The Debt Management Office, DMO, yesterday attributed Nigeria’s growing debt stock to budget deficits, continuous issuance of promissory notes and other borrowings as well as low revenue generation.
On the way out of the debt quagmire, the Lagos Chamber of Commerce and Industry, LCCI, asked the government to re-strategise on revenue generation, such as a shift in focus to equity financing, among others, while the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture, NACCIMA, called for a higher level fiscal discipline by government.
Recall that DMO had said last week that the country’s debt stock had risen to over N46 trillion, increasing by over N6 trillion in 2022 alone.
According to the Diretor-General of DMO, Patience Oniha, who disclosed this in an interview on Channels Television’s breakfast programme, Sunrise Daily, yesterday, she noted that Nigeria had been running budget deficits for many decades.
She said further that several loans had been contracted multilaterally and bilaterally, while the Federal Government kept issuing promissory notes to settle obligations for which it didn’t really have the revenue.
Also, borrowing is an accepted form to fund government activities but noted that this should be supported by revenues generated.
She added that when money borrowed was judiciously utilised to stimulate growth, revenue would be generated to offset the debt.
Oniha said: “Nigeria’s debt stock is N46.25 trillion as of the end of 2022. It includes the debt of the 36 state governments and the Federal Capital Territory. The Federal Government is responsible for about 85% of this.
“What are the triggers and why is the debt stock growing? It is because when the debt stock is growing, the debt service also grows. The debt stock is growing because Nigeria has been running budget deficits for many decades.
‘’In good and bad times with oil prices, we have borrowed. We’ve been running budget deficits and those deficits are funded largely 85 to 95% from borrowing and that is cumulative. These are publicly available data.
“As we borrow each year, it adds up. So, the annual budget deficits are a major component. If you look at this year’s budget, budget size is N21trn, borrowing is N10trn.”
She added that Nigeria had secured several loans in the past from multilaterals like the World Bank, and the African Development Bank and bilaterals from Germany, India, and China and disbursements are going on.
“The third part is the fact that the government has been issuing promissory notes to settle obligations for which it doesn’t really have the revenue. So, that is why the debt stock has been growing,”
Govt should shift to equity financing, other revenue strategies – LCCI
Reacting yesterday, Director General, LCCI, Dr. Chinyere Almona, said the government should emphasize strategies on revenue growth, while blocking leakages, among other measures.
Almona stated: “LCCI recommends that government must shift focus to equity financing, divestment or shedding of its equity holdings in state-owned enterprises, real estate, and infrastructure to reduce its debt commitments and improve its fiscal situation. ‘’Both capital and interest payments on borrowed sums expose the country’s fiscal vulnerabilities.
“Also, the government should, as a matter of urgency, emphasize strategies on revenue growth while blocking leakages. Importantly, the government may want to consider the need to deregulate the downstream subsector of the oil industry to block a major drain on revenue.
‘’Most importantly, following the commendable launching of the restructured Ministry of Finance Incorporated, MOFI, as the arrow head of Nigeria’s efforts to optimize national assets by President Muhammadu Buhari on February 1, 2023, LCCI wishes to urge that copious references should henceforth be made to the growth in the stock of financial assets that Nigeria owns in corporate equities, real estate and infrastructure spaces and the returns Nigeria is generating on them.
‘’This should be done each time government of Nigeria is providing updates on the growth in the stock of the financial liabilities Nigeria owes and the costs it is incurring on them, to provide local and global observers a balanced picture of our financial evolution.”
Higher level of fiscal discipline needed – NACCIMA
