Nigeria’s debts have increased by about 4 trillion naira over the past five months to bring the debt portfolio to 45.25 trillion naira according to official documents.
Official data indicated that the government raised around N3.34 trillion through its regular issuance of domestic debt instruments between April and August.
The depreciation of the naira also had an impact on the stock of external debt.
The documents come from the monthly issuance reports of the Debt Management Office (DMO), the Central Bank of Nigeria (CBN) and two major investment and finance companies that deal with public debt issues – Arthur Steven Asset Management and Vetiva Capital Management Limited.
Earlier in the month, the DMO reaffirmed that outstanding national debt reached N41.6 trillion at the end of the first quarter ended March 31, 2022.
Reports say the government raised N1.116 trillion through bond issuance during the five-month period. It also raised N1.999 trillion through Nigerian Treasury Bonds (BNT) and mopped up N220.01 billion through the Open Market Operation (OMO).
The DMO said it was using the official CBN exchange rate of 415.75 naira to the dollar as of March 31, 2022 as the country’s external debt conversion rate for the first quarter. The official rate of the apex bank stood at 423.48 naira per dollar as of August 31, 2022.
A breakdown of the total debt stock articulated the increase in external debt to the depreciation of the currency from 16.62 trillion naira in the first quarter to 16.93 trillion naira at the end of last month.
Domestic debts, due to new issues, fell from 24.987 billion naira in the first quarter to 28.322 billion naira at the end of August.
The stock of debt, which stood at N32.92 trillion in December 2020, increased to N39.556 trillion in December 2021 and further increased to N41.6 trillion at the end of the first quarter of 2022 .
The federal government accounted for over 88% of outstanding debt.
The growing debt burden continued to generate heated public debate as public and private sector experts expressed concerns about the country’s fiscal sustainability amid falling national revenues.
However, the Director General of the Debt Management Office (DMO), Ms. Patience Oniha, said the debt profile will continue to rise until the country can generate enough revenue to fund its annual budget.
Ms Oniha said one of the ways to deal with the rising debt profile is through a more effective review of the national budget to reduce the deficit level, adding that “if the deficit is lower, borrowing will be lower.”
According to her, the country has had a budget deficit for decades, which has led to increased borrowing to finance the budget. A World Bank survey places Nigeria 195th out of 197 countries in terms of debt-to-GDP growth.
Taiwo Oyedele of PricewaterhouseCoopers (PwC) said: “Debt in itself is not a problem if it is used productively. We must, however, begin to reverse the imbalance of revenue and expenditure to avoid an unsustainable accumulation of debt. Once the country’s spending profile is brought under control and revenue generation improves, indebtedness will become manageable.
“The high ratio of debt servicing costs to federal government revenue is the result of three main factors over a period of time, namely low revenue generation, increased spending, and debt accumulation. Nigeria’s public debt has been growing faster than the GDP growth rate, while the cost of servicing debt is rising at a faster rate than income growth.
A capital market professor, Uche Uwaleke, said increased government borrowing could be justified by the huge infrastructure deficit.
To close the infrastructure gap, the National Integrated Infrastructure Master Plan indicated that Nigeria should invest $3 trillion ($100 billion per year) in infrastructure over the next 30 years.
According to him, the increase in public debt can be justified by the need to accelerate the economic growth of an economy which has suffered severe external shocks in recent times – collapse of the price of crude oil in 2015 and COVID-19 in 2020, leading to low real gross domestic product (GDP) growth rates.
The inability of real GDP growth to exceed the population growth rate, estimated at 2.6% per year, has fueled unemployment and poverty which now stands at 40.1%, or 82.9 million people.
Uwaleke pointed out that, without government borrowing, the economy would not have emerged from recession cycles.
According to Oyedele, the government must ensure spending efficiency, block leakages, reprioritize spending, create an attractive policy environment for private sector participation in viable infrastructure while reforming the tax system to improve revenue generation. .
“Key reforms required include harmonizing taxes and tax agencies as well as harnessing technology and tax intelligence to combat evasion and aggressive avoidance,” Oyedele said.