The Debt Management Office (DMO) in Nigeria has expressed concerns over the country’s excessive borrowing, projecting that the debt burden may reach N81.64tn by the end of 2023.
This figure is based on the 2022 Debt Sustainability Analysis Report released by the DMO, highlighting the alarming increase in total public debt-to-GDP ratio.
The inclusion of estimated debt, government’s Ways and Means debt, and Promissory Notes issuance contribute to the significant rise in the debt stock.
Details: The DMO warns that Nigeria’s total public debt, which stood at N46.25tn in December 2022, may increase by 76.52 percent in the current year alone.
The projected revenue of N10tn for 2023 is deemed insufficient to support further borrowings. Additionally, the government’s debt service-to-revenue ratio of 73.5 percent poses a significant threat to debt sustainability.
Recommendations: To address the escalating debt situation, the DMO emphasizes the need for the government to focus on revenue generation.
Implementing revenue mobilization initiatives and reforms, such as the Strategic Revenue Growth Initiatives, can help raise the country’s tax revenue to GDP ratio and reduce reliance on borrowing. The DMO also suggests the privatization and/or sale of government assets as a means to decrease borrowing.
DMO’s Insight: According to the Director-General of the DMO, Patience Oniha, the issuance of promissory notes, budget deficits, and constant borrowing have contributed to the increase in public debt. The government has resorted to issuing promissory notes to settle obligations despite lacking the necessary revenue or cash, further exacerbating the debt stock.
Conclusion: Nigeria faces a mounting debt burden, and the DMO’s concerns about debt sustainability highlight the urgent need for fiscal responsibility and revenue diversification.
Addressing the revenue deficit, implementing reforms, and exploring alternative strategies, such as asset privatization, are crucial steps to alleviate the country’s growing debt challenges and ensure long-term financial stability.
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