Nigeria’s Debt Burden Soars, DMO Warns Against Further Borrowing

The Debt Management Office (DMO) has expressed concerns over Nigeria’s excessive borrowing, warning that the country’s debt burden may hit N81.64tn before the end of 2023.

The DMO said the increase in total public debt-to-GDP to 37.1 percent in 2023 from 23.4 per cent as of September 2022 was due to the inclusion of an estimated N8.8tn 2023 debt, the government’s Ways and Means debt of over N23tn, and an estimated Promissory Notes issuance of N2.87tn in the debt stock.

“As of December 2022, Nigeria’s total public debt was N46.25tn, which means they might be an increase of 76.52 per cent this year,” the DMO said.

The DMO warned that the Federal Government’s projected revenue of N10tn for 2023 cannot support fresh borrowings.

“The projected government’s debt service-to-revenue ratio of 73.5 per cent for 2023 is high and a threat to debt sustainability,” the office said.

The DMO stated that the government must pay attention to revenue generation by implementing far-reaching revenue mobilisation initiatives and reforms including the Strategic Revenue Growth Initiatives and all its pillars with a view to raising the country’s tax revenue to GDP ratio from about 7 percent to that of its peer.

It added that the Federal Government can reduce borrowing through the privatisation and/or sale of Government assets.

The Director-General of the DMO, Patience Oniha, recently said promissory notes, budget deficit and constant borrowing had led to an increase in public debt.

“Among other reasons, she said” “the government has been issuing promissory notes to settle obligations, for which it doesn’t really have the revenue or cash. That is why the debt stock has been growing.”

The DMO’s warning comes as Nigeria’s economy faces a number of challenges, including rising inflation, a weak currency, and a decline in oil prices.

Also Read: Nigeria didn’t hide borrowing plan, fail World Bank disclosure rule – DMO

The government has said that it is committed to reducing the country’s debt burden, but it is unclear how it will achieve this goal.

In the meantime, the DMO’s warning is a reminder of the risks associated with excessive borrowing.