With Nigeria’s debt level almost reaching suffocating limits, the country’s debt management agency, the Debt Management Office (DMO), has urged the government to explore the option of privatization and sale of government assets to raise revenue and cut down on borrowing.
The country’s latest total debt stock announced by the DMO in March this year, including fresh borrowings by the Federal, States, and sub-national governments, including the Federal Capital Territory (FCT), stood at about N46.25 trillion, or $103.11 billion as at December 31, 2022.
The total debt figure, which consists of N27.55 trillion, or $61.4billion as domestic debt and N18.70 trillion, or $41.69 billion as external debt for the three tiers of government, namely the Federal and the 36 State Governments and the FCT, does not include about N23 trillion approved by the Senate for the federal government last month as Ways & Means advances by the Central Bank of Nigeria (CBN).
With Ways & Means figures coupled with he value for Promissory Notes and other loans, the Director General of DMO, Patience Oniha, said the country’s debt profile could rise to as high as over N77 trillion before the end of the year.
The Ways & Means advances are borrowings from the apex bank undertaken by the Federal Government when it requires short-term or emergency finance to fund government projects and policies threatened by delays in expected cash receipts as a result of fiscal deficits in the annual appropriation.
Worried by the prospect of utilising about 73.5 percent of revenue to be generated this year in servicing he country’s total debt exposure, the DMO urged the Federal Government o be wary of undertaking fresh borrowings to avoid the debt trap.
The DMO said in its Annual National Market Access Country (MAC) Debt Sustainability Analysis report that the projected FGN Debt Service to Revenue ratio of 73.5 percent for 2023 was to high to support further borrowing, as it poses serious threat to the country’s debt sustainability capacity.
Consequently, the DMO recommended that the government should focus more on boosting its revenue generation capacity to between N10.49 trillion and N15.5 trillion projected in 2023 budget, to attain a sustainable Debt Service-to-Revenue ratio.
The report, which contained analysis on the country’s debt profile in 2022, showed the total Public Debt-to-GDP ratio was projected to grow to about 37.1 percent in 2023, compared to 23.4 percent as at September 2022.
The report said the projected increase was due to the inclusion of the N8.80 trillion as fresh borrowings for 2023, the FGN Ways & Means advances from the CBN of over N23 trillion and estimated Promissory Notes issuance of N2.87 trillion in the debt stock.
Presenting a Baseline Scenario of the country’s debt profile, the report said despite the rising debt stock, the country still remained within sustainable limit, although the borrowing space has shrunk compared to country’s self-imposed debt limit of 40 percent set in the Medium Term Debt Sustainability (MTDS) index 2020-2023.
While the FGN Debt Service-to-Revenue ratio of 73.5 percent in 2023 exceeds the recommended threshold of 50 percent due to low revenue, the report stressed the need to significantly increase government revenue to bridge the gap.
On the alternative, the report said a scenario where the total public debt-to-GDP ratio of 45.4 percent in 2023 exceeds the country’s set debt limit of 40 percent, and the FGN Debt Service-to-Revenue also exceeds the recommended threshold of 50 percent, the government should explore alternative sources of revenue away from borrowing.
“Although the baseline analysis projects total public debt-to-GDP ratio at 37.1 percent for 2023, indicating a borrowing space of 2.9 percent (equivalent of about N14.66 trillion) when compared to the self-imposed limit of 40 per cent, it is recommended that this should not be used as a basis for higher level of borrowing as was the case in the 2023 budget.
“This is because the outcome of the shock scenario, which is more realistic in the circumstances, exceeded the self-imposed limit.
“The projected FGN debt service-to-revenue ratio at 73.5 per cent for 2023 is high and a threat to debt sustainability. It means that the revenue profile cannot support higher levels of borrowing.
“Attaining a sustainable FGN debt service-to-revenue ratio will require an increase of FGN revenue from N10.49 trillion projected in 2023 budget to about N15.5 trillion,” he report noted.
With respect to expansion in fiscal deficit, the report said there was need to adhere strictly to the provision of extant legislations on government borrowings, especially the Fiscal Responsibility Act 2007 and CBN Act, 2007 as it relates to Ways & Means advances, to moderate the growth rate of public debt.
Besides, the report said there was an urgent need to pay closer attention to revenue generation by implementing far reaching revenue mobilization initiatives and reforms, including the Strategic Revenue Growth Initiatives and all its pillars, to raise the country’s tax revenue to GDP ratio from about 7 percent (one of the lowest in the world) to that of its peer.
“Government should encourage the private sector to fund infrastructure projects through the Public-Private Partnership, PPP, schemes and take out capital projects in the budget being funded from borrowings, to reduce budget deficit and borrowings”, the report said.
