The Nigerian Government is set to push its public debt stock to N50.22tn by 2023, with domestic debt at N28.75tn and external debt at N21.47tn.
It would be recalled that the Debt Management Office disclosed that Nigeria’s public debt was N38tn as of the end of the third quarter of 2021, with the total debt stock rising by N2.540tn in three months from July to September 2021.
Now, the government plan to push it to N50.22tn by 2023.
According to the projections in the National Development Plan 2021-2025, the regime of the President, Major General Muhammadu Buhari (retd.), plans to accumulate about N12tn debt in two years from 2021 to 2023.
However, based on the plan, the government targets a reduction in total public debt by 2025.
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.
The government also discloses that it needs money to finance the plan of N348.1tn, and the borrowing framework in the plan is 45 per cent each for both foreign and domestic borrowing.
The plan read in part;
“The plan will require an investment of about N348.1tn to achieve the plan objectives within the period of 2021-2025. It is estimated that the government capital expenditure during the period will be N49.7tn (14 per cent) while the balance of N298.3tn (86 per cent) will be incurred by the Private Sector. Of the 14 per cent, government contribution, FGN capital expenditure will be N29.6tn (9 per cent) while the sub-national governments’ capital
“The borrowing framework in the plan is 45 per cent each for both foreign and domestic borrowing while the other financing sources account for 10 per cent. Domestic bonds and concessional external loan financing, amongst others, will account for the borrowing strategies for the plan. Thus, the government will improve on current debt management strategies to ensure sustainability.”
An investment analyst, Omosuyi Temitope, said;
“As a matter of fact, debt service to revenue would remain above 80 per cent in 2022, but there are obvious reasons the government needs to embrace more borrowing.
“First, no nation can achieve long-lasting development without some forms of borrowing to finance growth-enabling projects and programmes. Nigeria’s infrastructure needs are very essential to her sustainable and inclusive growth.
“Everyone can clearly deduce the negative impact of poor infrastructure on the nation’s growth, ranging from the high cost of doing business to the high cost of living amidst a general unimpressive living condition, just to mention a few.”
However, the man stressed the need for the debt to be sustainable through the creation of assets and value that justify the debt.
“Nonetheless, it is imperative for the government to ensure debt obligations are sustainable by creating assets and value that justify the ballooning debt stock,” he said.
Speaking about the recent development, a professor of Economics at the Olabisi Onabanjo University, Ago-Iwoye, Ogun State, Prof Sheriffdeen Tella, said debt level was worrisome.
According to him, the government should not be considering more borrowing and consider other ways of generating revenue.
He said;
“Even at the level that we are now, it is worrisome, not to talk of planning to borrow more. It is unfortunate that the government is always thinking of borrowing, instead of thinking of other ways to generate revenue.
“They can ensure that public-private partnership projects are built, once operational and yielding capital, though whoever implemented it can generate their money plus interest and then the project becomes ours and we can generate revenue from those.
There are projects that we can scale down until we have enough funds to implement and there are projects that can generate money on their own.
“Instead of always thinking of borrowing, the government can go after those that owe the country, For instance, NEITI recently detected some money that is being held by some wealthy individuals, money that runs into trillions but the government isn’t going after those funds.”
He added;
“Also, our borrowing pace is not sustainable, because almost all the revenue generated by the country is used to pay the current debt and that is why the government doesn’t have enough to pay for a lot of its expenditure,”
Dr Muda Yusuf, an economist and the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, said that the increasing debt profile of the government raised some sustainability concerns.
He said;
“The rising debt profile of the government raises serious sustainability concerns. Although the government tends to argue that the condition is not a debt problem, but a revenue challenge.
But the truth is that debt becomes a problem if the revenue base is not strong enough to service the debt sustainably. It invariably becomes a debt problem.
“What is needed is the political will to cut expenditure and undertake reforms that could scale down the size of government, reduce governance cost, and ease the fiscal burden on the government.
“It is imperative for the country to operate as a true federation which it claims to be. The unitary character of the country is making it difficult to unlock the economic potentials of the sub-nationals. It is perpetuating the culture of dependence on the federal government.
“It is necessary to scale down the size of government and cost of governance. Fiscal sustainability is driven by both cost and revenue. Therefore managing the major drivers of cost and revenue is imperative.
As far as possible, the government should push back in sectors or activity areas where the private sector has the capacity to deliver desired outcomes. We should see more concessions and privatisations at all levels of government.
“It is important to ensure that the debt is used strictly to fund capital projects that would strengthen the productive capacity of the economy. This is the position of the Fiscal Responsibility Act.
“Additionally, emphasis should be on concessionary financing, as opposed to commercial debts which are typically very costly.”
Meanwhile, Kingsley Moghalu, a former Deputy Governor of the Central Bank of Nigeria and former presidential candidate, condemned the constant borrowing of the Federal Government.
He said;
“I condemn the borrowing plan in its entirety. I think the Federal Government of Nigeria has been borrowing irresponsibly and mortgaging the future of the youth of Nigeria.
“This should stop. The damage will be very difficult to repair. There is no need for Nigeria to be borrowing at the rate it is borrowing and the huge sums it is borrowing.
“There is an element of callousness in this. They are doing everything as possible to borrow before 2023, and then walk away and hand over the problem to someone else.”
