As concerns continue to mount over Nigeria’s rising debt stock, the Civil Society Legislative Advocacy Centre (CISLAC) and Christian Aid Nigeria have called on the Nigerian government to urgently amend and activate the laws that set debt limits and regulate borrowing in the country.
According to the Debt Management Office (DMO), Nigeria’s domestic debt stock as of June 30, 2022, stood at N26.23 trillion/$63.24 billion and external debt stock at N16.61 trillion/$40.06 billion of the federal government of Nigeria, the 36 State Governments and the Federal Capital Territory, was over N42 trillion which is about $103 billion.
The total debt stock is projected to stand at about N50 trillion after the Minister of Finance, Budget and National Planning submits the approved detailed budget.
Auwal Musa, executive director, CISLAC, speaking at a one-day policy dialogue on the Modality for Setting a Debt Limit Organised by CISLAC in Abuja, said Nigeria have a law that provides a framework for public debt management and sets out the conditions of borrowing including mandating the setting of limits on consolidated debts of Federal, State and Local Governments.
He informed that the Fiscal Responsibility Act, 2007 was enacted to “provide for the prudent management of the Nation’s resources, ensure long-term macro-economic stability of the national economy, secure greater accountability and transparency in fiscal operations within a Medium-Term Fiscal Policy Framework and the establishment of the Fiscal Responsibility Commission to ensure the promotion and enforcement of the nation’s economic objectives; and for related matters”.
” These mechanisms for the regulation of borrowing, namely, the setting of debt limit need to be urgently activated to provide the parameter for checks and control of the debt stockpile of all the tiers of Government and ultimately avert a national public debt crises of bankruptcy proportions,” he said.
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The executive director also expressed concern that Nigeria’s debt service cost presently outweighs its revenue with clear signs of economic dangers ahead. He noted that the proposed revenue and expenditure budgets for 2023 are ₦9 trillion and ₦20 trillion, respectively.
“This results in a ₦10 trillion fiscal deficit, representing 4.78 percent of GDP, which is well above the 3 percent ceiling set by the Fiscal responsibility Act 2007 (FRA). This deficit is expected to be financed by new borrowings (N8.8tn), privatization proceeds (N206.18bn) and drawdown on bilateral/multilateral loans secured for specific development projects/programmes (N1.77tn)”, Musa further said.
The executive director, therefore, stressed the need for Nigeria to explore new opportunities by increasing production, raising revenue, reprioritising expenditure, drastically reducing the cost of governance and plugging avenues of fiscal leakages, cannot be over-emphasized.
In his presentation, Uche Uwaleke, a financial economist and professor of capital market, at the Nasarawa State University Keffi, while also decrying Nigeria’s current high debt burden (debt service to revenue ratio) and by extension weak capacity to meet present and future obligations; said the need to set the right debt limit for all tiers of government cannot be overstressed.
In setting the right limits, the Economist said the notion of debt sustainability should be one that shifts focus away from GDP to revenue. According to him, the GDP is a weak measure of debt burden.
“Although it measures the size of the economy, it does not translate into a capacity to pay unlike government revenue which are available to make debt service
“It is vital to establish that tight limits on debt relative to revenues as opposed to limits based on GDP which is a less suitable metric. Doing so will help block the “back door” of illegitimate borrowings.
“The National Assembly is enjoined to expedite action on the passage of the amendments to the Fiscal Responsibility Act, 2007 and the setting of a debt limit for both the federal and state governments,” he urged.
