• Login
NORVANREPORTS.COM |  Business News, Insurance, Taxation, Oil & Gas, Maritime News, Ghana, Africa, World
  • Home
  • News
    • General
    • Political
  • Economy
  • Business
    • Agribusiness
    • Aviation
    • Banking & Finance
    • Energy
    • Insurance
    • Manufacturing
    • Markets
    • Maritime
    • Real Estate
    • Tourism
    • Transport
  • Technology
    • Telecom
    • Cyber-security
    • Cryptocurrency
    • Tech-guide
    • Social Media
  • Features
    • Interviews
    • Opinions
  • Reports
    • Banking/Finance
    • Insurance
    • Budgets
    • GDP
    • Inflation
    • Central Bank
    • Sec/Gse
  • Lifestyle
    • Sports
    • Entertainment
    • Travel
    • Environment
    • Weather
  • NRTV
    • Audio
    • Video
No Result
View All Result
No Result
View All Result
NORVANREPORTS.COM |  Business News, Insurance, Taxation, Oil & Gas, Maritime News, Ghana, Africa, World
No Result
View All Result
Home Business

Subsidy removal buys breathing space for debt-ridden Nigeria

2 years ago
in Business, Features, highlights, Home, home-news, latest News
2 min read
0 0
0
49
VIEWS
Share on FacebookShare on TwitterShare on Linkedin

RelatedPosts

African Debt and Climate Change: How the ICJ’s Vanuatu Ruling Could be Used for Broader Justice

European Leagues Defend Plans to Stage Matches Abroad Amid EU Criticism

Bank of Ghana Sets Gold Coin Price at GHS 39,273 Per Ounce

Subsidy removal buys breathing space for debt-ridden Nigeria

Nigeria has one less reason to grow its ballooning debt stock after last week’s move to abandon costly petrol subsidies that would have drained $12.9 billion (N6 trillion) from state finances this year.

Cash-strapped and with little room to sustain its explosive debt appetite, Nigeria faced a deeper fiscal crisis if the subsidy program didn’t end soon.

Public debt has grown more than six-fold since 2015 with servicing costs consuming about 80 percent of government income last year.

The IMF projects the country may spend more on servicing its loans than it raises in revenue by 2026 without reforms to boost revenues.

The subsidy programme, which gulped $10 billion last year alone, has contributed to a gaping annual budget deficit every year, dwarfed critical spending on healthcare, education and infrastructure, and has left public finances in tatters.

“In all, the adjustment to the subsidy is a fiscal positive,” Razia Khan, managing director & chief economist, Africa and Middle East at Standard Chartered Bank, said in an email response to BusinessDay.

“It lessens the amount of deficit spending which contributes to future debt accumulation.

To the extent that it also boosts inflation in the near-term, it helps to inflate away the value of the existing, accumulated debt stock,” Khan said.

Nigeria’s 2023 budget has a deficit of N11.34 trillion, with debt service costs of N6 trillion representing 31 percent of the budget.

The budget deficit has exceeded four percent every year since 2020 and will probably soar above 5 percent of GDP this year, the highest since 1999.

Several emerging economies are battling higher budget deficits in the wake of the COVID-19 pandemic and Russia Ukraine war, but Nigeria’s case is different.

Critics say the deficit is being fueled by wasteful government expenditure like the now abolished petrol subsidy and the expenses of an over-bloated civil service.

The last time Nigeria’s fiscal deficit exceeded 4 percent was in 1999 when the government opened the taps on infrastructure spending to give the economy a boost after years of military rule.

That year, the government spent more on capital expenditure (N498bn) than recurrent expenditure (N449bn). The actual deficit amounted to only N285 billion even though it was 5.2 percent of GDP.

Fast forward to every year since 2020 and the government now spends about 4 times more on recurrent expenditure than on capital expenditure. That means most of the borrowings is used to fund the recurrent component of the budget rather than capital projects.

Patience Oniha, the director-general of the Debt Management Office (DMO), the government agency responsible for raising debt on behalf of the government, had long pleaded with her employers to ditch the costly subsidy practice.

