ALARMING! Nigeria's Public Debt To Climb N27 Trillion As Government's Borrowings Continue - AMEBO NEWSPAPERS NG.


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ALARMING! Nigeria's Public Debt To Climb N27 Trillion As Government's Borrowings Continue

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Financial analysts have projected a rapid increase in Nigeria's public debt from N24.39 trillion in 2018 to more than N27 trillion this year as the federal government borrowing persists.

Out of the N8.82 trillion budgeted for this year, 18.6 percent or N1.65 trillion is expected to be generated through domestic and foreign lendings.

Going by the Minister of Budget and National Planning's budget breakdown, the N1.65 trillion lending involve domestic loans of N824.82 billion and foreign loans of N825.82 billion. 

But already, in the first half (H1 '19) of the year 2019, the federal government, using debt instruments such as Treasury Bills and FGN Green Bonds, has reportedly borrowed N1.736 trillion from the domestic market, which is  6.0 percent beyond the full year, 2019 budgeted borrowing.

Resultantly, the federal government would likely double the N1.65 trillion stipulated in the 2019 budget.

Based on the results of primary market treasury bills auction conducted by the Central Bank of Nigeria (CBN) on behalf of the Debt Management Office (DMO), FG’s borrowing through TBs dropped by 15.4 percent to N1.43 trillion in H1’19 from N1.65 trillion in H1’18. 

Borrowings through the monthly FGN bond auctions of the DMO rose by 66 percent to N707.3 billion in H1’19 from N425.35 billion in H1’18, while borrowings through the monthly FGN Savings bonds shot up by 75 percent to N2.31 billion in H1’19 from N1.32 billion in H1’18. 

In addition to the above is the N15 billion borrowed through the Green Bond offer in June. 

What this means is that the government will  end up borrowing more than N2.0 trillion from the domestic market in 2019, which when combined with the expected N824.82 billion foreign borrowing, will increase the total borrowing basket of the FG to N3 trillion at the end of the year, Financial Vanguard reports.

When combined with the nation’s debt stock of N24.387 trillion as at end of 2018, the N3 trillion estimated FG borrowing will result to a national debt stock of above N27 trillion at the end of 2019. 

The above, as seen, may raise the country’s Debt Sustainability indicators namely the Debt-to-GDP ratio, which stood at 19 percent at the end of 2018, Debt Service-to-Revenue Ratio (DSRR), which stood at 66 percent at end of 2018. 

At the moment, the DSRR is trending up to 70 percent as at end H1’19. 

Analysts explained that the source of worry lies in the utilisation of the proceeds of the nation’s increasing debt, saying with the DSRR set to exceed 70 percent at the end of 2019, future debt proceeds must be deployed to projects that can help increase government revenue and hence lower the DSRR. 

Financial Vanguard quoted Bismark Rewane, Managing Director/Chief Executive, Financial Derivatives Company as saying while the country will still need to borrow due to its various developmental needs, the issue is ensuring the loans are deployed to projects that will increase the productive capacity of the economy and also raise revenue for the government.

Similarly, Ayo Akinwunmi, Head of Research, FSDH Merchant Bank, told the newspaper that Nigeria’s challenge is not about the size of the debt but the DSRR which is very high and unsustainable.

According to him, “In measuring the ability of a country to service her debt obligations, we look at the ratio of domestic debt service-to-federal government allocation from the federation account. 

“This is where the problem lies for Nigeria. Low revenue generation makes it very difficult for the FGN to meet its debt obligations without sacrificing other important responsibilities of government. 

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