Nigeria’s total public debt portfolio now stands at about N48.93 trillion, with the government borrowing about N3.73 trillion over the past five months.

Data obtained by the media yesterday showed that the government raised about N1.599 trillion in the fourth quarter of 2022.

The Debt Management Office (DMO), which oversees the issuance and management of Nigeria’s sovereign debts, had earlier confirmed The Nation’s exclusive report that the government had raised N2.129 trillion in the first two months of 2023.

A breakdown indicated that Nigeria’s domestic debts have risen to about N30.643 trillion, primarily due to new borrowings of about N1.599 trillion in the fourth quarter of 2022 and N2.129 trillion between January and February 2023.

Nigeria’s external debt increased to N18.282 trillion, mainly due to the depreciation of the naira against the dollar.

The national debt portfolio for the third quarter ended September 30, 2022, published by DMO indicated that Nigeria had total debt of N44.064 trillion, including domestic borrowing of about N26.916 trillion and converted external debts of N17.148 trillion.

The DMO had applied the then-official exchange rate of N432.37 per dollar to the country’s external debt of $39.662 billion.

The Central Bank of Nigeria (CBN) yesterday indicated the official exchange rate at N460.96 per dollar, implying the addition of some N1.13 trillion to the country’s converted foreign debts due to currency depreciation. With this, external debts increased from N17.148 trillion in the third quarter of 2022 to stand now at N18.282 trillion.

With maturing debt obligations and running a budget deficit, the government has continued to raise funds through the monthly issuance of regular bonds, retail savings bonds and treasury bills.

A breakdown of the debt issuances showed that about N852.926 billion were raised through the Nigerian Treasury Bills (NTBs), N4.174 billion through the Federal Government of Nigerian Savings Bonds (FGNSBs) and N741.55 billion through regular bond and Sukuk issuances in fourth quarter 2022.

In January 2023, the government raised N662.617 billion through its regular bond auction, N277.468 billion through the NTBs and N533.03 million through the FGNSBs, a retail monthly debt issuance introduced in 2017.

It raised N1.189 trillion in February 2023, including N770.56 billion through bond auctions, N417.064 billion through NTBs and N1.271 billion through the FGNSBs. Total borrowings in February 2023 represented a 26.4 per cent increase above N940.62 billion raised in January 2023.

The total debt issuance in the past two months represented more than a 33 per cent increase on the total debt issuance in the fourth quarter of 2022.

Faced with sovereign downgrades by global rating agencies, with attendant higher risk profile and cost for international debt issuances, the government appeared to be increasingly dependent on the domestic capital market to raise N8.8 trillion regular debt component of the 2023’s N10.78 trillion deficit.

Providing clarification on the recent borrowings, the DMO stated that the domestic debt issuance was designed not only to provide funds to finance the budget deficit but also to refinance the Federal Government’s maturing obligations during the fiscal year.

According to DMO, out of the N2.129 trillion raised so far this year, only N1 trillion has been deployed for deficit financing, 14.2 per cent of total estimated domestic borrowings of N7.043 trillion in the 2023 budget. The agency said the balance of the funds raised was for refinancing maturing obligations.

The federal government laid out a budget size of N20.51 trillion on a total revenue of N9.73 trillion in 2023, with plans to borrow N10.78 trillion in 2023.

Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, at the public presentation of the breakdown and highlights of the 2023 budget proposal, said the overall budget deficit of N10.78 trillion for 2023 would largely be financed through domestic loans.

She outlined that the budget deficit would be financed mainly by borrowings including domestic sources, N7.04 trillion; foreign sources, N1.76 trillion; multilateral and bi-lateral loan drawdowns, N1.77 billion and expected N206.18 billion proceeds from the privatisation of national assets.

Nigeria’s public debt has continued to generate intensive debate on the growing size of indebtedness and the burden of sustainability amidst declining national revenue.

Also, while experts agreed that rising demand for sovereign debts provides the government with a comfortable fallback option, many analysts said the government’s domestic mop-up may crowd out other issuers and raise the cost of funds.

Ahmed had raised the possibility of a higher budget deficit and financing in 2023, noting that “there is a continuing need to exceed this threshold considering the existential security challenges facing the country”.

She however said Nigeria has no plan to restructure its debt as the government remains committed to meeting its domestic and external debt obligations.

According to her, the government will continue to utilize appropriate debt management tools to streamline the cost and risk profile in the debt portfolio, including through concessional loans, spreading out of debt maturities to avoid bunching, and re-profiling of the debt maturities by refinancing short-term debt using long-term debt instruments.

Nigeria has increasingly relied on borrowings to bridge its dwindling national revenue

Data provided by the Budget Office of the Federation showed that Nigeria has consistently over the past eight years significantly underperformed its revenue target. For instance, while the country had budgeted a revenue target of N7.2 trillion in 2018, it generated only N3.9 trillion, about 54 per cent of the revenue target. In 2019, it achieved about 59 per cent with a revenue budget of N7 trillion and an actual of N4.12 trillion.

Revenue target and actual stood at N5.4 trillion and N3.96 trillion and N6.64 trillion and N4.64 trillion in 2020 and 2021 respectively.

In the current budget, while the country had set a revenue target of N5.82 billion, it only achieved 63 per cent or N3.66 trillion by July 2022.

Nigeria has been using more than three-quarters of its revenues to service debts.

Debt-service to total revenue ratio stood at 61.3 per cent in 2020, rose to 90.9 per cent in 2021 and currently stands at 84.5 per cent. Debt-service-to-total revenue was about 32.7 per cent in 2015.

DMO has expressed concerns that the country now faces the risk of being unable to sustain its rising national public debts unless urgent actions are taken to curtail expenditure and increase the country’s revenues.

DMO warned that while Nigeria’s loans may still be within an acceptable range of the country’s economic size, the country’s ability to sustainably meet the obligations on such loans is now under threat.

Director General of the Debt Management Office, Ms Patience Oniha, said beyond keeping within the debt-to-GDP ratio, it is important that the public debt is sustainable and the government is able to service its debt without the risk of distress.

Reviewing revenue budgets and actuals against actual debt service over the past eight years, Oniha said the debt service-to-revenue ratio is “high”.

She said dependence on borrowing and a low revenue base was now threatening debt sustainability.

“Nigeria’s public debt stock has grown consistently over the past decades and even faster in recent years. Consequently, debt service has continued to grow,” Oniha said.

She pointed out that Nigeria’s low revenue base compounded by its dependence on crude oil resulted in budget deficits over the past decades, putting pressure on the country’s debt sustainability.

“The outlook shows that both the local and international markets are becoming tighter and interest rates are rising, thus priority should be less on borrowing and more on revenues from oil and non-oil sources,” Oniha said.

She said while efforts at increasing non-oil revenue are yielding positive results, urgent actions are required to moderate the level of new borrowings and ensure that the public debt is sustainable.

She outlined that government should, as a matter of urgency, rationalise expenditure and accelerate the growth in revenues, including implementation of strategic actions to boost tax administration and efficiency.

She said it was unacceptable that Nigeria has the lowest revenue-to-GDP ratio among a list of countries sampled by the World Bank, noting that an efficient tax administration would ensure greater compliance to remittances devoid of all forms of evasions in the system.

According to her, most countries around the world have placed more emphasis on taxation as a principal source of funding for the government while the reverse is the case in Nigeria.

Oniha also advised that “borrowing should be tied to projects and some of the projects should generate commensurate revenues to service loans used to finance them”.

She called for the sale of government assets to unlock funding, adding that physical assets such as idle or underutilised properties could be redeveloped for commercialisation to generate revenue. (The Nation)

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