The Debt Management Office (DMO) has asked the National Assembly to take steps to control the deficit in the annual appropriation acts to reduce the debt profile of the country.
The Director-General of DMO, Patience Oniha, made the call on Thursday at the public hearing on the Medium Term Expenditure Framework (MTEF) organised by the House of Representatives Committee on Finance.
Ms Oniha said the budget deficit has been the main contributing factor to Nigeria’s debt profile. She noted that the debt profile will continue to grow as long as lawmakers continue to pass deficit budgets.
The MTEF proposal before the National Assembly has an estimated budget deficit of N11.03 trillion which represents 5.01% deficit/GDP ratio which is above the recommended threshold by the Fiscal Responsibility Commission.
According to the DG, the debt profile of the federal government and the sub-national stands at N41.6 trillion.
She stated that borrowing has increased in the post-COVID-19 era as the debt stock has risen by about N9 trillion.
“From Covid in 2020, the level of borrowing had increased significantly as you know. Those budgets pass through this House. The issue is how do you reduce that debt.
“As of 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 of March of this year, we publish quarterly, it was N41.6triilion. On average, (the federal government) is about 85 per cent of the total.
“Debt has grown and that has come really from the annual budget. There are there 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,” she said.
To address the growing borrowings, Ms Oniha asked the lawmakers to scrutinize the budget proposal. Adding that revenue must grow at a significant rate to address the gap in the budget
“Revenue can’t grow at low rate of 2 per cent to 3 per cent. It has to grow significantly to be able to ensure that we can service our debt and still have capital projects for other overheads and important activities. So that is what it is.
“So, we are concerned about debt services to revenue? Of course, we are but we always say that when you incur debt that is approved, you have to service it. It is not a grant. So, we have to look at revenues,” she said.
While reacting to questions on the justification of borrowings, Ms Oniha said the rail projects, airport renovations and other projects are products of the loans.
“I think we should be fair to ourselves as people serving Nigeria to say that we can’t see what we use the borrowing for might not be exactly true. Look at the airports. How many do you have? You have a new International airport in Abuja, you have modernisation in Kano, and even Enugu is now international. Those came from borrowings. The rail lines have also come from borrowings. So, it is not that is a zero performance,” he said.
Reacting to the comments made by the DMO, the Deputy Chairman of the Committee, Saidu Abdulahi (APC, Niger), said the concern should be about sustainability.
“I want to appreciate the fact that for a developing country, the need for borrowing will always be there. It doesn’t matter how much we make, the country must borrow.
“What we should be interested in is the sustainability of what we are borrowing and from what she has said, the country is on a good pedestal in terms of managing its borrowing”, Mr Abdulahi said.
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