The Debt Management Office (DMO) has expressed concern over the spate of borrowing by the federal government.
The DMO advised government to focus on increasing revenue earnings while borrowing should be for special purposes.
Director-general of the DMI, Ms. Patience Oniha, stated this at the 3-day interactive session on the 2022-2024 Medium Term Expenditure Framework (MTEF) and Fiscal Responsibility Paper (FSP) held at the National Assembly (NASS) on Wednesday.
According to her, Nigeria’s debt stock was rising due to new borrowings in the annual budgets and new borrowings approved under the Medium Term External Borrowing Plan.
This is in spite recent assurances from the Minister of Finance, Budget and National Planning, Zainab Ahmed that the federal government was being responsible in its actions and that “if we don’t invest now, we will regret it later.”
According to Oniha, Nigeria’s borrowing was high when the country went into recession, and it was based on the Economic Growth and Recovery Plan (EGRP) with the goal to bring the economy out of recession.
“Thereafter, the level of borrowing started coming down, though not significantly, but at least there was a tendency towards that. Then in 2020, when the Budget was revised because of the socio-economic implications of COVID-19, the borrowings shot up, by about double. So the new borrowings in the first 2020 budget was about N1.6 trillion, the revised budget about N4.6 trillion,” she said.
She pointed out that it was not sustainable to fund the government with borrowings in the Medium to Long-term.
“In our presentation, we extracted the new borrowing from the budget and as the distinguished Chairman said, if we are continuing with that trajectory of N4.6 trillion last year, this year we incurred debt at the rate of N5.356 trillion so it is actually growing.
“Therefore, as Debt Managers, we are concerned with activities that will generate revenues that we can use to service the debt,” Oniha added.
The DMO boss also noted that despite debt-to-GDP ratios of other countries being much higher than Nigeria’s – Nigeria was at 21.6 per cent as of December 2020, while countries like the USA and UK have much higher ratios and, in some cases, more than 80 per cent – their Debt Service-to-Revenue ratios is 10 per cent, at most 15 per cent.
Nigeria’s debt stock has been growing because of new borrowings in the annual budgets and new borrowings approved under the Medium Term External Borrowing Plan, both of which are duly approved as provided for in the DMO Act and the Fiscal Responsibility Act, she said.
Oniha lamented that between January to June 2021, the Debt Service-to-Revenue was about 34 per cent.
“However, the actual ratio is higher which is not good for any country. When we say there is a revenue problem, there is a revenue problem,” she said, pointing out that the borrowing in the Medium-Term Expenditure Framework (MTEF) 2022-2024 is high and urging Nigeria to accelerate revenue generation significantly.
“If we want to borrow to develop the economy, let us keep a sharper focus on generating revenues so that we do not spend all our revenues on Debt Service or even borrow to service debt,” she urged.
