The Debt Management Office (DMO) has raised concerns over Nigeria’s increasing debt profile.
According to the DMO, Nigeria’s total public debt hit N87.38 trillion at the end of June 2023.
The figure represents an increase of 75.29 per cent or N37.53 trillion compared to N49.85 trillion recorded at the end of March 2023.
In a report on Thursday, the DMO said the debt includes the N22.71 trillion Ways and Means Advances of the Central Bank of Nigeria (CBN) to the federal government.
“Nigeria’s total public debt stock as at June 30, 2023, was N87.38tn ($113.42 billion). It comprises the total domestic and external debts of the Federal Government of Nigeria, the thirty-six states, and the Federal Capital Territory,” the DMO stated.
“The major addition to the Public Debt Stock was the inclusion of the N22.712 trillion securitized FGN’s Ways and Means Advances.”
The statement also noted that other additions to the debt stock were new borrowings by the Federal Government and the sub-nationals from local and external sources.
“The reforms already introduced by the present administration and those that may emerge from the recommendations of the Fiscal Reform and Tax Policies Committee, are expected to impact debt strategy and improve debt sustainability,” it added.
The DMO had earlier projected that Nigeria’s public debt burden may hit N77 trillion following the National Assembly’s approval of the request by former President Muhammadu Buhari to restructure the CBN’s Ways and Means Advances.
The Ways and Means Advances is a loan facility through which the CBN finances the shortfalls in the government’s budget.
The Director-General of the DMO, Patience Oniha, during a public presentation of the 2023 budget organised by the former Minister of Finance, Budget and National Planning, Dr Zainab Ahmed, noted that the debt would be N70 trillion without N5 trillion new borrowing and N2 trillion promissory notes.
However, the latest data showed that the current debt stock of N87.38 trillion exceeded the DMO’s projection by N10.38 trillion.
Further breakdown showed that Nigeria has a total domestic debt of N54.13 trillion and total external debt of N33.25 trillion.
While the domestic debt makes up 61.95 per cent of total debt, the external makes up 38.05 per cent.
It was also observed that there was a significant increase in both domestic and external debt within three months.
The domestic debt rose by 79.18 per cent from N30.21 trillion while the external debt rose by 69.28 per cent from N19.64 trillion in the first quarter of 2023.
In its 2022 Debt Sustainability Analysis Report, the DMO warned that the Federal Government’s projected revenue of N10 trillion for 2023 could not support fresh borrowings.
According to the office, the projected government’s debt service-to-revenue ratio of 73.5 per cent for 2023 is high and a threat to debt sustainability.
It noted that the government’s current revenue profile could not support higher levels of borrowing.
In a report titled, ‘Report of the Annual National Market Access Country Debt Sustainability Analysis (DSA),’ the debt office said, “The projected FGN Debt Service-to-Revenue ratio at 73.5 per cent for 2023 is high and a threat to debt sustainability.
It means that the revenue profile cannot support higher levels of borrowing. Attaining a sustainable FGN Debt Service-to-Revenue ratio would require an increase of FGN Revenue from N10.49tn projected in the 2023 Budget to about N15.5tn.”
DMO stated that the government must pay attention to revenue generation by implementing far-reaching revenue mobilisation initiatives and reforms including the Strategic Revenue Growth Initiatives and all its pillars with a view to raising the country’s tax revenue to GDP ratio from about 7 per cent to that of its peer.
The federal government would be unable to borrow a lot as it nears its self-imposed debt limit of 40 per cent, the DMO said.
To reduce borrowing and budget deficit, DMO stated that the government should encourage the private sector to fund some of the capital projects that were being financed from borrowing through the public-private partnership schemes.
It added that the federal government can reduce borrowing through the privatisation and/or sale of Government assets.
Over the years, Nigeria’s low revenue generation has pushed the government to more borrowing.
However, President Bola Tinubu recently expressed his administration’s commitment to break the cycle of overreliance on borrowing for public spending, and the resultant burden of debt servicing it places on management of limited government revenues.
“It means that the revenue profile cannot support higher levels of borrowing. Attaining a sustainable FGN Debt Service-to-Revenue ratio would require an increase of FGN Revenue from N10.49tn projected in the 2023 Budget to about N15.5 trillion,” the DMO added.