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Amid options in equity, idle assets, DMO defends borrowing, as debt rises to N39.6trn

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DESPITE having options of attracting fundings from equity and sale of idle national assets, the Debt Management Office (DMO) has kept defending its borrowing stance, with the current national debt profile put at N39.556 trillion.

According to the DMO, Nigeria’s total debt by December 31, 2021 was N39.556trn, or $95.779 billion. The amount represents the total external and domestic debts of the Federal Government of Nigeria, 36 state givernments, and the Federal Capital Territory (FCT).

The Director-General of the DMO, Patience Oniha, had on several fora defended federal government’s stance on borrowing, despite other options on securitised debt and equity issuance.


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According to Oniha, the rising public debt level stems from new borrowings to fund recurring budget deficits in the appropriation acts over the years.

She said, “These new borrowings are approved by the Federal Executive Council (FEC) and the National Assembly (NASS) as required by the Fiscal Responsibility Act, 2007, and the Debt Management Act, 2003.”

“If we critically look at the Federal Budget over many years, it will be observed that successive governments have run budget deficits, which have been financed 80 per cent or more by new borrowings.

“These successive new borrowings have resulted in debt accumulation and, by extension, an increase in the debt stock. Budget deficits have arisen from shortfalls in revenues required to meet the government’s expenditure.”

She explained further that a look at budget deficits showed that the range between 2015 and 2022 was NGN1.616 trillion to NGN6.449 trillion, while new borrowings to finance the deficits ranged between NGN1.457 trillion and NGN5.489 trillion.

While supporting government’s reason to borrow, an economist, Tope Fasua, saying although borrowing has become imperative for the government following current economic realities, called on the Federal Government to improve on the budgeting system to check deficit financing and make the annual budgets more impactful.

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Fasua said due to prevailing circumstances, especially with the recent COVID-19 concerns, such borrowings should be judiciously utilised to improve infrastructure that can grow the economy.

“Government should ensure that our borrowings are effectively utilised for optimum economic impact,’’ he said.

The DMO is mandated by the Act establishing it to advise the government on borrowings and debts using the annual debt sustainability analysis tool.

Some analysts, however, posit that constant borrowing to fund the national budget could be averted if the government stuck to opportunities in equity investment, and did proper commercialisation of its idle assets across the country.

According to the Senior Investment Analyst at Afrinvest West Africa, Temitope Omosuyi, “There is no perfect time than now for Nigeria to embark on reforms. We are currently heading to difficult conditions. Last year, our debt servicing was 85 per cent. In the next three years, the projection will be 100 per cent, which will lead us to more trouble.

“You also look at the ‘ways and means’ which shows government borrowing is now over N4 trillion from the Central bank. This is not healthy for the overall economy. The implication is that more naira circulates more than local production and worsens the econimic situation.”

Findings have shown that constant borrowing has wider implications on Nigeria’s fragile economy, amidst slow economic growth and huge sums for debt servicing.

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Whereas the Federal Government easily yields to debt as an option to close budget gaps, opportunities abound more in equities and even securitised debts, economist say.

“Nobody is going to disagree with us that Nigeria needs revenue, but what most of us disagree with the government is that in the current global realities, you can raise more revenue from your assets,” the Chief Executive Officer of Economic Associates, Ayo Teriba, told THE ICIR.

Teriba added, “Your economy is still reeeling from the effects of the pandemic. It is wrong to expect more revenue from such an economy. In fact some economies give tax holidays.

The economist spoke of lots of idle assets Nigeria could generate revenue from, but which it is not utilising.

He said, “On our balance sheet, debt is not the only type of liability we can talk of. You can also issue equity.”

Teriba expressed concern that the government only had debt in its portfolio, while stressing lack of equity issuance by the government, even with the Nigerian Stock Exchange.

Africa’s biggest economy has as much as $900 billion of idle assets in real estates and agriculture alone sitting with the Federal Government, according to an estimate by global consulting firm, Pricewaterhousecoopers.

Analysts say privatising or securitising these assets – which daily lose their real value to wear and tear – could help the government generate private capital, create jobs for the teeming youths and lift over 40 per cent of its population living in poverty.

“The government needs to privatise or sell off some of these idle assets to realise funds,” said Ayodeji Ebo, senior economist/head, research & strategy, Greenwich Merchant Bank.

“A lot of these assets are depreciating by the day because they are not in use. If the government doesn’t want to give out totally, they can have an operating and transfer arrangement with the private sector. Someone takes it up, renovates and brings it up to a functional level, while the government can just be a part of it,” Ebo added.

THE ICIR reports that the main advantage of equity financing is that there is no obligation to repay the money acquired through it.

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