Nigeria’s debt hits N41.6trn –DMO –

States and rising domestic debt

By Merit Ibe

The Debt Management Office (DMO)has put Nigeria’s total public debt (federal and state governments) at N41.6 trillion at the end of the first quarter (Q1) of 2022.

This it said represents an increase of N2.04 trillion compared to the N39.56 trillion recorded at the end of December 2021.

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In a statement, DMO attributed the increase to new domestic borrowing by the Federal Government to partly finance the deficit in the 2022 budget, the $1.25 billion Eurobond issued in March 2022, and disbursements by multilateral and bilateral lenders.

It said there were also increases in the debt stock of the state governments and the Federal Capital Territory (FCT).

“The total public debt stock as at March 31, 2022, was N41.60trillion or $100.07 billion,” the statement reads.

“The amount represents the domestic and external debt stocks of the Federal Government of Nigeria, the thirty-six state governments, and the FCT. “The comparative figures for December 31, 2021, were N39.56tn or $95.78billion.”

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The debt management agency said the total public debt to gross domestic product (GDP) ratio was 23.27 percent as of March 31, 2022. This, it explained, is still below Nigeria’s self-imposed limit of 40 percent.

According to DMO, the momentum by the government to grow and diversify revenues remains a priority in ensuring debt sustainability.

“Initiatives in this regard are yielding results as actual revenues for January to November 2021 at N5.51 trillion was 39.21 percent more than the N3.96 trillion recorded in 2020,” the statement added “Similarly, the share of non-oil revenue grew to 80 percent compared to 61 percent in 2020.”

Reacting to Nigeria’s soaring sovereign debt, the Centre for the Promotion of Private Enterprise(CPPE), warned that government’s rising  debt profile raises serious sustainability worries.

Its Chief Executive Dr Muda Yusuf said “When we take account of borrowings from the Central Bank of Nigeria (CBN) and the stock of AMCON debt,  the debt profile would be in excess of N50 trillion.

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 Although government tends to argue that the conditions was not a debt problem, but a revenue challenge, the truth is that debt becomes a problem if the revenue base is not strong enough to service the debt sustainably.  It invariably becomes a debt problem and possibly a debt crisis.  Today for instance, the Federal Government actual revenue can hardly cover recurrent budget, which implies that the entire capital budget and part of the recurrent expenditure are being funded from borrowing. This is surely not sustainable. As at November  2021, debt service to revenue ratio was 76 percent. The situation has evidently worsened  now.” 

According to him what was needed at the moment was the political will to cut expenditure and undertake reforms that could scale down the size of government, reduce governance cost and ease the fiscal burden on government.

It is important to ensure that the debt is used strictly to fund capital projects, especially infrastructure projects, that would strengthen the productive capacity of the economy.  This is position of the Fiscal Responsibility Act.

Yusuf said the  emphasis for the government should be on concessionary financing,  as opposed to commercial debts which are typically very costly.

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Also reacting, the Chairman, Apapa branch of the Manufacturers Association of Nigeria (MAN), Frank Onyebu, said: “This is not at all surprising going by the level of borrowing in the last few years.

Obviously, this level of indebtedness is not sustainable. The consequence is that most of our revenue will be used to service debts, leaving little or nothing to run the country. I just hope we won’t get to a situation where we need to take more loans to service existing loans.”

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