Nigeria’s debt burden rose by N1.31tn in one year, the Debt Management Office has said.
Official statistics released by the DMO in Abuja on Wednesday showed that the country’s total debt rose from N11.24tn as of December 31, 2014 to N12.6tn at the end of 2015.
The N1.31tn increase showed that within a period of one year, the country’s debt rose by 12.1 per cent.
As of June 30, 2015, the country’s debt burden stood at N12.12tn. This means that the federal and state governments grew the country’s debt profile by N480bn in the first six months of last year.
The total is made up of the external debt of the federal and state governments, the domestic debts of the Federal Government as well as the domestic debts of the states.
In terms of segmentation, the external debts of both tiers of government rose from $9.71bn as of December 31, 2014 to $10.71bn as of December 31, 2015. This shows a rise of $1bn or growth rate of 10.37 per cent within the period.
The domestic debt of the Federal Government, which is the biggest component of the debt burden, rose from N7.9tn as of December 31, 2014 to N8.84tn in the 12-month period.
This shows that the domestic debt of the Federal Government rose by N932.97bn within the one-year period. It also means that the domestic debt of the Federal Government rose by 11.8 per cent.
The 36 states of the federation and the Federal Capital Territory held $3,369,911,154.54 of the country’s external debt component, while the Federal Government’s external commitments stood at $7,348,520,340.26.
With $1,207,900,597.65, Lagos remained the most externally indebted state of the federation as it held 35.84 per cent of the country’s subnational external debt.
For 2016, the Federal Government expects to borrow N984bn from domestic sources and N900bn from foreign sources to finance the capital component of the budget.
It will also set aside the sum of N113bn as a sinking fund towards the retirement of maturing loans, while N1.36tn has been provided for foreign and domestic debt service obligations.
Our correspondents reported that the Federal Government spent a total of N2.95tn to service domestic debts for a period of five years from 2010 to 2014.
The amount spent on servicing the domestic component of Nigeria’s total debt rose from N334.66bn in 2010 to N846.64bn by the end of December 2014.
The increase in the debt service obligation of the Federal Government showed an increase of N511.98bn within a period of five years. This means that in that time, the country’s domestic debt service obligation rose by 152.99 per cent.
The increase also reflected the rise in the size of the country’s domestic debt portfolio, which moved from N4.55tn in December 2010 to N7.9tn as of December 31, 2014, an increase of 73.63 per cent.
This means that while the domestic debt rose by 73.63 per cent within the period, the cost of servicing the debt rose by 152.99 per cent. Some of the debts that had fallen due within the period, however, might have been liquidated.
While reacting to the development, the Director-General, West African Institute for Financial and Economic Management, Prof. Akpan Ekpo, told one of our correspondents in a telephone interview, “It is unfortunate that the last government incurred so much debt. It is not healthy for the economy because a lot of the money was not used for capital projects. They were borrowing to meet recurrent expenditure to finance the budget, which was very wrong.
“But we have sympathy for the new government because there is a deficit, which has to be financed. I suggest that to reduce the debt burden, we should reduce the debt service obligation of over N1tn. It is too high. We should then try and borrow externally from the African Development Bank or the World Bank because they have long repayment periods and concessionary terms. We should minimise borrowing domestically.
“Then going forward, we should be very careful. I don’t think the rising debt profile is good for the economy. And the money borrowed should be put into viable projects like infrastructure development.
“This new government is in a dilemma. There is a deficit and they have no choice; they have to borrow. Also if the looted funds are recovered, they should be used to reduce the deficit.”
Prof. Sheriffdeen Tella of the Department of Economics, Olabisi Onabanjo University, Ago Iwoye, Ogun State, said, “The debts were actually accumulated by the last government at a time when the economy was going down, pretending that we were still having some money as it were.
“This is not good for us. We should worry about it because of the situation now. It is more precarious for us to continue to accumulate debt. If the debt is long-term, it is okay; but it is likely going to be short and medium-term.”