Nigeria’s overall public debt stock climbed to N46.25 trillion ($103.11 billion) in the fourth quarter of 2022, according to data released by the Debt Management Office on Thursday.
The most recent data has led economists and members of the organized private sector to forecast that Nigerians and businesses will face more difficult times in the future.
It was estimated that the country owed N44.06 trillion as of September 2022.
The new figure, according to the office, is made up of the entire domestic and foreign debt stocks of the federal government and the subnational governments (36 state governments and the Federal Capital Territory)
The Debt Management Office released the most recent number in a statement.
According to the DMO, the comparable public debt as of December 31, 2021, was N39.56 trillion ($95.77 billion).
As a result, the nation’s debt rose by N6.69 trillion ($7.34 billion) in a single year.
The DMO listed several factors that led to the growth in the debt stock, including increased borrowing by the FGN and sub-national governments, largely to fill budget deficits and carry out projects, and the issue of promissory notes to satisfy some commitments.
“As of December 31, 2022, the total public debt stock was N46.25 trillion, or $103.11 billion,” the statement said in part. The overall stock of domestic debt was N27.55 trillion ($61.42 billion), while the total stock of overseas debt was N18.70 trillion ($41.69 billion).
“Amongst the reasons for the increase in the total public debt stock were new borrowings by the FGN and sub-national governments, primarily to fund budget deficits and execute projects. The issuance of promissory notes by the FGN to settle some liabilities also contributed to the growth in the debt stock.
“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 also clarified that the debt amount under evaluation was 23.20 percent of GDP, suggesting that it was well within the guidelines established by both the federal government and international organizations.
“The total public debt to gross domestic product (GDP) ratio for December 31, 2022, was 23.20 per cent and indicates a slight increase from the figure for December 31, 2022, at 22.47 per cent.
“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.”
In response, Muda Yusuf, the director of the Center for Promotion of Private Business, voiced alarm over the multiplier effect of the most recent debt figure and warned that if immediate action was not taken, the nation will continue to suffer with debt servicing.
He said, “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.
The reduction of fuel and foreign exchange subsidies, according to Yusuf, would boost the country’s earnings.
“A possible solution is to increase our revenue through the removal of fuel subsidy and foreign exchange subsidy. This will bring relief of N8trn. We also have to address increasing oil production, curb leakages, cut our spending,” he added.
On his part, 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.”
Leo Ukpong, a professor of financial economics at the University of Uyo, proposed that a country’s failure to pay its debts can cause taxes to rise.
He said, “Borrowing tends to have a negative effect on the credibility of the borrower. Clearly, we know that public debt is very high and this increase is not good for the country.
“When debts rise, you run the risk of bankruptcy but since a country can’t be declared bankrupt, it is likely that taxes will be increased which will reduce our purchasing power.”
Members of the organized private have also reacted to the development.
On his part, the Deputy-President of the Lagos Chamber of Commerce and Industry, Gabriel Idahosa described Nigeria’s continued recourse to borrowing as worrisome for the economy.
Idahosa said, “We are looking at external borrowing that is not tied to specific revenue-generating projects, that are not collateralized. For example, if you want to take a loan to build a seaport, to be paid from the operations of the seaport, it can still raise money. But if you want to borrow money and use it for various projects that do not generate income, hoping to pay from the federal budget, then you are not likely to make any progress.”