“One issue to be addressed is the petrol subsidy which has significantly increased annual budget deficits and ultimately, increased the level of new borrowings and the public debt stock,” Oniha said at a press conference before the subsidy removal.

The subsidy removal, which has triggered a doubling in the price of petrol in Nigeria, is painful for many Nigerians who have long enjoyed cheap petrol.

It was always going to be politically difficult to scrap the popular practice that’s used by residents and small businesses in Africa’s most populous nation to run cars and power generators in the energy-deficient country.

Former President Muhammadu Buhari resisted pressure from the World Bank and International Monetary Fund to end the payments. Instead, he passed the task to the next president.

All three leading candidates at Nigeria’s pivotal presidential elections in February vowed to end the subsidy during their campaigns, in a sign that time was truly up for the wasteful practice.

In his election manifesto, 70-year-old Bola Tinubu, who clinched victory at the poll, pledged to end the subsidies and use the money to fund health and education programs, as well as infrastructure and social-welfare projects.

Tags: Subsidy removal buys breathing space for debt-ridden Nigeria
No Result
View All Result

Highlights

Rewriting the Rulebook: Ghana’s Battle to Restore Currency Credibility

Bank of Ghana Raises GHS 836m in Short-Term Bill Auction at 24.8% Yield

Importers Urged to Use Credit Cards as BoG Tightens Foreign Currency Rules

FirstBank Prepares for 2025 Staff Engagement Empowering People, Shaping Culture, Achieving Targets

Gov’t to Overhaul Investment Law, Create 24-Hour Economy Authority in New Bills to Parliament

Ghana, Singapore Push Cross-Border Payments and SME Ties as Mahama Hails Stabilising Economy

Trending

Features

African Debt and Climate Change: How the ICJ’s Vanuatu Ruling Could be Used for Broader Justice

August 28, 2025

African Debt and Climate Change: How the ICJ’s Vanuatu Ruling Could be Used for Broader Justice African...

European Leagues Defend Plans to Stage Matches Abroad Amid EU Criticism

August 28, 2025

Bank of Ghana Sets Gold Coin Price at GHS 39,273 Per Ounce

August 28, 2025

Rewriting the Rulebook: Ghana’s Battle to Restore Currency Credibility

August 28, 2025

Bank of Ghana Raises GHS 836m in Short-Term Bill Auction at 24.8% Yield

August 28, 2025

Who we are?

NORVANREPORTS.COM |  Business News, Insurance, Taxation, Oil & Gas, Maritime News, Ghana, Africa, World

NorvanReports is a unique data, business, and financial portal aimed at providing accurate, impartial reporting of business news on Ghana, Africa, and around the world from a truly independent reporting and analysis point of view.

© 2020 Norvanreports – credible news platform.
L: Hse #4 3rd Okle Link, Baatsonaa – Accra-Ghana T:+233-(0)26 451 1013 E: news@norvanreports.com info@norvanreports.com
All rights reserved we display professionalism at all stages of publications

No Result
View All Result
  • Home
  • Business
    • Agribusiness
    • Aviation
    • Energy
    • Insurance
    • Manufacturing
    • Real Estate
    • Maritime
    • Tourism
    • Transport
    • Banking & Finance
    • Trade
    • Markets
  • Economy
  • Reports
  • Technology
    • Cryptocurrency
    • Cyber-security
    • Social Media
    • Tech-guide
    • Telecom
  • Features
    • Interviews
    • Opinions
  • Lifestyle
    • Entertainment
    • Sports
    • Travel
    • Environment
    • Weather
  • NRTV
    • Audio
    • Video

Welcome Back!

Login to your account below

Forgotten Password?

Create New Account!

Fill the forms bellow to register

All fields are required. Log In

Retrieve your password

Please enter your username or email address to reset your password.

Log In
NORVANREPORTS.COM | Business News, Insurance, Taxation, Oil & Gas, Maritime News, Ghana, Africa, World
This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.
We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it.