Private sector predicts more hardship as national debt hits N46trn

Oluwanifemi Ojo
Oluwanifemi Ojo

Members of Organised Private Sector and economists have predicted more hardship for Nigerians and organizations as the total public debt stock increased to N46.25tn in the last of 2022.

This comes after the announcement of the the Debt Management Office on Thursday that revealed that Nigeria’s total public debt stock increased to $103.11bn in the fourth quarter.

The Debt Management Office reported that the current total public debt of Nigeria includes both the domestic and external debt of the Federal Government, as well as the 36 state governments and the Federal Capital Territory.

It was also stated that as of December 31, 2022, the total public debt was N46.25tn or $112.11bn, indicating an increase of N6.69tn or $7.34bn compared to the previous year’s figure of N39.56tn or $95.77bn.

The DMO statement partly read , “As of December 31, 2022, the total public debt stock was N46.25tn or $103.11bn. In terms of composition, total domestic debt stock was N27.55tn ($61.42bn) while total external debt stock was N18.70tn ($41.69bn).”

Stating the reason for the increse in debt, DMO said that it was due to new borrowings by the Federal Government and state governments, which were primarily used to fund budget deficits and execute projects. The issuance of promissory notes by the Federal Government to settle some liabilities also contributed to the growth in the debt stock.

According to the statement, “On-going efforts by the Government to increase revenues from oil and non-oil sources through initiatives such as the Finance Acts and the Strategic Revenue Mobilization initiative are expected to support debt sustainability.”

The DMO further explained that the debt figure under review was 23.20 per cent of the Gross Domestic Product, indicating that it was well within the limits set by both the federal government and international organisations.

DMO said that the ratio of Nigeria’s total public debt to its gross domestic product was 23.20 per cent  as of December 31, 2022, which is slightly higher than the 22.47 per cent ratio from the previous year.

“The ratio of 23.20 per cent is within the 40 per cent limit self-imposed by Nigeria, the 55 per cent limit recommended by the World Bank/International Monetary Fund, and, the 70 per cent limit recommended by the Economic Community of West African States,” the statement added.

The Punch reported that the Director, Center of Promotion for Private Enterprise, Muda Yusuf, showed concerns over the multiplier effect of the latest debt figure.

He said that if proper measures are not taken, the country would continue to struggle with servicing of debts.

In his words, “What this means is that the country will continue to struggle with servicing of debts. Already, debt service is close to 80 per cent of our revenue and it is likely to increase with the new figure.

“The implication is that we are likely to get ourselves into a vicious cycle of debt, like a debt trap because the higher debt service burden is, when your revenue is low, the more you continue to borrow to be able to sustain the system. Remember that the N23tn from the CBN Ways and Means is not part of this. If we add that, it will make it almost N80tn.”

Proposing a potential solution to the problem, he suggested the elimination of fuel subsidy and foreign exchange subsidy to increase revenue and provide relief of N8tn.

Additionally, he suggested that the country should focus on increasing oil production, reducing waste and expenses, and preventing unnecessary losses.

In the words of a professor of Economics at the University of Uyo, Akpan Ekpo, “Those figures are worrisome because our revenue base is very low. I just hope the borrowing was for infrastructure and the government is transparent on what it was spent on.

“Those debts should not be on recurrent expenditure because that is a waste. Borrowing to fill up the deficit is not good for our economy either. If it was spent on capital projects, can the projects pay the debts back? The debt is for future generations. We need to get information on debt servicing revenue ratio or debt revenue because our revenue base is not healthy at all.”

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