Nigeria spent more money servicing debt than it earned between January and April of this year, according to the Director-General of the Debt Management Office (DMO), Mrs. Patience Oniha.
The cost of debt servicing has been a source of concern because the Federal Government spent more on debt servicing than it collected in the first four months of the year, she said, adding that the debt servicing bill increased by 109% between last December and this March, rising from N429 billion to N896 billion.
According to DMO data, this amounted to N3.83 trillion in debt servicing payments over 15 months.
Mrs Oniha told the News Agency of Nigeria (NAN) yesterday that the amount of new borrowing to meet these needs is frequently captured in the annual Appropriation Acts and the Medium-Term External Borrowing Plan. Although it appears obvious, one thing omitted in expert analysis is that new borrowing will automatically translate to higher debt stock and debt service levels," she said, emphasizing that Nigeria needs to earn more revenue and manage its debt profile more efficiently.
According to statistics, Nigeria's revenue is low in comparison to other countries, so the DMO chief wondered how much revenue Nigeria was generating.
According to the World Bank's World Economic Outlook for 2020, Nigeria was ranked 194 out of 196 countries covered, with a revenue to GDP ratio of 6.3%, adding that a "strong and comparable revenue base will reduce the need for relatively large amounts of new borrowing, as Nigeria has witnessed, and will also reduce the debt service to revenue ratio."
Mrs. Oniha emphasized the need for more stakeholders to focus and pay attention to the need to improve revenue generation in order for debt to be sustainable.
"It is recommended that the media and public analysts begin to focus on Nigeria's revenue generation." Revenue is the way to go, and countries develop and use borrowing to supplement revenue shortfalls from time to time.
"Nigeria has been running budget deficits for decades; it is about time to shift to balanced, if not surplus, budgets," she said, urging the government to address the recurring issue of petroleum subsidy payment in order to reduce borrowings even further.
She stated that the DMO has consistently maintained its position on the need to raise revenue, citing the petrol subsidy as one issue that must be addressed, as it has significantly increased annual budget deficits and, as a result, the level of new borrowings and the public debt stock.
"There is an urgent need to increase crude oil production and eliminate crude oil theft and pipeline vandalism in order to meet oil revenue targets, particularly in light of rising crude oil prices."
Other structural issues affecting the business environment, such as insecurity, inflation, infrastructure deficits, and foreign exchange shortages, she added, needed to be addressed.
She claimed that doing so would open the door to more efficient tax collection and a larger tax base.
According to Mrs. Oniha, the DMO's role in debt acquisition and management processes is primarily advisory.
"The DMO advises the government on public debt issues, including new borrowing, debt negotiation, and debt management strategy," she said, adding that the yearly Debt Sustainability Analysis and the four-yearly Medium-Term Debt Management Strategy are the tools with which the DMO advises the government on policy issues.
She stated that the DMO Establishment Act, 2003 requires the institution to keep a record of public debts and service them, and that the DMO actually prepares Debt Service projections for the Medium Term Expenditure Framework (MTEF) and yearly budgets so that debt is serviced promptly.
Mrs. Oniha chastised Nigerians for criticizing the DMO over debt management, claiming that they are unaware of the legislation and regulations governing borrowing and public debt.
"It is strongly advised that the public become acquainted with the provisions of the DMO Establishment Act of 2003 and the Fiscal Responsibility Act of 2007," she said.
"Public debt has risen in recent years as the government borrowed to cover major revenue shortfalls, increased spending on security and infrastructure, and health funding due to the COVID-19 pandemic."
Mrs Zainab Ahmed, Minister of Finance, Budget, and National Planning, also lamented the large gap between revenue and debt servicing while presenting the draft MTEF.
Mrs. Ahmed estimated N1.63 trillion and N1.9 trillion in actual revenue and debt service from January to April 2023 respectively.