The Debt Management Office, on Thursday, revealed that Nigeria’s total public debt stock increased to N46.25tn or $103.11bn in the fourth quarter of 2022.
The latest figure has made members of the organised private
sector and economists to predict that tougher days are ahead for Nigerians and
firms.
The national debt as of September, 2022, was put at
N44.06tn.
According to the office, the new figure consists of the
domestic and external total debt stocks of the Federal Government and the
sub-national governments (36 state governments and the Federal Capital
Territory)
The latest figure was disclosed in a statement by the Debt
Management Office.
The DMO stated that the comparative figure of public debt as
of December 31, 2021, was N39.56tn or $95.77bn.
This means that the country’s debt increased by N6.69trn or
$7.34bn within one year.
Stating reasons for the increase, the DMO said new borrowings
by the FGN and sub-national governments, primarily to fund budget deficits and
execute projects and the issuance of promissory notes to settle some
liabilities also contributed to the growth in the debt stock.
The statement read in part, “As of December 31, 2022, the
total public debt stock was N46.25tn or $103.11bn. In terms of composition,
total domestic debt stock was N27.55tn ($61.42bn) while total external debt
stock was N18.70tn ($41.69bn).
“Amongst the reasons for the increase in the total public
debt stock were new borrowings by the FGN and sub-national governments,
primarily to fund budget deficits and execute projects. The issuance of
promissory notes by the FGN to settle some liabilities also contributed to the
growth in the debt stock.
“On-going efforts by the Government to increase revenues
from oil and non-oil sources through initiatives such as the Finance Acts and
the Strategic Revenue Mobilization initiative are expected to support debt
sustainability.”
The DMO further explained that the debt figure under review was 23.20 per cent of the Gross Domestic Product, indicating that it was well within the limits set by both the federal government and international organisations.
“The total public debt to gross domestic product (GDP) ratio
for December 31, 2022, was 23.20 per cent and indicates a slight increase from
the figure for December 31, 2022, at 22.47 per cent.
“The ratio of 23.20 per cent is within the 40 per cent limit
self-imposed by Nigeria, the 55 per cent limit recommended by the World
Bank/International Monetary Fund, and, the 70 per cent limit recommended by the
Economic Community of West African States.”
Reacting, the Director, Center of Promotion for Private
Enterprise, Muda Yusuf, expressed concern over the multiplier effect of the
latest debt figure, stating that the country would continue to struggle with
servicing of debts if drastic steps were not taken.
He said, “What this means is that the country will continue
to struggle with servicing of debts. Already, debt service is close to 80 per
cent of our revenue and it is likely to increase with the new figure.
“The implication is that we are likely to get ourselves into
a vicious cycle of debt, like a debt trap because the higher debt service
burden is, when your revenue is low, the more you continue to borrow to be able
to sustain the system. Remember that the N23tn from the CBN Ways and Means is
not part of this. If we add that, it will make it almost N80tn.
On possible solutions, Yusuf stated that removal of fuel and
foreign exchange subsidy would increase the nation’s revenue.
“A possible solution is to increase our revenue through the
removal of fuel subsidy and foreign exchange subsidy. This will bring relief of
N8trn. We also have to address increasing oil production, curb leakages, cut
our spending,” he added.
On his part, a professor of Economics at the University of
Uyo, Akpan Ekpo, “Those figures are worrisome because our revenue base is very
low. I just hope the borrowing was for infrastructure and the government is
transparent on what it was spent on.
“Those debts should not be on recurrent expenditure because
that is a waste. Borrowing to fill up the deficit is not good for our economy
either. If it was spent on capital projects, can the projects pay the debts
back? The debt is for future generations. We need to get information on debt
servicing revenue ratio or debt revenue because our revenue base is not healthy
at all.”
A professor of Financial Economics at the University of Uyo,
Leo Ukpong, posited that the inability of the country to service might lead to
an increase in taxes.
He said, “Borrowing tends to have a negative effect on the
credibility of the borrower. Clearly, we know that public debt is very high and
this increase is not good for the country.
“When debts rise, you run the risk of bankruptcy but since a
country can’t be declared bankrupt, it is likely that taxes will be increased
which will reduce our purchasing power.”
Members of the organised private have also reacted to the
development.
On his part, the Deputy-President of the Lagos Chamber of
Commerce and Industry, Gabriel Idahosa described Nigeria’s continued recourse
to borrowing as worrisome for the economy.
Idahosa said, “We are looking at external borrowing that is
not tied to specific revenue-generating projects, that are not collateralised.
For example, if you want to take a loan to build a seaport, to be paid from the
operations of the seaport, it can still raise money. But if you want to borrow
money and use it for various projects that do not generate income, hoping to
pay from the federal budget, then you are not likely to make any progress.” PUNCH
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