Nigeria’s total public debt hit N46.25 trillion at the end of December 2022, data published by the Debt Management Office (DMO) on Thursday revealed.
With N23.77 trillion ways and means, the total debt will amount to N70.02 trillion by May 2023 when the President-elect, Bola Tinubu, and governors will be sworn in.
Ways and means implies facilities lent by the Central Bank of Nigeria (CBN) to the Federal Government.
The total debt could reach N80 trillion if N10 trillion is factored in from debt servicing and other Federal Government’s borrowings.
Public debt realities
Compared to N39.56 trillion in December 2021, the country’s public debt increased by 16.92 percent. On a quarter-on-quarter basis, the public debt grew by 4.96 percent.
The N46.25 trillion public debt consists of the domestic and external owed by the Federal Government, the 36 state governments, and the Federal Capital Territory (FCT).
In recent times, Nigeria’s debt profile has been increasing consistently, which has led to several public debates over what these borrowed funds are used for. This trend is likely to remain the same for a long while, as the 2022 fourth-quarter data showed.
According to the latest data released by the DMO, Nigeria’s total public debt stock rose to N46.25 trillion at the end of the 2022 fiscal year, indicating a 4.96 percent increase from the third quarter.
As explained by the Director General of the DMO, Patience Oniha, this increase was because of the federal and sub-national governments’ new borrowings, primarily to fund budget deficits and execute projects.
Of the country’s current N46.25 trillion public debt, domestic debt accounted for N27.55 trillion (59.56 per cent), while external debt stood at N18.70 trillion (40.44 per cent).
Out of the N46.25 trillion total public debt, the Federal Government owed N38.91 trillion, representing 84.14 percent of the debt, while the remaining 15.86 percent is owed by the 36 states and the FCT.
According to state profile analysis, Lagos recorded the highest domestic debt in Q4 2022 — N807.21 billion – which is 15.12 percent of the total domestic debt owed by the 36 states and the FCT. The domestic debt owed by Lagos State alone is more than the total debt of the other five states in the South-West region.
Delta State, with N304.25 billion, is the second state with the highest domestic debt. Ogun and Rivers states followed with N270.45 billion and 225.51 billion, respectively.
On the other hand, the lowest debt was recorded by Jigawa with N43.95 billion, followed by Kebbi and Katsina with N61.31 billion and N62.37 billion, respectively.
The domestic debt stock figures for Katsina and Taraba States were those estimated for September 30, 2022. The figure for Rivers State was as of September 30, 2021. Other states and the FCT were estimated for December 31, 2022.
Further analysis of the debt data showed that 13 states recorded increases in their domestic debts at the end of Q4 2022.
Ebonyi State increased its debt from N67.07 billion to N76.5 billion, indicating a 14.07 percent increase. Cross River, Ogun, and Delta states followed by 12.56 percent, 11.86 percent, and 11.6 percent, respectively.
The FCT, on the other hand, reduced its domestic debt by almost 28 percent. Lagos, Kaduna, Bayelsa, and Taraba also reduced their domestic debt by at least three percent.
On external debt, Lagos State still had the highest debt — a total of $1.250 billion – followed by Kaduna State with $573.74 million. Edo and Cross River states also topped the chart.
Borno, Yobe and the FCT recorded the lowest external debt at the end of Q4 2022. Out of the 36 states and the FCT, only Borno State’s external debt is below $20 million.
States’ external debts are published by the DMO bi-annually, i.e., Q2 and Q4 only.
An analysis of the bi-annual data showed that Taraba State increased its external debt by 108.57 percent. Adamawa, Ogun, and Osun states also saw rises in their external debts.
While every other state, including the the FCT, recorded a reduction in their foreign debts, Rivers, Gombe, Ekiti, and Kano reduced theirs the most.
Overall, Nigeria’s total public debt at the end of 2022 was 23.20 percent of the country’s Gross Domestic Product (GDP). This was an increase from the 22.47 percent debt-to-GDP ratio that was recorded at the end of the 2021 fiscal year.
Ways and means problem
In late 2022, Nigeria’s President, Muhammadu Buhari, sought the approval of the National Assembly for ways and means restructuring of estimated N23.7 trillion. Interest on ways and means has exceeded N1.22 trillion, and the World Bank and Fitch Global have warned that the ways and means is piling pressure on Nigeria’s expenditures. But the Buhari administration has remained adamant, piling up debts, which would hurt the next administration.
The legality of ways and means is also under question. The Chief Executive Officer, The CFG Advisory, Adetilewa Adebajo, said it was illegal for the CBN to finance the Federal Government through ways and means.
Debt servicing, alarming
Perhaps, the more serious issue is debt servicing, which economists consider very high. A report said Nigeria spent $1.79 billion in five years on servicing the debts from the World Bank and the Exim Bank of China. Nigeria spent N6.16 trillion in 16 months on debt servicing, according to the 2023-2025 Medium Term Expenditure Framework & Fiscal Strategy Paper, as reported by The Punch. Debt service has recently exceeded revenue, which is a sign that all is not well with Nigeria’s fiscal outlook. The World Bank estimates that Nigeria’s debt servicing will take 123.4 percent of the Federal Government’s revenue this year. The country spent N5,24 trillion on debt servicing in 2022, according to the DMO.
“Nigeria is likely to continue to have a higher debt service-to-revenue ratio if revenue levels do not increase significantly,” said the President of Lagos Chamber of Commerce and Industry, Michael Olawale-Cole, at a press conference in 2022.
Debt-to-GDP, misleading
While the Director General of the DMO, Patience Oniha, explained that Nigeria’s 23.30 percent debt-to-GDP ratio was still within the limits set by both the Federal Government and international organisations, experts have cautioned the government over its voracious appetite for borrowing.
They have also kicked against the use of the debt-to-GDP ratio as a basis for borrowing more.
Professor of Economics and Public Policy at the University of Uyo, Akwa Ibom, Akpan Ekpo, stated that using the debt-to-GDP ratio could be misleading.
“Looking at debt-to-GDP ratio can be quite misleading because we debased our GDP, making the denominator very large compared to the numerator. Instead, we should use debt servicing-to-GDP ratio and debt-to-revenue ratio, which at the current rates are disturbing,” he said.
According to the Chief Executive Officer, Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, the president-elect must pay more attention to unlocking more income from revenue generating agencies through enhanced efficiency of their operations.
“It is important to initiate budget reforms to ensure fiscal discipline, curb budget padding, duplication of projects, and review the service wide votes to ensure transparency,” he said.