DMO raises concern over Nigerian govt’s debt service-to-revenue ration

The ratio of debt service to revenue for the Federal Government has raised concerns for the Debt Management Office (DMO).

The expected deficit for the federal government’s 2023 budget is N11.30 trillion, which is an increase of 54% over the predicted deficit for the prior budget.
When Patience Oniha, director general of DMO, appeared before the House of Representatives Committee on Finance on Thursday for discussion of the Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) 2023–2025, she provided the explanations for the high debt profile.

Oniha revealed that Nigeria’s debt had grown to N41.6 trillion as of March this year and claimed that the nation has been experiencing budget deficits for a long time, which had an impact on its revenue profile.

She said unless the issues of personnel, overhead and capital expenditure were properly addressed in the budget, borrowing would continue.

She said: “As you know, we publish the debt numbers quarterly, which is why there are a lot of discussions around it. But let me just give some numbers. As at December 2020, the debt stock of Nigeria and that includes the federal, state governments and the federal capital territory was N32.92 trillion.

“By December 2021, it was N39.556 trillion. As at March of this year, it was N41.6 trillion. On the average, (federal government) it is about 85 percent of the total. Technically, the bulk of it is the federal government.

“Speaking specifically to the question, it is a genuine concern that Nigerians ask and you as the stakeholders in Nigeria with responsibility for borrowing ask. Debt has grown and that has come really from the annual budget. There are three levels where those borrowings have increased. We have been running a deficit budget for many, many years.

“So, each time you approve a budget with a deficit, by the time we raise that money – because when you approve, it is giving us a mandate, authority to borrow, it will reflect in the debt stock; so debt stock will increase. Also remember that states are also borrowing. So we add their own. They also have laws governing their borrowings.

“The second leg to that really, as debt stock increases, so does debt service. And so, the clear message is go through the budget; we have been having a deficit budget for many years and have been borrowing significantly.

“The challenge is: we have been borrowing because of shortfalls. So, the other thing to do is let’s look at our expenditure profile: what can we do to reduce it, because you are asking me what is the remedy? It is from the budget. There is revenue, there is expenditure listed in various categories, personnel, overhead and capital. So, those are what bring out the deficit we borrow for. It is those things that should be interrogated in addition to increasing revenue significantly.”

According to Oniha, what DMO has been saying since 2020, when the MTEF for 2021 to 2023 was being prepared, is to begin to look at revenues because as debt is growing, debt service is increasing.