According to the most recent data from the Debt Management Office, the Federal Government’s desire for loans from overseas banks is decreasing.
This is because, as of the end of September, the total national debt increased to N87.91 trillion. As opposed to the previous trend of increasing its foreign debt stock, there was a notable overall decrease. Nigeria’s overall public debt increased slightly from N87.38tn at the end of the second quarter to N87.91tn in the third quarter of 2023, or 0.61 percent.
New debt stock data from the Debt Management Office, which was made public on Wednesday, support this. According to the data, during the reporting period, total external debt was recorded at N31.98 trillion, while total domestic debt was recorded at N55.93 trillion.
“At N87.91tn, the total public debt stock represents a marginal increase of 0.61 per cent when compared to the June 30, 2023, figure of N87.38tn,” DMO stated in a statement regarding its report. The decline in external debt, which was $43.16 billion as of June 30, 2023, to $41.59 billion as of September 30, 2023, and the relatively mild increase in domestic debt of N1.8 trillion account for this trend.The $500 million Eurobond redemption and the $413.859 million first principle payment of the $3.4 billion loan taken out in 2020 during COVID-19 contributed to the reduction of external debt.
The Federal Government spent N1.79 trillion on servicing domestic debt and $1.39 billion on servicing overseas debt in Q3 of 2023.
The government’s commitment to fulfilling its debt obligations is demonstrated by the recent debt servicing, according to DMO, in response to repeated concerns about the nation’s debt situation and whether or not the government will default.
Patience Oniha, the Director-General of the Debt Management Office, recently revealed that the reason behind the high rates on blue-chip securities is the high rates of inflation in the West.
Speaking off-the-cuff at the African Development Institute of the African Development Bank’s Abuja sidelines for the creation of the African Debt Managers Initiative Network, she observed that the government has been concentrating more on the home market.
“Rates on blue chip securities, the US government, and the UK government are high for the international market because of the inflation rate,” the speaker stated.
across addition, the conflict between Russia and Ukraine continues to cause concern across the world. Thus, overseas investors are a little more circumspect. They are making investments in triple-A or double-A rated securities that provide them high yields of 4% and 5%.
She did point out, though, that stability is starting to return to these nations, with predictions indicating that US interest rates will remain the same in 2024.
In her remarks, she disclosed that the Federal Government has increased the total amount of new domestic borrowing to N7.04 trillion in 2023.
“I am happy to say that the new domestic borrowing in 2023 was N7.04tn, and as we speak that has been raised in full,” stated the DMO DG. It has been raised, so I won’t have to explain how we did it. In contrast to the N3.5 trillion from the previous year. It indicates that there is debt in the market for us to raise capital.
She emphasised that the domestic market’s liquidity has been positive and that the government is anticipated to keep supporting it in 2024.
Oniha claims that the government’s ongoing revenue problems must be resolved since they are causing havoc. If revenue increases, the nation won’t require further borrowing.
“Several governments had tried to change that narrative, improve revenue,” she said in an interview with CNBC Africa. “But now that we have a presidential committee on fiscal reforms and taxes, we expect the narrative to change to higher revenues.” You may observe the trajectory in that approach if you look at the MTEF for 2024 to 2027.
It goes without saying that raising revenue will decrease your demand for borrowing. Your income will allow you to provide more services. Additionally, your debt-to-income ratio will decrease.
In a statement releasing the debt data on Wednesday, DMO repeated the remarks made by its DG, saying, “Nevertheless, Mr. President’s initiatives and actions towards revenue generation remain important for Nigeria’s overall fiscal balance.”
Wale Edun, the Coordinating Minister for the Economy and Minister of Finance, has stated that the nation must increase its revenue position since it cannot continue to rely on borrowing.
At the public unveiling of the 2024 budget, Minister of Budget and Economic Planning Abubakar Bagudu reaffirmed the nation’s revenue position and stated that income production continued to be the biggest obstacle to the nation’s fiscal viability.
“The primary fiscal barrier to Nigeria’s fiscal viability continues to be revenue generation,” he declared. To increase revenue production, the government is examining its current fiscal and taxation policies. Within the current term of this Administration, the goal is to raise the revenue to GDP ratio from less than 10 percent to 18 percent.
This is supported by the World Bank, which, prior to its recent reforms and policy reorientation, thought that Nigeria’s debt servicing costs would surpass 200 percent of its GDP by 2026. Nonetheless, the bank thinks that over the medium run, the nation’s recent reforms will increase revenues and maintain debt levels below 40% of GDP.
According to the report, debt servicing costs are expected to decrease from roughly 101.5% of total income in 2022 to 43% in 2026.
