The recent report that the nation’s debt has risen to N24.947 trillion ($81,274 billion) is worrisome. According to data from the Debt Management Office (DMO), this represents 2.3 per cent increase from N24.389trillion recorded as at December 2018, and a staggering N4.9trillion rise from the N16trillon in 2016. Expectedly, the development has raised fears that Nigeria may slide into another debt crisis.
The debt, according to DMO, comprised the Federal Government, the 36 states of the federation and the Federal Capital Territory (FCT) as at March 31, 2019. The increase of N560,009 billion in the total public debt was due to domestic debt, which grew by N458.363billion. Also, external debt increased by N101.646billion during the same period. In relation to the debt management strategy, DMO explained that the ratio of domestic to external debt stood at 68.49 per cent to 31.51 per cent at the end of March 2019. Also, the total public debt to GDP ratio was 19.03 per cent. This, according to the DMO, is still within the 25 per cent debt limit imposed by the Federal Government.
The nation’s rising debt might have prompted the International Monetary Fund (IMF), the World Bank Group and the African Development Bank (AfDB) to warn the Nigerian government of imminent debt crisis if nothing is done to check the development. To avert the economic crisis, they advised the government to diversify the revenue base and reduce the amount spent on debt servicing.
In the same vein, the Manufacturers Association of Nigeria (MAN), the Nigeria Employers’ Consultative Association (NECA), experts in the financial sector and some prominent Nigerians have equally raised the alarm on the nation’s spiraling debt.
Therefore, we urge the government to map out strategies to urgently check the nation’s rising debt stock. Available statistics revealed that in 2014, Nigeria’s total debt stock was N11.20 trillion. It grew to N12.12trillion in 2015, N17.5trillion in 2016 and N21.7trillion in 2017. The nation’s debt profile is very high. The government’s insistence that the debt is still within the borrowing limit is no longer convincing.
For the national debt to rise by N560billion in three months is disturbing. At the subnational level, it is even more precarious as most of the states have weak internal revenue base. They depend largely on the monthly allocation from the Federal Government. Many of the states are reportedly facing debt crisis.
There is urgent need to stick to borrowing guidelines by all tiers of government. The time has come for more prudent management of the nation’s resources. Government should diversify the economy in order to check the nation’s rising debt. It should not let higher oil prices delay its economic reforms.
It is a matter of concern that government is still in a borrowing binge. Unfortunately, Nigerians are yet to see the dividends of the loans already taken. In the current fiscal year, the Federal Government intends to borrow about N1.6trillion from the domestic capital market to partly finance the 2019 budget. In 2017, government spent N1.8trillion on debt servicing. It will spend about N2.2trilion on debt servicing this financial year, which represents over 30 per cent of the N8.8trillion budget for 2019.
In October 2018, President Muhammadu Buhari sought the approval of the 8th Senate for $2.86billion foreign loan. There is nothing wrong with borrowing if the money is judiciously used to ensure the economic development of the country. Borrowing is perhaps worse at the state level where DMO figures have shown that the states have accumulated over N4.5trillion debt.
Therefore, the time has come to halt excessive borrowing to avoid putting the country in harm’s way. There is need to strengthen the fiscal positions through reforms and boost diversification through non-oil revenues. Besides, we urge government at all levels to adhere strictly to the provisions of the Fiscal Responsibility Act 2007, especially Section 41(1)(a-b), and Section 42(1-3) which stipulate the framework for debt management and limits on consolidated debt of the Federal and state governments.
We also advise these two tiers of government to reappraise their financial profiles and avoid unnecessary borrowing. We cannot continue to spend almost 50 per cent of the nation’s revenue to service debts. The government should save the country from the looming debt crisis.
