The Federal Government has incurred N950bn new domestic borrowing between January 2022 and March 11, 2022, the Debt Management Office (DMO) has revealed.
The fresh borrowing was disclosed on March 17 in the presentation of the Public Debt Data as of December 31, 2021, by the Director-General of the DMO, Patience Oniha.
In the document, Oniha disclosed that the Federal Government was considering all options to raise funds externally.
She said, “All options for raising funds externally are being considered. These include funding from multilateral and bilateral sources, the International Capital Markets and the $3.35bn Special Drawing Rights allocated by the International Monetary Fund to the Central Bank of Nigeria.”
According to the document, the Federal Government still plans to borrow an additional N1.6tn, while the 2022 debt target for domestic borrowing is N2.57tn.
There is also a plan to borrow N2.57tn from foreign creditors, while N1.16tn is expected from multilateral/bilateral drawdowns.
In total, the Federal Government plans to add N6.3tn new debts to the current debt stock, which would push the country’s total debt stock to N45.86tn by December 2022.
However, the Federal Government, in the National Development Plan 2021-2025, hopes to push the total debt stock to N46.63tn for 2022.
A tabular illustration in the document showed that the government targets N39.59tn debt stock for 2021, N46.63tn for 2022, N50.22tn for 2023, N50.53tn for 2024, and N45.96tn by 2025.
In March this year, Nigeria acquired $1.25bn Eurobond debt from the International Capital Market, making Nigeria the first African country to access the ICM in 2022.
This happened a few days after the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, had told Reuters that there was no plan to enter the Eurobond market in 2022.
The DMO said the proceeds of the Eurobond would be used to finance critical capital projects in the budget in order to bridge the deficit in infrastructure and strengthen Nigeria’s economic recovery, while the Finance minister said that proceeds from the $4bn acquired from the Eurobond market the previous year would be used to fund fuel subsidy.
The World Bank has said that Nigeria’s debt, which may be considered sustainable for now, is vulnerable and costly.
According to the Washington-based global financial institution, the country’s debt is also at risk of becoming unsustainable in the event of macro-fiscal shocks.
Experts have kicked against the Federal Government’s proclivity for debt, which they have described as unsustainable.
Speaking on the development, an economist and Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, said the country is on the brink of debt distress.
He said, “Nigeria is on the brink of debt distress because our debt profile now is not sustainable. We had a debt service to revenue ratio getting to 76 per cent as of November last year. The situation is likely to get worse because our deficit in the 2022 budget is N6.4tn, and we need to borrow to finance the deficit. Also, the Federal Government has submitted a supplementary budget proposal for subsidy for N2.55tn after the budget was passed. Adding that to the deficit, we will get about N9tn.
“How much is the revenue? It is just about N10.7tn, and we are not likely to get the full revenue, maybe 70 per cent. So, we are getting to a point whereby the time we service our debts, which should be around N4tn, and spend another N4tn on subsidy this year, we have consumed almost all our revenue for the year. Does that now mean that we are going to be using debt for personnel costs?; for overhead?; for capital budget? That is where we are heading to.”
He further lamented that instead of the country gaining from the increase in oil price like other oil-producing countries, the government was losing money on fuel importation and fuel subsidy
“With the increase in oil price, the subsidy price will have to increase beyond what the NNPC requested. While other oil-producing companies are ‘happy’, as their reserves are increasing and currency are getting stronger, we are lamenting because we are not getting the full benefit of the oil windfall,” he added
A professor of Economics at the Olabisi Onabanjo University, Ago-Iwoye, Ogun State, Prof Sheriffdeen Tella, criticised the Federal Government for the rate of increasing debt.
According to him, the money spent on debt servicing is eating deep into the government’s revenue, which makes borrowing an unsustainable form of financing.
He said, “We are already in debt distress if we are spending a large proportion of our revenue on debt servicing, we are in trouble and our revenue is not growing. The Minister of Finance recently said we will borrow from Eurobonds to finance subsidy. What kind of economics is that? The Minister of Finance deserves to be given an award for patronising the debt market. She has made Nigeria the most active debt in the world. This is not good enough.
“We are already in distress in terms of debts because we are spending our revenue, which is declining, on debt servicing and fuel importation. It is unfortunate. What is the money borrowed used for? Every time, we hear of things being underfunded. Even the NNPC said they are underfunded which is why they were unable to meet up with the OPEC quota for oil production. So, what really is funded in this country?”
He further urged the Federal Government to stop borrowing and focus on how to boost revenue, especially by removing the fuel subsidy.
“The Federal Government needs to be stopped from borrowing money. They just borrow for consumption and not production. How can you borrow for subsidy on fuel when people are using more diesel? Industries, trains, and trailers use diesel. Diesel is not enjoying subsidy. So, what subsidy are they paying on petrol, which is for domestic use and not industrial use? Industries even have to use diesel steadily due to poor electric power supply. We need to get our priority right,” Tella said.