Patience Oniha, Director-General of DMO, revealed this in an interview on Channels Television’s Sunrise Daily programme on Wednesday.
She stated that several loans had been obtained from multilateral and bilateral sources. At the same time, the federal government keeps issuing promissory notes to settle obligations for which it does not have the revenue.
Oniha recognized that borrowing is a common way to fund government activities. However, there should be revenues to support the borrowing. The debt projection of N77 trillion could be overcome with incentives. These incentives should ensure that borrowing is balanced with expenditure and that revenue is sustained. The debt is expected to be inherited before the end of the current administration.
“Nigeria’s debt stock is N46.25 trillion. It includes the debt of the 36 state governments and the federal capital territory (FCT). The federal government is responsible for 84 percent to 85 percent of this.
“What triggers debts and why the debt stock keeps growing is because when the debt stock is growing, debt service also grows.
“The debt stock is growing because Nigeria has been running a budget deficit for many decades.
“In good and bad times with oil prices, we have borrowed. We have been running budget deficits, which are funded largely by 85 percent to 95 percent from borrowing, which is cumulative. These are publicly available data.
“As we borrow each year, it adds up. So, the annual budget deficits are a major component. If you look at this year’s budget, the budget size is N21 trillion; borrowing is N10 trillion.
“The third part – the government has been issuing promissory notes to settle obligations for which it doesn’t really have the revenue. So, that is why the debt stock has been growing.”
She noted that Nigeria had previously contracted several loans from multilateral sources like the World Bank and the African Development Bank and bilateral sources like Germany, India, and China.
“Our debt to GDP as at December 2022 was 23 percent and that is still within the limit the government set for itself and the 55 percent set by the World Bank and International Monetary Fund (IMF). If we add the ways and means, it increases to about 40 percent,” she explained.
“The challenge is debt service to revenue and Nigeria has 6.7 percent ratio revenue to GDP.”
She suggested the best way out is to reduce borrowings and improve revenue at all costs.
