It has come to light that 45% of Nigeria-tax revenue as generated by the government in April and May of 2022 were used to settle a debt.
According to the Central Bank of Nigeria (CBN)’s economic report for May 2022, the government documented ₦977.88 billion in tax receipts from Value Added Tax (VAT), Company Income Tax (CIT), and Customs & Excise Duties but it cost ₦412.91 billion to settle the country’s debt for April and May.
These figures indicate that for every ₦100 tax receipt documented by the federal government, an average of ₦45 went into settling debts obtained from local and foreign creditors.
Nigeria-Tax Revenue : An analysis of May’s revenue
According to the CBN report, Nigeria recorded non-oil receipts of ₦549.10 billion in May 2022, down from ₦857.68 billion in April.
It revealed that the performance indicated a 66.2%, 24.1%, and 18.5% fall in Company Income Tax (CIT), Customs & Excise Duties, and Value-Added Tax (VAT), respectively.
Also, receipts from CIT were especially low, due to seasonal effects, as firms prepared towards the end-June cut-off date for filing tax returns.
Expert Weighs In
Speaking on the subject, Ibrahim Shelleng, MD, Credent Investment Managers Ltd, explained that debt service poses a worrying situation because it will limit the government’s capacity to spend on much-needed capital expenditure and infrastructure.
It endangers the country’s fiscal stability to global headwinds, making it even more costly to finance the budget as interest rates surge globally due to inflationary pressures.
Though, this also poses a challenge to the government to discover new revenue sources as borrowing may become more difficult.
Nigerian states with the highest external debt
Due to the bad state of the Naira against the US dollar, settling the external debts of the 36 states has become more costly.
According to data from the Debt Management Office (DMO), the total external debt stock of 36 subnational governments and the Federal Capital Territory Abuja as of December 2021 stood at $4.77 billion.
As of that time, the states with the highest external debts were Lagos, Kaduna, Cross River, Edo, and Rivers.
Nigeria Augments Its Public Debt By Adding ₦3.28 Trillion In Q2, 2022
By adding over N3 trillion to its entire public debt in 2022, Nigeria has increased its total public debt by 2.98% in the second quarter, growing its debt profile to ₦42.84 trillion.
According to new data from the Debt Management Office (DMO), the total stock represents domestic and external debt stocks of the federal government, the 36 state governments, and the Federal Capital Territory (FCT).
The debt stock spiked by ₦3.28 trillion in the first half of this year from N39.56 trillion at the end of the previous year.
The DMO revealed that the entire external debt stock rose to about ₦16 trillion as of June 30, 2022, from $39,96 trillion in March.
The body named top sources of the country’s external debt to include concessional and non-concessional loans from multilateral lenders such as the World Bank and bilateral lending from Germany, China, Japan, India, and France.
The total domestic debt as of June 30, 2022, was ₦26.23 trillion due to new loans by the federal government to partly fund the debt in the 2022 Appropriation Act as well as new ones by state governments and the FCT.
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