The Debt Management Office (DMO) has reported that Nigeria’s total public debt reached N87.38tn by the end of the second quarter of 2023, marking a substantial increase from the N49.85tn recorded at the end of March 2023. This surge represents a 75.29% increase in debt, primarily attributed to the inclusion of N22.71tn in Ways and Means Advances provided by the Central Bank of Nigeria to the Federal Government. Additionally, new borrowings by the Federal Government and sub-national entities from both local and external sources contributed to the increase in public debt.
The DMO had previously projected that Nigeria’s public debt could reach N77tn following the National Assembly’s approval to restructure the Central Bank’s Ways and Means Advances. This facility is used to finance shortfalls in the government’s budget. However, the current debt stock of N87.38tn exceeded the DMO’s projection by N10.38tn.
The breakdown of Nigeria’s public debt includes a total domestic debt of N54.13tn and a total external debt of N33.25tn. The domestic debt accounts for 61.95% of the total debt, while external debt makes up 38.05%.
The significant increase in both domestic and external debt within three months can be attributed to various factors, including foreign exchange rate fluctuations and borrowing to finance government expenses, including subsidies.
The DMO has warned about the high debt service-to-revenue ratio, which stands at 73.5% for 2023. This high ratio poses a threat to debt sustainability, and the government must focus on revenue generation through initiatives and reforms to maintain debt levels and reduce reliance on borrowing.
The Deputy-President of the Lagos Chamber of Commerce and Industry and other experts have pointed out that while borrowing is not inherently bad, it should be directed toward productive purposes that contribute to economic growth. They emphasized the need to address revenue challenges and reduce borrowing for non-productive purposes. The government is encouraged to explore avenues to boost revenue, reduce the cost of governance, and ensure that borrowed funds are invested in projects that generate returns and enhance economic growth.
In conclusion, Nigeria’s growing public debt calls for a balanced approach that addresses revenue challenges, promotes responsible borrowing for productive purposes, and ensures fiscal sustainability.