On Thursday, the Debt Management Office announced that Nigeria’s public debt stock had risen to N46.25tn or $103.11 billion as of December 31, 2022. It increased from the N39.56 trillion ($95.77 billion) recorded on December 31, 2021.
The total amount of public debt includes both the domestic and external debt stocks of the Federal Government of Nigeria (FGN) as well as the subnational governments, including the 36 state governments and the Federal Capital Territory. Regarding its makeup, the entire domestic debt stock amounted to N27.55 trillion (equivalent to $61.42 billion), whereas the overall external debt stock was N18.70 trillion (equivalent to $41.69 billion).
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On Thursday, the Debt Management Office (DMO) clarified that one of the factors contributing to the rise in the total public debt stock was the acquisition of fresh loans by the FGN and sub-national governments. This borrowing was largely aimed at financing budget deficits and implementing various projects. They noted that “the issuance of Promissory Notes by the FGN to settle some liabilities also contributed to the growth in the Debt Stock,” adding “ongoing efforts by the Government to increase revenues from oil and non-oil sources through initiatives such as the Finance Acts and the Strategic Revenue Mobilisation initiative are expected to support debt sustainability”.
The new figure pushes Nigeria’s public debt-to-GDP ratio to 23.20%, up from 22.47% at the end of 2021.
Experts and Economists React
After the announcement made by the DMO, the Organized Private Sector (OPS), economists, and observers reacted to the news.
Muda Yusuf, the Director of the Center of Promotion for Private Enterprise expressed concern about the debt servicing struggle, noting to Punch Newspaper, “What this means is that the country will continue to struggle with servicing of debts. Already, debt service is close to 80 percent 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.” He added further, referencing the proposed securitization of the N22.7 trillion Way and Means borrowing from the CBN.
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He noted possible solutions, “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,”
Deputy-President of the Lagos Chamber of Commerce and Industry, Gabriel Idahosa also decried the spate of public borrowings in Nigeria. He noted, “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.”
Also, Mr. Sola Obadimu, Director General, of the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA) spoke, noting, “A rising public debt profile is not too good for a developing economy by any means, particularly if one cannot easily point to any developmental effects arising from the growing debt profile.
“Yes, some people may argue that our public debt exposure level or ratio is still low at 23% of our GDP however, a situation where our national budget is gradually being wiped out by the duo of increasing levels of debt servicing and fuel subsidy should be a huge matter of concern based on its likely negative effect on development. There’s a huge need for a higher level of fiscal discipline as well as a need to get value for money spent.
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“Some of the indirect effects may be rising inflation rates and lower quality of life of the citizenry on an average level and, if not checked, it could get calamitous if we end up with a debt crisis later. This is a situation where creditors are not motivated to lend us more and/or we are unable to service our current debts as scheduled. In summary, we need to exercise more fiscal discipline and be more accountable by getting good value for money spent for a start. Accountability is key.” He noted.
