Lagos, Nigeria – October 15, 2023 – As Nigeria’s public debt continues to soar and its sustainability is questioned, the government’s decision to persistently borrow funds has raised concerns among financial experts and stakeholders.
According to the country’s Debt Management Office, Nigeria’s total public debt reached N87.38 trillion by the end of the second quarter of the year. This represents a significant increase of 75.29 percent or N37.53 trillion compared to the N49.85 trillion recorded at the end of March 2023. The data from the DMO reveals that Nigeria’s domestic debt accounts for N54.13 trillion, while the external debt stands at N33.25 trillion. Domestic debt constitutes 61.95 percent of the total, with the external debt making up the remaining 38.05 percent.
In its 2022 Debt Sustainability Analysis Report, the DMO cautioned that the projected government revenue of N10 trillion for 2023 couldn’t support additional borrowing. The report highlighted that the government’s debt service-to-revenue ratio of 73.5 percent was alarmingly high and posed a threat to debt sustainability. It emphasized that the current revenue profile couldn’t support further borrowing.
Despite these warnings from the DMO and financial analysts, the Federal Government is reportedly in discussions with the World Bank regarding a fresh $1.5 billion loan for the ‘Nigeria Human Capital for Opportunities and Empowerment’ project, aimed at enhancing basic education and primary health services.
Dr. Muda Yusuf, the CEO of the Centre for the Promotion of Private Enterprise, expressed concern about Nigeria’s escalating debt levels and advised against borrowing for projects that wouldn’t significantly enhance productivity. He urged the government to focus on borrowing for capital projects that would generate income.
The Secretary of the Independent Petroleum Marketers Association of Nigeria, Abuja-Suleja, Mohammed Shuaibu, highlighted the impact of Nigeria’s continued dependence on importing refined petroleum products, suggesting that a functioning domestic oil industry could significantly reduce the need for borrowing.
Chinedu Ukadike, the National Public Relations Officer for IPMAN, emphasized the need to fix challenges in the oil sector to boost government revenues and reduce borrowing. He noted that the vandalization of pipelines and the obsolescence of infrastructure had hindered crude oil production and domestic distribution of petroleum products.
The situation is further exacerbated by volatility in the foreign exchange market, which contributes to the challenges leading to increased borrowing by the government. Yusuf suggested that corrective measures to address distortions in the foreign exchange market should be implemented, while managing the forex supply limitations to maintain investor confidence.
As Nigeria grapples with its rising debt burden and the need for economic stability, it remains to be seen whether the government will adjust its borrowing practices and channel funds toward initiatives that boost productivity and address the root causes of economic challenges.
In the meantime, stakeholders continue to voice their concerns about Nigeria’s growing debt levels and the impact on the country’s financial health.