CEM REPORT, FINANCE | Many Nigerians have been asking the question of why the nation’s debt stock keeps rising no matter how much is budgeted for debt servicing.
The Debt Management Office (DMO) has given insight into why the nation’s debt doesn’t seem to abate. The debt office provided 3 major factors to the rising debt.
Speaking as a guest on a Channels Television programme, Sunrise Daily, Director-General of DMO, Patience Oniha attributed the rising debt profile to budget deficits which the country has been running for many decades.
She added that 85 to 95% of budget deficits have been funded by loans over the years.
“Nigeria’s debt stock is N46.25trn. It includes the debt of the 36 state governments and the Federal Capital Territory. The Federal Government is responsible for 84% to 85% of this.
“The debt stock is growing because Nigeria has been running a budget deficit for many decades. In good and bad times with oil prices, we have borrowed. We’ve been running budget deficits and those deficits are funded largely 85 to 95% from borrowing and that is cumulative. These are publicly available data.
“As we borrow each year, it adds up. So, the annual budget deficits are a major component. If you look at this year’s budget, budget size is N21trn, borrowing is N10trn.”
Furthermore, she highlighted Nigeria’s several loans from multilateral in the past as another major contributor to the unabating debt stock.
‘’Nigeria had contracted several loans in the past from multilaterals like the World Bank, the African Development Bank and bilaterals like Germany, India, China and disbursements are going on.”
Explaining, Oniha described borrowing as an accepted form to fund government activities however stressed that loans should be judiciously utilised to stimulate growth, and revenue will be generated to offset the debt.
The DMO boss further said the Federal Government keeps issuing promissory notes to settle obligations for which it doesn’t really have the revenue.
“The third part – the government has been issuing promissory notes to settle obligations for which it doesn’t really have the revenue. So, that is why the debt stock has been growing.”
Recall that CEM reported that Nigeria’s total public debt stock is N46.25 trillion or $103.11 billion as of December 2022.
The DMO said the debt which consists of external and domestic debt stocks of the Federal Government and 36 State Governments with the Federal Capital Territory (FCT) increased by N6.69 trillion or $7.34 billion when compared to the comparative figure of N39.56 trillion and $95.77 billion as of December 31, 2021.