- DMO boss said Nigeria’s growing debt stock is due to running a budget deficit for many decades as well as several loans contracted in the past from multilaterals and bilaterals.
- It also grew as a result of the continuous issuance of promissory notes by the Federal Government to settle obligations.
- Nigeria’s debt stock is N46.25 trillion, with the Federal Government responsible for 84% to 85% of this, while the state governments account for the rest.
The Debt Management Office (DMO) has attributed Nigeria’s growing debt stock to a combination of 3 major factors.
This was made known on Wednesday by the Director-General of DMO, Patience Oniha when she appeared as a guest on a Channels Television programme, Sunrise Daily, where she spoke on the country’s increasing debt profile.
Oniha said Nigeria’s debt stock is growing because the country has been running a budget deficit for many decades with those deficits funded largely 85% to 95% from borrowing which is cumulative.
She added that several loans have been contracted in the past by Nigeria from multilaterals like the World Bank, and African Development Bank (AfDB) and bilaterals like Germany, India and China with disbursements still going on.
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The DMO boss further said the Federal Government keeps issuing promissory notes to settle obligations for which it doesn’t really have the revenue.
A promissory note is a legal instrument, in which one party promises in writing to pay a determinate sum of money to the other, either at a fixed or determinable future time or on demand of the payee, under specific terms and conditions.
What the DMO Director-General is saying
Oniha said borrowing is an accepted form to fund government activities though there should be revenues generated.
She noted that when monies borrowed are judiciously utilised to stimulate growth, revenue will be generated to offset the debt.
- Oniha said, “Nigeria’s debt stock is N46.25trn. It includes the debt of the 36 state governments and the Federal Capital Territory. The Federal Government is responsible for 84% to 85% of this.
- “What are triggers and why is the debt stock growing when the debt stock is growing, debt service also grows.
- “The debt stock is growing because Nigeria has been running a budget deficit for many decades. In good and bad times with oil prices, we have borrowed. We’ve been running budget deficits and those deficits are funded largely 85 to 95% from borrowing and that is cumulative. These are publicly available data.
- “As we borrow each year, it adds up. So, the annual budget deficits are a major component. If you look at this year’s budget, budget size is N21trn, borrowing is N10trn.”
- She added, ‘’Nigeria had contracted several loans in the past from multilaterals like the World Bank, the African Development Bank and bilaterals like Germany, India, China and disbursements are going on.
- “The third part – the government has been issuing promissory notes to settle obligations for which it doesn’t really have the revenue. So, that is why the debt stock has been growing.”
What you should know
- The DMO had a few days ago revealed that Nigeria’s total public debt stock is N46.25 trillion or $103.11 billion as of December 2022.
- The DMO said the debt which consists of external and domestic debt stocks of the Federal Government and 36 State Governments with the Federal Capital Territory (FCT) increased by N6.69 trillion or $7.34 billion when compared to the comparative figure of N39.56 trillion and $95.77 billion as of December 31, 2021.
- The DMO stated that the increase in the debt stock was due to new borrowing by the Federal Government and sub-national governments, primarily to fund budget deficits and execute projects as well as the issuance of promissory notes to settle some liabilities also contributed to the growth in the debt stock.