•says borrowing has hit N41.6 trillion as March, 2022
By Christiana Ekpa
The Director-General of the Debt Management Office (DMO), Patience Oniha, yesterday attributed Nigeria’s high debt profile to lack of revenues and approval of the annual budget with a deficit by the national assembly which increased the debt stock of the country.
According to her, Nigeria has been running on budget deficit for many decades which in turn affected its revenue profile.
Oniha who disclosed this before the House of Representatives committee on Finance interfacing with the Office on the on the consideration of Medium Term Expenditure Framework MTEF and Fiscal Strategy Paper FSP from 2023 to 2025, said that Nigeria was indebted to the tune of N41. 6 trillion
Oniha said that until the issues of personnel, overhead and capital expenditure were properly addressed in the budget, borrowing would not stop.
She said “As you know, we publish the debt numbers quarterly which is why there is a lot of discussions around it. But let me just give some numbers. As
at December 2020, the debt stock of Nigeria and that includes the federal, state governments and the federal capital territory was N32.92 trillion. By December 2021, it was N39.556 trillion. As at March of this year, we publish quarterly, it was N41.6triilion. On the average, (federal government) it is about 85 percent of the total. Technically, the bulk of it is the federal government.
“Speaking specifically to the question and it is a genuine concern that Nigerians ask and you as the stakeholders in Nigeria with responsibility for borrowing ask.
“Debt has grown and that has come really from the annual budget. There are 3 levels where those borrowings have increased. We have been running deficit budget for many, many years. So, each time you approve a budget with a deficit by the time we raise that money because when you approve it is giving us a mandate, authority to borrow, it will reflect in the debt stock, so debt stock will increase. Also remember that states are also borrowing. So we add their own. They also have laws governing their borrowings.
“The Second leg to that really, as debt stock increases so does debt service. And so, the clear message is go through the budget, we have been having deficit budget for many years and have been borrowing significantly.
“From Covid in 2020, the level of borrowing had increased significantly as you know. Those budgets pass through this House. The issue is how do you reduce that debt. One of it is revenues which we have talked about. So, if revenues are high, your deficit will be lower and your new borrowing will be lower and then your new borrowing will be less and your debt stock will be slower and debt service to revenue will now be so high.
“So, the challenge is, we have been borrowing because of shortfalls. So, the other thing to do is let’s look at our expenditure profile, what can we do to reduce there because you are asking me what is the remedy. It is from the budget. There is revenue, there is expenditure listed in various categories, personnel, overhead and capital. So, those are what bring out the deficit we borrow for. It is those things that should be interrogated in addition to increasing revenue significantly.
“Let me say that a world Bank report just show that in terms of debt to GDP ratio, Nigeria is low but for debt service to revenue ration, we are very high. So, if you look at tax to GDP ratio of these other countries, they are in multiples of Nigeria. The world bank report did a survey and I think it’s about 197 countries and Nigeria is number 195, meaning we beat only two countries and that was Yemen and Afghanistan and I don’t think we want to be at those places. So, we can’t talk about borrowing without talking about revenues and we can’t say why is the debt stock growing. It’s growing because we are running deficit budget and some of you may be aware we are also issuing promissory note to refinance arrears of government which also comes to the national assembly for approvals.
“What we as DMO has been saying particularly since 2020, when the MTEF for 2021 to 2023 was being prepared is to say hey, let’s begin to look at revenues because as debt is growing, debt services are increasing. So, the language we used was for debt to be sustainable in the medium term, sustainable means you can service your debt without difficulty, without it consuming all your revenues because you have very little for other projects. You must look at revenues very closely and I think the discussions you have had with the Customs is on part of it. There are many other revenue generating agencies. So, we must increasingly begin to look out our revenue for funding out activities as opposed to deficit.
“We talk about N11 trillion deficit and borrowing for 2023, how much is the revenue there? That’s one. When we looked at the first tranche that was 10 trillion for full year of subsidy and 9 trillion for subsidy next year, the size of the borrowing was 62 percent of the budget. That’s high. The responsibilities, I think, are on both sides. Query the various expenditure lines and see what what it is we can handle. So, if the deficit is lower, the borrowing will be lower and that’s how to grow on a slower pace.
“I have just said what the sources of those debts are and we need to focus on revenue. We did say this in 2020 at a public hearing in the national assembly. If you listened to us, we have been talking about it a lot.
“Revenue can’t grow at low rate of 2 percent to 3 percent. It has to grow significantly to be able to ensure that we can service our debt and still have for capital projects and for other overheads and important activities. So that is what it is.”
