…says debt stock within tolerable limit

The Federal Government borrowed N1 trillion to fund petroleum subsidy retention this year, a development that has led to increase in the country’s total debt stock, Director- General, Debt Management Office (DMO), Ms. Patience Oniha, has said. Nigeria’s current public debt stock as of June 30, 2022 stood at of $42.8 billion, a thresholdshesaidwaswithin the acceptable limits and is sustainable.

She made the disclosure In a presentation at the Executive Course on Budgeting and Fiscal Transparency at the Army Resource Centre in Abuja. The DMO boss attributed the current debt stock to budget deficit, noting that the borrowing plan for 2022 was increasedbyN1trillion to enable the government pay the extra cost of petrol subsidy. Speaking on the topic, “Debt Sustainability Challenges and Strategic Revenue Mobilisation Initiative,” Oniha said that the Federal Government had to resort to borrowingtofundthebudget due to revenue challenges.

She said that the DMO was deploying World Bank Fund tools to ensure the sustainabilityof Nigeria’spublic debt. According to her, “these tools include an annual Debt Sustainability Analysis (DSA) and a Medium-Term Debt Management Strategy (MTDS) every four years. “Maturities in the public debt portfolio are well spread to avoid bunching of maturities and to ease repayments of maturing obligations. The Domestic Debt portfolio has securities with tenors ranging from 91 days to 30 years, whiletheExternalDebtPortfolio has securities ranging between 5 years to 30 years.”

She explainedthat despite criticisms of the government’s borrowing, Nigeria’s debt to GDP ratio remained among the lowest globally. She pointed out that while Nigeria’s debt to GDP ratio was 23.06 per cent, countries such as Angola (136.54%), South Africa (69.45%), Ghana (78.92%), United States (133.92%) and United Kingdom (104.47%) have higher ratios. She, however, stressed that Nigeria was not alone in rising levels of public debts, pointing out that across the globe, governments were borrowing more to meet with economic and social challenges posed by the Covid-19 pandemic and the Russia-Ukraine war.

“Governments across the world borrow. Globally, debt levels are growing, but it is not a new trend. Debt levels were already rising prior to Covid-19 crisis when compared to 2014. Globally, sovereign debt grew from 49 percent of GDP in 2014 to 57.9 percent in 2019 and in sub-Saharan Africa, from 35 percent of GDP in 2014 to 55 percent in 2019. In Nigeria, this ratio rose from 13 percent in 2014 to 19 percent in 2019”, she stated.

The DG also explained that the government was not just borrowing for borrowing sake, emphasising that the loans would enable the government to finance critical infrastructure with multiplier benefits (job creation, movement of persons and goods) and overall GDP growth. She noted that the country was facing a revenue crisis, adding that it had become very important for the government at all levels to pay more attention on how to increase revenue generation as a means of reducing borrowing. The DMO boss noted that Nigeria was performing poorly in terms of revenue, as she said that the country had a far lower revenue record than it could generate.

She said that the Federal Government had taken a number of measures to grow its revenue, while urging citizens and corporate bodies to pay their taxes in order to make funds available for the government to finance the various muchneeded infrastructural facilities, across the country. Oniha said that the issuance of Federal Government securities had several benefits for both the citizens and corporate organisations. They included being safe investment opportunities with regular returns and being the vehicle for mobilising large pools of funds from domestic and international sources for investments in capital projects.

DMO DG said that the development of the domestic financial sector; liquid assets for banks and other institutions who need to hold such assets; attracting foreign investors into the domestic markets; and providing sovereign yield curves in the domestic and international markets, against, which other issuers such as state governments, private sector entitiesandmultilateralscan issue securities to raise capital were major advantages of the exercise.