Recently the Debt Management Office (DMO) has decided to carefully and critically look into the debt stock of Nigeria on Wednesday which reveals that Nigeria’s debt stock is not reducing but increasing as a result of a combination of three major factors.
In a statement, the Director-General of the DMO, Patience Oniha disclosee to Channels Television’s Sunrise Daily that Nigeria has been running a budget deficit for decades indicating
that several loans from multilaterals and bilaterals have been contracted, while the federal government continues to issue promissory notes to settle obligations for which it does not have the revenue to generate such.
According to the debt management boss, borrowing is an acceptable method of funding government activities, but there should always be revenue generation tactis to be able to back such loans.
She insisted that when money borrowed should be judiciously utilised inorder to stimulate growth, so that revenue will be generated inorder to also offset the debt.
Oniha explained, “Nigeria’s debt stock is N46.25trn. It includes the debt of the 36 state government and the Federal Capital Territory. The Federal Government is responsible for 84% to 85% of this.
“What are triggers and why is the debt stock growing because when the debt stock is growing, debt service also grows..
“The debt stock is growing because Nigeria has been running a budget deficit for many decades. In good and bad times with oil prices we have borrowed. We’ve been running budget deficits and those deficits are funded largely 85 to 95% from borrowing and that is cumulative. These are publicly available data.
“As we borrow each year, it adds up. So, the annual budget deficits are a major component. If you look at this year’s budget, budget size is N21trn, borrowing is N10trn.”
She recalled that Nigeria had contracted several loans in the past from multilaterals like the World Bank, the African Development Bank and bilaterals like Germany, India, China and disbursements are still on going.
“The third part – government has been issuing promissory notes to settle obligations for which it doesn’t really have the revenue. So, that is why the debt stock has been growing.”
(Channels)