Director General of the Debt Management Office (DMO), Mrs. Patience Oniha, has sensationally disclosed that Nigeria’s debt profile will continue to rise, so long the country is unable to generate enough revenue to fund its annual budgets.
Oniha spoke during an interactive session with the House of Representatives Committee on Finance on the Medium Term Expenditure Framework and Fiscal Strategy Paper, where she put the country’s debt stock as of March ending at N41.6trillion.
She revealed that the Federal government accounts for 85 percent of the debt, while the balance of 15 percent is owed by the various State governments, which also have their own laws on borrowing.
Oniha explained that one of the ways to address the increasing debt profile is for the National Assembly to query the various expenditure lines and see what can be handled, saying: “If the deficit is lower, the borrowing will be lower.
According to her, Nigeria has been running a deficit budget for decades, leading to increase borrowing to fund the budget, stressing that the World Bank survey put Nigeria in the 195th position out of 197 countries in term of debt to GDP growth.
She said: “As at December 2020, the debt stock of Nigeria which includes the federal government, state governments and the federal capital territory was N32.92 trillion. By December 2021, it was N39.556 trillion. As at March of this year, it was N41.6triilion.
“On the average, Federal government’s debt stands at about 85 percent of the total. Technically, the bulk of our debt is owed by the Federal government.
“Debt has grown and that has come from the annual budget. There are 3 levels where those borrowings have increased. We have been running deficit budget for many, many years. So, each time you approve a budget with a deficit, you approve it giving us a mandate, an authority to borrow and it will reflect in the debt stock, so debt stock will increase.
“Also remember that states are also borrowing. So, we add their own. They also have laws governing their borrowings.
“The second leg to that really is that as debt stock increases, debt service will also increase. So, the clear message is for us to go through the budget because we have been having deficit budget for many years and have been borrowing significantly.
“From the COVID-10 period in 2020, the level of borrowing increased significantly, as you know. Those budgets pass through this House. The issue is: how do we reduce that debt? One of it is revenue, which we have talked about.
“So if revenue is high, your deficit will be lower and new borrowing will be lower and then your new borrowing will be less and your debt stock will be lower and debt service to revenue will now be so high.
“So, the challenge is, we have been borrowing because of shortfalls. The other thing to do is to look at our expenditure profile. What can we do to reduce it because you are asking me what is the remedy? It is coming from the budget.”