FG raises borrowing limit as Nigeria’s debt crosses 25% of GDP

• Nation’s total debts chase N50trn

The Federal Government (FG) has upped the borrowing limit from 25% of Gross Domestic Product (GDP)to 40%.This is contained in its Medium Term Debt Strategy.

The move was apparently because Nigeria currently owes more than 25per cent of our GDP despite the fact that her current debt is officially put at N33.11tn, which is not up to25% of our GDP put at N152.3tninthelatestNational Bureau of Statistics (NBS) report.

However, if the over N10tn owed the Central Bank of Nigeria(CBN) by the FG through its ways and means operation and other debts it has borrowed which are yet to be drawn –down are added, Nigeria’s total debts is already chasingN50tn.

With the new 40% limit,it means that the FG now has enough latitude to expand  the debt portfolio, but the problem is that Nigeria has entered into unchartered territory as many are asking who will pay the debts the government is parking and how could it be paid as the nation’s economy is already in dire-strait.

For example, the FG made a total of N3.25tn last year, according to a review of the 2020 budget Appropriation Act and it spent a total of N2.34tn on debt servicing within the year. Which is to say that 72per cent of the government’s revenue was spent on debt servicing. Thus, the review put the government’s debt servicing to revenue ratio at 72 per cent. In 2019 FG made a total revenue of N3.86tn.

The year, debt servicing gulped N2.11tn.This meant the FG’s debt servicing to revenue ratio in 2019 was 54.66 per cent. Thus between 2019 and 2020, the FG’s debt servicing to revenue ratio jumped from 54.66 percent to  72 percent.

According to the Debt Management Office (DMO), Nigeria’s total debt stands at N33.11tn. Out of this figure, N20.64tn (62.33percent) was owed to domestic creditors, while N12.47tn (37.67 per cent) was owed to foreign creditors.

Of the domestic debt profile, N16.51tn belong to the Federal Government while N4.12tn belongs to the 36 states and the Federal Capital Territory (FCT). Yet, last week, the Senate a p proved President Muhammadu Buhari’s request for ongoing external loans to the tune of $ 8,325,526,537 and €490,000,000 under the 2018-2020 external borrowing (Rolling) Plan.

The approval kow-towed a report on the 2018-2020 External Borrowing (Rolling) Plan by the Committee on Local and Foreign Debt. The Chairman of the Committee, Sen. Clifford Ordia, said the committee noted the concerns of Nigerians about the level and sustainability/ serviceability of the country’s borrowings in the last decade.

Said  he: “Our debt service figures constitute a huged rain on our revenue to the extent that it accounts for over 30 percent of our expenditure in the annual budget.”

He informed the proposed projects in the Ministries of Transportation, FCT, Aviation, Works and Housing, Agriculture, Water Resources and some others were mostly ongoing projects and programmes in respect of which External Borrowed funds had been spent in the past.

According to him, the funding agencies namely are: World Bank–$796,000,000; China  Exim Bank – $2,901,026,509; Industrial Commercial Bank of China – $2,484,555,304; African Development Bank – $104,200,000; Africa Growing Together Fund – $20,000,000. Others include “French Development Agency – €240,000,000; European Investment Bank – €250,000,000; European ECA/KfW/IPEX/AFC – $1,959,744,724; and International Fund for Agricultural Development (IFAD) – $60,000,000.”