Nigeria intends to owe N50.53trn public debt by 2024
- Incurs N950bn domestics borrowing in Q1 2022 already
- As IMF, experts cry out
Even amidst troubled revenue generation and socio-economic contradictions facing the country, Nigeria’s absolute economic plan involves owing a total of N50.53 trillion public debt by 2024, facts obtained from the Debt Management Office (DMO) have revealed.
The road leading to such huge debt profile is already unfolding as the country has already incurred up to n950 billion domestic debts in less than three month into 2022.
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 is also 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 (ICM) and the $3.35 billion Special Drawing Rights allocated by the International Monetary Fund (IMF) to the Central Bank of Nigeria (CBN).”
According to the document, the Federal Government still plans to borrow an additional N1.6 trillion, while the 2022 debt target for domestic borrowing is N2.57 trillion.
There is also a plan to borrow N2.57 trillion from foreign creditors, while N1.16 trillion is expected from multilateral/bilateral drawdowns.
In total, the Federal Government plans to add N6.3 trillion new debts to the current debt stock, which would then push the country’s total debt stock to N45.86 trillion by December 2022.
However, the Federal Government, in the National Development Plan 2021-2025, hopes to push the total public debt stock to N46.63 trillion for 2022.
A tabular illustration in the document showed that the government targets N39.59 trillion debt stock for 2021, N46.63 trillion for 2022, N50.22 trillion for 2023, N50.53 trillion for 2024, and N45.96 trillion by 2025.
In March this year, Nigeria acquired $1.25 billion Eurobond debt from the International Capital Market, to emerge as 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.
Also justifying the country’s voracious appetite for borrowing, the Finance minister said that proceeds from the $4 billion acquired from the Eurobond market the previous year would be used to fund fuel subsidy.
Debt servicing burden generates concerns
As the country borrows more at every giving opportunity, the burden of servicing the debt has not ceased to generate concerns among local and international observers.
Particularly, there have been warnings that the current level of revenue generated by the country maybe not be able to sustain debt servicing and repayment obligations in the near future.
For instance, 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.
Similarly, the International Monetary Fund (IMF) recently estimated that said the Federal Government could spend as much as 92.6 per cent of its revenue on debt servicing this year. This is contained in its 2021 Article IV released last week.
It also estimated last year’s debt servicing-to-revenue ratio at 85.5 per cent. This is considered outrageous.
The IMF 2022 debt-serving-to-revenue-ratio projection is higher than the 90 per cent forecast given by Agusto & Co even as expert described both projections as lacking economic sense.
As at the end of September, 2021, debt-servicing-to-revenue ratio stood at 76 per cent, implying that 76 kobo out of every N1 earned by the government was spent on payment of interest on debts.
IMF’s latest statement estimates the debt-servicing-to-consolidated revenue (total revenues of the government and its agencies) for 2021 and 2022 at 29 and 32.8 per cent respectively.
Economic experts in the country have kicked against the Federal Government’s penchant 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 (CPPE), 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 N6.4 trillion, and we need to borrow to finance the deficit. Also, the Federal Government has submitted a supplementary budget proposal for subsidy for N2.55 trillion after the budget was passed. Adding that to the deficit, we will get about N9 trillion.
“How much is the revenue? It is just about N10.7 trillion, 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 N4 trillion 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.