Nigeria Records 17% Debt Growth to N26.215trn as at September 2019 – DMO

Total public debt increased by ₦2.4 trillion in Q2 2020 - NBS

Nigeria’s total debt grew by almost 17 percent in one year as at September 2019 to stand at N26.2 trillion, the Debt Management Office (DMO) has disclosed.

This disclosure was made in a press release where it was revealed by the Director-General of the DMO, Ms Patience Oniha, in Abuja on Friday during the presentation of public debt data as at September 2019.

“The comparative figure for September 2018 was N25.701 trillion which implies that in the 12 months period to September 2019 the Total Public Debt grew by 16.88 percent,” she said.

The breakdown showed that Total External Debt, across the Federal, States, and Federal Capital Territory (FCT) was N8.3 trillion (13.5 percent); while the Total Domestic Debt was 68.5 percent (Federal Government accruing N13.9 trillion – 53.0 percent with States and FCT amassing N4.0 trillion – 15.4 percent)

The DMO chief said a breakdown of the total public debt as at September 2019 which includes Promissory Notes stood at N812.650 billion and has been issued to settle the FGN’s arrears to Oil Marketing Companies and State Governments under the Promissory Programme approved by the Federal Executive Council (FEC) and the National Assembly.

Speaking on the country borrowing which saw the country out of recession, Ms Oniha said: “Borrowing came in to fund the budget which included capital projects so when you finance capital projects, you create an entire economy around that in terms of employment, in terms of materials that you buy, in terms of what happens in the environment so there are vendors selling all sort of things so that is the description.”

“We are talking about the multiplier effect of borrowing to finance capital infrastructure and what we generate,” she said. Ms Oniha also spoke about government issuing promissory notes to its creditors, stating that “these are arrears so it’s not that they did a contract for us now and then we decided to issue a promissory note. These are arrears from several years prior to 2017.”

“It is voluntary on the part of the creditor you don’t have to take a promissory note. You can wait when the government has money in its budget to pay you.

“There are provisions in the budget just that they are not large so you can’t be sure when you will get it but you can wait there is no compulsion around it,” she added.

Speaking on new borrowings, she stated that: “the level of New Borrowings in the Appropriation Acts declined consistently since Nigeria exited the recession in the year 2017.

“The increase in the New Borrowings in the Appropriations Acts between 2015 and 2017 was due to the need to stimulate growth and create jobs in the economy as contained in the Economic Recovery Growth Plan (ERGP).”

According to her, “whereas the 2019 Appropriation Act provided for a total New Borrowing of N1.605 trillion split equally between Domestic and External, only the domestic component of N802.82 Billion was raised due to the late passage of the 2019 Appropriation Act and the expectation that the implementation of the 2020 Budget would commence on January 1, 2020.”

The Ratio of Domestic Debt to External Debt at 69:31 as at September 2019 she said was an improvement over the Ratio of 71:29 as at September 2018 “compared to the target of 60:40 in the Medium-Term Debt Management Strategy.”

The Ratio of Long Term to Short Term Debt in the Domestic Debt as at September 2019 was 80:20, which shows that the target of 75:25 had been outperformed by September 2019. Furthermore, it was an improvement over the Ratio of 73:23 recorded in September 2018.

Oniha stated that “total Debt as a percentage of GDP was 18.47 percent as at September 2019 was well within the limit of 25 percent and fares better in comparison with the Debt/GDP ratios of countries such as the United States of America, United Kingdom and Canada with ratios of 105 percent, 85 percent and 90 percent respectively for the same period.”

However, because they generate adequate revenues, their Debt Service/Revenue Ratios for the same period were much lower at 12.5 per cent, 7.5 per cent and 7.5 percent respectively when compared to Nigeria’s 51 per cent in 2017.

The low revenue base of Nigeria relative to its GDP is clearly reflected in the high Debt Service to Revenue Ratio and this is very important for the country to generate more revenue.

“The efforts towards increasing and diversifying revenue such as the passage of the Finance Act and Strategic Revenue Growth Initiative of the Federal Ministry of Finance, Budget and National Planning should thus be supported.” She recommended.

The DMO also unveiled its plans for the year 2020, based on the New Borrowings in the 2020 Appropriation Acts, which comprises of N850 billion and N744.99 billion for External and Domestic Borrowings respectively.

The New Domestic Borrowings will be raised through FGN Bonds, Sukuk, FGN savings Bonds and possibly Green Bonds. For External Borrowings the strategy is to first seek out concessionary and semi concessionary loans due to the lower interest rate and longer tenors. The Debt office added that any shortfall thereafter may be raised from commercial sources.

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