accounted for 41.9 per cent of the total. At N2,220.0 billion or 2.7 per cent of GDP, capital expenditure was 13.0 per cent higher than the level in 2012 and accounted for 54.0 per cent of the total. Direct deductions from statutory allocations, however, fell by 21.5 per cent from the level in 2012 to N169.1 billion and accounted for 4.1 per cent of the total.