Nigeria’s debt profile hits N33trn as DMO raises alarm

With the approval of a fresh $22.7 billion foreign loan requested by President Muhammadu Buhari, Nigeria’s debt profile has reached a high of N33 trillion.

The Senate on Monday declared this just as the Director – General of the Debt Management Office (DMO), Ms. Patience Oniha, expressed fear that economic effects of the Coronavirus pandemic may incapacitate the country from servicing her debt appropriately.

These submissions were made in Abuja at the one day public lecture organised by the National Institute for Legislative and Democratic Studies (NILDS), on Public Debt in Nigeria: Trend, Sustainability and Management.

In his remark, the Deputy Chairman of Senate Committee on Local and Foreign Debts, Senator Muhammad Bima Enagi (APC Niger South), said judiciously utilisation of loans for intended projects and servicing the debts appropriately have also been problems for some developing nations like Nigeria.

Enagi said realities on ground in the country in terms of required infrastructure and debts accumulations between 2006 and now, are not in anyway connected.

He said from a low ratio of debt to gross domestic product (GDP) of about 3.4 percent at independence, Nigeria’s total public debt as at September 30, 2019 according to the Debt Management Office (DMO) stands at about N26.2 trillion (or $85.4 Billion).

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“Of this amount, total domestic debts is about N18 trillion (or $58.4 Billion) which is 68.45% of the total public debts. With the recent approval of the 2016-2018 External Borrowing Plan, the total debt stock would be about N33 trillion and 21 Debt/GDP ratio.

“The big question in the minds of average Nigerian aware of this fact is what did we do with the money? In other words, where did the money go?

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“What do we have to show as a people for these huge debts accumulated over the last four decades or so?, he quiped.

To address the trend, the Senate and by extension, the National Assembly, he said, is more than determined to monitor the executive on prompt utilisation of new loans being sought for, in saving the country from going back to pre 2005 and 2006 debt burden era by.

His words: “Consequences of these borrowings is that the sheer magnitude of the nation’s Annual Debt Servicing put at about N2.47 trillion for 2020 makes the provision of basic but essential amenities and infrastructure in the country, almost impossible without further borrowings.

“Cearly, Nigeria needs to get its public finance in order to avoid the potential fiscal and financial crisis ahead of the nation.

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“The current debt situation in Nigeria needs to be properly managed and every borrowed Naira or Dollar, carefully deployed, especially in the face of the continued dependence of the nation’s economy on exported crude oil, with its usual price volatility.

“Borrowings must be project tied and not just to support budget deficit. Furthermore, the projects must be such to grow the economy and bequeath laudable infrastructure and not debt for future generations,

“The government must improve on its Internally Generated Revenue (IGR), its Foreign Exchange Earnings and reduce importation of unnecessary goods. To this end, the 9th National Assembly will ensure very effective oversight”

But the DMO boss in her remarks said there was no cause for alarm as regards the total budget profile of the country which put at $85.390 billion or N26 trillion as at September 2019.

According to her, though the country’s total debt stock as at 2006 when she exited the Paris and London Club of Creditors was $17.349 million but yearly deficit budgeting and poor revenues generation, forced the country into taking loans thereafter which accumulated to N26 trillion as at September last year.

“Concerns have been expressed about the growth in Nigeria’s debt stock since the exit from the Paris and London Club of Creditors. It is true that the Public Debt Stock has grown from US$17,349.69 million in 2006 to USD85, 390.82 million as at September 30, 2019.

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“However, it must be recognised that the current Debt Stock is the result of cumulative borrowings by successive Governments to finance budget deficits and various Infrastructure Projects”, she said.

She said in order to ensure that the public debt is sustainable, the Debt to GDP Ratio was set at 25%, lower than the 56% advised by the World Bank and International Monetary Fund.

The Total Public Debt to GDP, according to her, has remained within the 25% limit and stood at 18.47% in September 2019.

“This is however, only one measure of debt sustainability. The other equally important measure is the Debt Service to Revenue Ratio and this is where Nigeria needs significant improvement. Actual Debt Service to Revenue Ratio has been high at over 50% since the year 2015 although it dropped to 51% in 2018 from 57% in 2017.

“The relatively high Debt Service to Revenue Ratio is the result of lower Revenues and higher Debt Service figures.

“Whilst, Nigeria’s debt is sustainable, recent developments in the global environment induced by COVID 19, already suggest a less than favourable economic outlook with implications for Nigeria”, she added.