Nigeria Could Potentially Accrue A Debt Of N77 Trillion Before Mid-2023

FG has revealed that Nigeria‘s dept could hit N77 trillion by May.

EKO HOT BLOG reports that the Director-General of the Debt Management Office (DMO), Patience Oniha, has predicted a high increase in the country’s debt before the end of the Muhammadu Buhari-led administration.

The director-general made this known in Abuja on Wednesday during the public presentation and breakdown of the highlights of the 2023 Appropriation Act.

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According to Oniba, the country’s debt may hit N77tn if the Central Bank of Nigeria (CBN) continues in its ways and means, which has accumulated from 2014 to 2022 and put at about N22.7 trillion is securitized, coupled with the N44.06 trillion total debt stock as at third quarter of 2022 (Q3 2022) and the N8 trillion new borrowing.

She maintained that securitization was the best option because, at the current interest rate charge of 18.5 percent, an additional N1.8 trillion to N2 trillion may be incurred as interest if the government fails to securitize the CBN Ways & Means; hence the decision of the executive to work with the National Assembly to bring it into fruition.

She said, “The DMO released the figure for the country’s debt stock as at September, you don’t expect it to be significantly deferent from December.

“Secondly, there are a lot of discussions on the CBN’s Ways & Means.

“In addition to the signific- ant costs saving in loans ser- vice we would get by securitizing it, there is an element of transparency in the sense that it is now reflected in the public debt stock.

“Once it is passed by the National Assembly, it means we will be seeing that figure included in the public debt.

“You will see significant in- crease in public debt to N77 trillion. So, if you add the new borrowing depending on market conditions N5 trillion. So we’re looking anywhere at, it will be about N72 trillion.

“The other debt stock we are trying to highlight is to say the debt stock is also growing from the issuance of promis- sory notes which are not true borrowing as such by the government. It will be safe to say that we will be looking at N70 trillion.

“While the debt is growing because there is new borrow- ing, revenue is receiving signi- ficant importance. Like DMO always says, you can’t talk about debt without talking about revenue. We need the two to work together.”

The Finance Minister, Zainab Ahmed also explained that, as of September 30, 2022, the total Public Debt as a percentage of GDP stood at 22.97 percent.

She added that the 55 percent threshold recommended by the International Monetary Fund (IMF)/World Bank (WB), as well as Nigeria’s self-imposed limit of 40 percent set in the MTDS 2020- 2023, is expected to increase to 35.33 percent after including the outstanding balance on CBN Ways & Means.

“The exposure of the Total Public Debt portfolio to exchange rate risk remains moderate, as the share of Domestic Debt in the Total Public Debt comprises 61.08 percent.

“Target Ratio under the MTDS 2020-2023 is 70:30, with the DMO expecting to achieve the target by end of the year 2023. The expos- ure to refinancing risk remained stable as a result of the strategy of issuance of long dated securities in the domestic and international markets in addition to accessing long term funds from multilateral and bilateral lenders”.

Under the Medium Term Debt Management Strategy (MTDS) 2020 – 2023, the FGN’s Contingent Liabilities as a percentage of GDP was 2.64 percent in 2021 compared to 2.75 percent in 2020. It is projected to remain at around 2.64 percent by the end of 2022.

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Ahmed stated that “Nigeria is not planning on restructuring its debt as it remains committed to meeting its domestic and external debt obligations.”

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