Nigeria’s Public Debt Rises By N700bn To N32.9trn-DMO

The Debt Management Office has said Nigeria’s total public debt rose to N32.9tn at the end of December 2020.

The N32.9trn represents an increase of N700bn from the public debt profile of N32.2trn as of the end of September last year.

The DMO disclosed that the total public debt to the Gross Domestic Product was 21.61 per cent, adding that it was within Nigeria’s new limit of 40 per cent.

Nigeria’s total public debt as of December 31, 2020 was N32.92tn. The figures include the debt stock of the federal and state governments, as well as, the Federal Capital Territory,” it stated.

It said that after Nigeria exited recession in 2017, the level of new borrowing at the federal level as shown in the annual Appropriation Acts, had been declining to moderate the rate of growth in the public debt stock in order to ensure debt sustainability.

DMO stated that new borrowing to part finance budget deficits had declined steadily from N2.36tn in 2017 to N2.01tn in 2018, N1.61tn in 2019 and N1.59tn in the first 2020 Appropriation Act.

This trend was reversed in 2020 due to the economic and social impact of the COVID-19 pandemic as new borrowing in the revised 2020 Appropriation Act was N4.2tn.

The DMO stated, “It should be noted though, that apart from the new domestic borrowing of N2.3tn, the other new borrowings were concessional loans from the International Monetary Fund ($3.34bn) and other multilateral and bilateral lenders.

This incremental borrowing to part-finance the 2020 budget and the additional issuance of promissory notes to settle some arrears of the Federal Government of Nigeria, contributed to the increase in public debt stock.

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“New domestic borrowings by state governments also contributed to the growth in the public debt stock.”

In February, the Federal Executive Council at a meeting approved a new Medium-Term Debt Management Strategy for Nigeria, for the period of 2020-2023, when the government disclosed it planned to increase domestic borrowings in its debt profile from 2021 to 2023.

“Borrowing will be from domestic and external sources but a larger proportion of new borrowing will be from domestic sources using long-term instruments while for external borrowing, concessional funding from multilateral and bilateral sources will be prioritised,” it stated.

The debt accumulation is coming at a time when key government officials in the Economic Management Team had repeatedly defended the country’s debt level arguing that it is still within sustainable limit.

For instance, the Minister of Finance, Budget and National Planning, Zainab Ahmed had recently said Nigeria can’t stop borrowing because not doing so would stagnate the progress of the economy.

According to her, there is a need for government to continue to borrow to provide basic infrastructural facilities.

She said, “If we say we will not borrow and therefore not build rails and major infrastructure until our revenue rises enough, then, we will regress as a country, we will be left behind, we won’t be able to improve our business environment and our economy will not grow.

“So, there will be a lot of capital projects that are affected. So, we need to look at it that borrowing is, even as you see it in the budget every year, used to support infrastructural development. Otherwise, there will be a challenge.”

But the Finance Minister ‘s position differs with that of some economic experts who said that the huge borrowings portend danger for the economy.

For instance, the Managing Director/Chief Executive Officer Cowry Asset Management Ltd, Johnson Chukwu said the Federal Government’s current fiscal position constrains it from embarking on such huge expenditure as a result of accumulated large deficits over the past few years.

He said the huge debt is a burden for the economy, adding that time had come for Nigeria to begin to seek for debt relief from its creditors.

ENDS