(Bloomberg) -- Nigeria will spend at least six times more on servicing its debt next year than on building new schools or hospitals in the West African nation, where more than 40% of the population live in extreme poverty. 

President Bola Tinubu on Wednesday outlined 2024 spending plans projected at 27.5 trillion naira ($34.7 billion), of which 30% will go to pay borrowing costs. Spending on education will consume 7.9% of the budget while healthcare gets 5% and infrastructure a similar amount. This excludes spending by 36 states and the capital Abuja on social services. 

“The proposed budget seeks to achieve job-rich economic growth, macro-economic stability, a better investment environment, enhanced human capital development, as well as poverty reduction and greater access to social security,” Tinubu told lawmakers in the capital Abuja. It was his first budget presentation since taking office in May.

Direct allocations to social development and poverty reduction will only get 4% of the budget. In the six months through June, the nation spent $3.85 billion servicing debt. In 2022, the figure was $8.1 billion.

The nation’s public debt stood at 87.4 trillion naira as of June with 38% owed to external creditors including multilateral and commercial lenders. High debt-service costs complicate Tinubu’s goal to double the size of Africa’s largest economy to $1 trillion by 2030 and lift 100 million of its people out of poverty. 

Boost Revenues

To tackle this, the government set an ambitious revenue target of 18.3 trillion naira for 2024, which if achieved will bring down debt-service costs to 45% of projected revenue, compared with 98% this year, and help narrow budget deficit.

“Our target is to increase the ratio of revenue to GDP from less than 10% currently to 18% within the term of this administration,” Tinubu said. “Government will make efforts to further contain financial leakages through effective implementation of key public financial management reforms.”

In the past, revenue has fallen short of forecast and forced the government to rely significantly on borrowing to meet its public spending needs. Revenue collection increased to 8.65 trillion naira in the nine months through September, which was above the target for the period, Atiku Bagudu, minister for budget and national planning said Wednesday. 

The World Bank estimates Nigeria’s 2021 revenue ratio was among the five lowest globally at about 7% of gross domestic product. 

The proposed 9.18 trillion naira budget-deficit for next year will be funded mainly by borrowing, proceeds from asset sales and loans from multilateral creditors including the World Bank and the African Development Bank. 

“Government assets for which we are not generating revenue might be best transferred to private hands,” Bagudu said.  

The AfDB pledged a $1 billion loan for budget support as a “reward for ongoing macro-economic reforms,” Finance Minister Wale Edun said on Monday. The government also expects to receive $1.5 billion from the World Bank.

Nigeria has been unable to meet its OPEC+ allocation this year, and the alliance of oil producers is considering cutting its quota next year from 1.74 million barrels a day currently.

(Updates with value of public debt stock in fourth paragraph)

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