Domestic borrowing jumps by 134%, rises to N52tn

The total domestic debt stock may have risen by 133.95 per cent to N51.96tn as of the end of 2023.

This is based on new revelations by the Director-General of the Debt Management Office, Patience Oniha.

While speaking to CNBC Africa on the sidelines of the discussions for the establishment of the African Debt Managers Initiative Network spearheaded by the African Development Institute of the African Development Bank in Abuja, she disclosed that the Federal Government had raised N7.04tn as total new domestic borrowing in 2023.

Oniha said, “I am happy to say that in 2023, the new domestic borrowing was N7.04tn, and as we speak that has been raised in full. So, I don’t need to explain how we raised it, but it has been raised. When you compare it to the N3.5tn of last year. It tells you that the market has debt for us to raise money.”

As of the end of end of December 2022, Nigeria’s total domestic debt was N22.21tn. This increased significantly by the end of June to N48.32tn.

Defending the jump, DMO explained that the major addition to the public debt stock was the inclusion of the N22.71tn securitised FGN’s Ways and Means Advances, which was reflected in domestic borrowings.

According to The PUNCH’s analysis, the total domestic borrowings outside of the securitised Ways and Means Advances would have been N25.60tn (signifying that that total new domestic borrowing at the time was N3.39tn). Since the government’s total domestic borrowing for 2023 amounted to N7.04tn, The PUNCH added total domestic debt as of the end of December 2022 (N22.21tn) with new borrowing for the year (N7.04tn), and securitised Ways and Means Advances (N22.71tn) which amounted to N51.96tn.

Commenting on the makeup of debt, Oniha noted that several of the investors in the securities issued were institutions whose balance sheets were growing including asset managers, fund managers, including pension funds, insurance companies, and banks.

She stated, “We still had an auction this week. Subscription levels have been good, and the rates have been very responsible below the monetary policy rate, so it just tells you that there is liquidity.” She declared that the government expects its outing in the domestic market to continue in 2024.

When she was asked about the foreign market, the DMO DG noted that rates have been high due to high inflation rates.

She highlighted, “There is still uncertainty around the world from the Russia-Ukraine war. So foreign investors are a bit more cautious. Let’s use the word, risk-averse and they are investing in those securities that are triple A or double A rating that are offering them high rates, four per cent, five per cent.’

She, however, argued that based on available data It could be speculates that stability was returning to the market.

Also commenting on revenue, Oniha decried the challenge that the country has faced with raising enough to meets its need due to high dependence on oil.

She added, “Several governments had tried to change that narrative, improve revenue, but now we see a presidential committee on fiscal reforms and taxes, so we expect the narrative to change to higher revenues. If you look at the MTEF for 2024 to 2027, you can see the direction in that regard.

“If you increase revenues, clearly your need for borrowing will be reduced. With your revenues, you can provide more services. But also, your debt-service to revenue ratio will be lower.”

As of the second quarter of 2023, Nigeria’s total public debt rose to N87.38tn according to DMO.

Nigeria’s total public debt stock as at June 30, 2023, was N87.38tn ($113.42bn). It comprises the total domestic and external debts of the Federal Government of Nigeria, the thirty-six states, and the Federal Capital Territory.

The major addition to the Public Debt Stock was the inclusion of the N22.712tn securitized FGN’s Ways and Means Advances.

Recently, the Minister of Finance and Coordinating Minister for the Economy, Wale Edun, declared that Nigeria cannot rely on borrowing to fund its 2023 national budget. He noted that the country must make the necessary sacrifices to generate adequate revenues to reduce its current high deficit financing.

He said, “Clearly, in the environment that we have now, internationally as well as nationally, we are in no position to rely on borrowing.

“We have an existing borrowing profile. Our direction for the tariff is to reduce the quantum of borrowing or intercept deficit financing in the 2024 budget. Simply put, internationally, there is a focus among rich countries on bringing down the inflation rate to stabilise the economies and give them the opportunity for investment growth.

“They are in the process of sacrificing that immediate goal of compacting their economies, or at least contracting the money supplies and pushing up the interest rates, and of course, high-interest rates and investments don’t go together.”

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