Follow Us on Google
The Minister of Finance, Budget and National Planning, Zainab Ahmed, recently disclosed that Nigeria’s total public debt will reach an all-time high of N38trillion by December 2021. In her presentation to the Senate Committee on Local and Foreign Debts, the Finance Minister said “the total public debt stock comprising the external and domestic debts of the federal and state governments and the Federal Capital Territory (FCT) stood at N31.01 ($85.90billion) as at June 30, 2020.” The debt, according to the minister, is projected to rise to N32.51trillion by December 31, 2020 and N38.68trillion by December 31, 2021.
As it stands now, the present administration is likely to borrow about N6.17trillion next year. Moreover, the Federal Government is seeking fresh $1.2billion external loan from Brazil to finance agricultural programmes in the 2021 budget. The request has been sent to the National Assembly for approval. The fresh loan, Ahmed stated when she appeared before the House of Representatives Committee on Finance, will help address issues in the agricultural value chain, as government will require 100,000 hectares of land in each state for food production.
Defending the rising borrowing and spending which experts say may raise the nation’s debt servicing above N3trillion, the Finance Minister attributed such loans to numerous abandoned road projects across the country and poor funds releases occasioned by dwindling revenue. The government had spent N162billion Sukuk fund reportedly for 45 roads in the six geopolitical zones.
The Federal Government should be mindful of excessive borrowing and its effect on the economy. While there is nothing basically wrong with borrowing to fund worthy projects, everything is wrong with binge borrowing to service consumption and some worthless projects. Let government ensure prudent management of all borrowed funds. Also, deploying large percentage of the budget on recurrent expenditure and overheads is unsustainable.
This trend, as many Nigerians have observed, is likely to harm the country now and after. No doubt, the increasing debt will lead to high debt servicing burden. All of this will constrain infrastructural development. Since the government has disclosed that the fresh loans are strictly for infrastructural projects, we urge it to do so. Let there be close monitoring and supervision of the management of the loans.
With the national debt stock on a steady rise, it has become expedient to comply with the Revised Guidelines of the 2020 Debt Management Office (DMO) on External and Domestic Borrowing for the federal and state governments, the Federal Capital Territory (FCT) and other agencies of the government. The revised guidelines stipulate how the various tiers of government can secure loans from the external and domestic markets.
The updated guidelines derived largely from provisions of extant legislations and approved documentations, notably the Constitution, the DMO (Establishment Act, 2003, the Fiscal Responsibility Act and Securities Act, 2007, and the Fiscal Sustainability Plan, as well as the Fiscal Framework for sub-national governments in the country.
According to the guidelines, to borrow externally, the Federal Government and its agencies are now required to prepare a National Debt Management Strategy for the approval of the Federal Executive Council (FEC) which is the decision-making organ of the federal government. This process will be handled by the DMO in collaboration with Ministries, Departments and Agencies (MDAs).
In addition, such requests are to include documents on the projects to be funded, consistent with national development priorities and what DMO called “creditors partnership strategies.” Altogether, we enjoin the government to borrow cautiously and spend prudently. Although the government is within the acceptable borrowing limits, we urge it to come to terms with the implications of excessive borrowing and avoid the looming debt crisis.
