As of March 2022, Nigeria’s debt load was N41.60 trillion. On Thursday, Mrs. Patience Oniha, the Director-General of the Debt Management Office (DMO), verified this.
Oniha stated Thursday that Nigeria’s high debt profile was due to a lack of revenues and the National Assembly’s approval of the annual budget with a deficit, both of which increased the country’s debt stock. The engagement was being held on the 2023–2025 Medium Term Expenditure Framework (MTEF) and Fiscal Policy Paper.
“As of December 2020, the Federal Capital Territory, state governments, and the federal debt stock totaled N32.92 trillion,” she stated. The amount was N39.556 trillion by December 2021. We publish quarterly, and as of March this year, it was N41.6 trillion. The federal government owes, on average, around 85% of the amount.
We have been operating on a deficit budget for a number of years, and each time you approve a budget with a deficit, by the time we get the money—because your approval gives us the go-ahead to borrow—the debt stock will have increased. Also keep in mind that states are borrowing. So we include theirs. They also have restrictions governing their borrowing, and debt service rises as the total amount of debt does.
“Borrowing would not halt until the concerns of staff, overhead, and capital spending are appropriately addressed in the budget.”
In addition, she added, “A World Bank report showed that while Nigeria has a low debt to GDP ratio, we have a very high debt service to revenue ratio. As a result, these other countries’ tax to GDP ratios are greater than Nigeria’s.
“Nigeria is ranked 195 in the World Bank survey report of approximately 197 nations, meaning that we only outperformed Yemen and Afghanistan, and I don’t think we want to be like those places.
“Let’s start looking at income, as was stated when the MTEF for 2021 to 2023 was being established, because as debt grows, debt services expand as well. Therefore, we spoke about debt being manageable over the medium run. Sustainable debt management entails being able to repay your debt without too much difficulty or with little left over for other endeavors.
“You must examine revenues carefully, and I believe that part of that is reflected in the conversations you have had with the Customs. There are other additional organizations that generate income. Therefore, rather than relying on a deficit to fund our activities, we must gradually start to focus on revenue.
How much revenue is there when we talk about a N11 trillion deficit and borrowing for 2023? One is that. The extent of the borrowing was 62% of the budget when we look at the first tranche, which was N10 trillion for the entire year of subsidies and N9 trillion for subsidies the following year. That’s a lot. I believe that both parties are responsible. Check the various expense lines to see what we are capable of. Therefore, if the deficit is smaller, borrowing will also be smaller, which is how to increase at a slower rate.
The committee’s vice-chairman, Hon. The session’s chair, Saidu Abdullahi, declared: “The country was in a good position to maintain borrowing. There will always be a need to borrow. No matter how much money we make, the nation must borrow. The sustainability of the debt we are taking on is what we should be concerned about, and based on what she has said, the nation is doing well in terms of managing its debt.