With Nigeria’s debt level almost reaching suffocating limits, the country’s debt management agency, the Debt Management Office (DMO), has urged the government to explore the option of privatization and sale of government assets to raise revenue and cut down on borrowing.
The country’s latest total debt stock announced by the DMO in March this year, including fresh borrowings by the Federal, States, and sub-national governments, including the Federal Capital Territory (FCT), stood at about N46.25 trillion, or $103.11 billion as of December 31, 2022.
The total debt figure, which consists of N27.55 trillion, or $61.4billion as domestic debt and N18.70 trillion, or $41.69 billion as external debt for the three tiers of government, namely the Federal and the 36 State Governments and the FCT, does not include about N23 trillion approved by the Senate for the federal government last month as Ways & Means advances by the Central Bank of Nigeria (CBN).
With Ways & Means figures coupled with the value for Promissory Notes and other loans, the Director General of DMO, Patience Oniha, said the country’s debt profile could rise to as high as over N77 trillion before the end of the year.
The Ways & Means advances are borrowings from the apex bank undertaken by the Federal Government when it requires short-term or emergency finance to fund government projects and policies threatened by delays in expected cash receipts as a result of fiscal deficits in the annual appropriation.
Worried by the prospect of utilizing about 73.5 percent of revenue to be generated this year in servicing the country’s total debt exposure, the DMO urged the Federal Government o be wary of undertaking fresh borrowings to avoid the debt trap.
The DMO said in its Annual National Market Access Country (MAC) Debt Sustainability Analysis report that the projected FGN Debt Service to Revenue ratio of 73.5 percent for 2023 was too high to support further borrowing, as it poses a serious threat to the country’s debt sustainability capacity.
Consequently, the DMO recommended that the government should focus more on boosting its revenue generation capacity to between N10.49 trillion and N15.5 trillion projected in the 2023 budget, to attain a sustainable Debt Service-to-Revenue ratio.
The report, which contained an analysis of the country’s debt profile in 2022, showed the total Public Debt-to-GDP ratio was projected to grow to about 37.1 percent in 2023, compared to 23.4 percent as of September 2022.
The report said the projected increase was due to the inclusion of the N8.80 trillion as fresh borrowings for 2023, the FGN Ways & Means advances from the CBN of over N23 trillion, and estimated Promissory Notes issuance of N2.87 trillion in the debt stock.
Presenting a Baseline Scenario of the country’s debt profile, the report said despite the rising debt stock, the country still remained within the sustainable limit, although the borrowing space has shrunk compared to the country’s self-imposed debt limit of 40 percent set in the Medium Term Debt Sustainability (MTDS) index 2020-2023.
While the FGN Debt Service-to-Revenue ratio of 73.5 percent in 2023 exceeds the recommended threshold of 50 percent due to low revenue, the report stressed the need to significantly increase government revenue to bridge the gap.
On the alternative, the report said a scenario where the total public debt-to-GDP ratio of 45.4 percent in 2023 exceeds the country’s set debt limit of 40 percent, and the FGN Debt Service-to-Revenue also exceed the recommended threshold of 50 percent, the government should explore alternative sources of revenue away from borrowing.
“Although the baseline analysis projects total public debt-to-GDP ratio at 37.1 percent for 2023, indicating a borrowing space of 2.9 percent (equivalent of about N14.66 trillion) when compared to the self-imposed limit of 40 percent, it is recommended that this should not be used as a basis for a higher level of borrowing as was the case in the 2023 budget.
“This is because the outcome of the shock scenario, which is more realistic in the circumstances, exceeded the self-imposed limit.
“The projected FGN debt service-to-revenue ratio at 73.5 percent for 2023 is high and a threat to debt sustainability. It means that the revenue profile cannot support higher levels of borrowing.
“Attaining a sustainable FGN debt service-to-revenue ratio will require an increase of FGN revenue from N10.49 trillion projected in 2023 budget to about N15.5 trillion,” the report noted.
With respect to expansion in fiscal deficit, the report said there was the need to adhere strictly to the provision of extant legislations on government borrowings, especially the Fiscal Responsibility Act 2007 and CBN Act, 2007 as it relates to Ways & Means advances, to moderate the growth rate of public debt.
Besides, the report said there was an urgent need to pay closer attention to revenue generation by implementing far-reaching revenue mobilization initiatives and reforms, including the Strategic Revenue Growth Initiatives and all its pillars, to raise the country’s tax revenue to GDP ratio from about 7 percent (one of the lowest in the world) to that of its peer.
“Government should encourage the private sector to fund infrastructure projects through the Public-Private Partnership, PPP, schemes and take out capital projects in the budget being funded from borrowings, to reduce budget deficit and borrowings”, the report said.