Researchers at the Centre for the Study of Economies of Africa (CSEA), a leading economic research firm with primary focus on developments in African economies, have advocated the need for the Federal Government to review its debt management procedures and framework to ensure that borrowing is resorted to only when necessary and that borrowed funds are deployed efficiently.
The experts, who expressed this view in the latest ‘Nigeria Economic Update Issue 12’ published by the consulting firm on Monday, also stressed the need for the government to increase Nigeria’s domestic revenue generation capacity through improved tax administration, enforcement, and compliance mechanisms as a fiscal option of avoiding excessive borrowing by the tiers of government.
The analysts gave this charge against the backdrop of the latest report by the Debt Management Office (DMO), that Nigeria’s total debt stock rose by 10.72 percent from N87.91 trillion in Q3 2023 to N97.34 trillion in Q4 2023, representing 110% (N51.09 trillion) increase from N46.25 trillion reported in Q4 2022.
They attributed the increase in the debt stock mainly due to new borrowings by both federal and state governments to finance the 2023 budget deficit and repay maturing debts.
They reported that data from the DMO showed that domestic debt accounted for 60.74 percent (N59.12 trillion) of the total debt whereas foreign debt accounted for 39.26% (N38.21 trillion) of the total debt, which is in line with the government’s debt strategy.
According to the report, in the quarter under review, both sources of debt witnessed an increase – domestic debt rose by N3.19 trillion and foreign debt increased by N7.28 trillion.
The CSEA analysts further clarified: “While this might look like Nigeria embraced more foreign sources, the increment is largely due to exchange rate depreciation. The continuous increase in Nigeria’s debt level can be attributed to budget deficit, naira depreciation, high interest payments and low revenues, among other factors.
“It has never been more pertinent, than now, for the government to review its debt management procedures and framework to ensure that borrowing is embraced only when necessary and that borrowed funds are deployed efficiently.
“Furthermore, increasing Nigeria’s domestic revenue generation capacity through improved tax administration, enforcement, and compliance mechanisms can reduce the need for excessive borrowing”, they advised.
