By Nigeria’s expanding debt stock was ascribed yesterday by the Debt Management Office (DMO) to budget deficits, the ongoing issuing of promissory notes and other borrowings, and insufficient revenue production.
The Lagos Chamber of Commerce and Industry, LCCI, asked the government to re-strategize on revenue generation, such as a shift in focus to equity financing, among others, while the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture, NACCIMA, called for a higher level of fiscal discipline by the government as a means of getting out of the debt quagmire.
DMO reported last week that the nation’s total debt had increased to almost N46 trillion, rising by more than N6 trillion just in 2022.
In an appearance yesterday on Channels Television’s breakfast show, Sunrise Daily, the Director-General of DMO, Patience Oniha, said that Nigeria had been experiencing budget deficits for a very long time.
According to her, numerous loans had been made on a bilateral and multilateral basis, and the federal government continued to issue promissory notes in order to pay off debts for which it had the necessary resources.
She stated that while borrowing is a recognized method of funding government activities, it should be accompanied by revenue.
She said that when borrowed money was used wisely to promote growth, income would be produced to pay off the loan.
As of the end of 2022, Oniha stated that Nigeria’s debt stock was N46.25 trillion. It covers the debt owed by the Federal Capital Territory and the 36 state governments. Around 85% of this is the responsibility of the federal government.
What are the causes and the reasons behind the rising debt stock? Because debt service increases together with rising debt stock, this is the case. Nigeria’s long history of budget deficits is causing the debt pile to increase.
“We have borrowed during both good and bad periods for oil prices.” We have been running accumulative budget deficits, which are funded to a great extent (between 85 and 95%) by borrowing. This information is freely accessible.
“The amount we borrow annually adds up. The yearly budget deficits are thus a significant factor. The budget for this year is N21 trillion, and the amount borrowed is N10 trillion.
She continued by saying that Nigeria had already obtained various loans from bilateral lenders like Germany, India, and China as well as multilateral lenders like the World Bank, the African Development Bank, and that disbursements were currently taking place.
The third factor is the government’s practice of issuing promissory notes to pay obligations for which it lacks the necessary revenue. Thus, the debt stock has been increasing.
Government should switch to equity financing and other sources of income, says LCCI
