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Tougher Days Ahead For Nigerians, Firms As National Debt Hits N46tn

Economists have revealed that Nigerian firms and citizens are likely to lament even more in the coming days as the country’s total debt figure rises to N46.25tn or $103.11bn in the fourth quarter of 2022.

The reported figure consists of the Federal Government’s domestic and external total debt stocks and the sub-national governments (36 state governments and the Federal Capital Territory), Naija News learnt.

According to the Debt Management Office (DMO), Nigeria’s debt, as of September 2022, was at N44.06tn. The government agency revealed that the comparative figure of public debt as of December 31, 2021, was N39.56tn or $95.77bn.

This means that the country’s debt increased by N6.69trn or $7.34bn within one year. Stating reasons for the increase, the DMO said new borrowings by the FGN and sub-national governments, primarily to fund budget deficits and execute projects and the issuance of promissory notes to settle some liabilities also contributed to the growth in the debt stock.

A statement recently released by the DMO read: “As of December 31, 2022, the total public debt stock was N46.25tn or $103.11bn. In terms of composition, total domestic debt stock was N27.55tn ($61.42bn) while total external debt stock was N18.70tn ($41.69bn).

“Amongst the reasons for the increase in the total public debt stock were new borrowings by the FGN and sub-national governments, primarily to fund budget deficits and execute projects. The issuance of promissory notes by the FGN to settle some liabilities also contributed to the growth in the debt stock.

“On-going efforts by the Government to increase revenues from oil and non-oil sources through initiatives such as the Finance Acts and the Strategic Revenue Mobilization initiative are expected to support debt sustainability.”

The DMO further explained that the debt figure under review was 23.20 per cent of the Gross Domestic Product, indicating that it was well within the federal government’s and international organisations’ limits.

“The total public debt to gross domestic product (GDP) ratio for December 31, 2022, was 23.20 per cent and indicates a slight increase from the figure for December 31, 2022, at 22.47 per cent.

“The ratio of 23.20 per cent is within the 40 per cent limit self-imposed by Nigeria, the 55 per cent limit recommended by the World Bank/International Monetary Fund, and, the 70 per cent limit recommended by the Economic Community of West African States,” it added.

The development has, however, raised concerns among financial experts as members of the Organised Private Sector (OPS) predict more woes for firms and citizens.

The Country Will Continue To Struggle

Speaking on the development, the Director, Center of Promotion for Private Enterprise, Muda Yusuf, told reporters that Nigeria would continue to struggle financially due to the continuous rise in its debt servicing.

He noted that if drastic steps were not taken, Nigeria would get into a vicious debt cycle, which he considers a trap.

He said, “What this means is that the country will continue to struggle with servicing of debts. Already, debt service is close to 80 per cent of our revenue, and it is likely to increase with the new figure.

“The implication is that we are likely to get ourselves into a vicious cycle of debt, like a debt trap, because the higher debt service burden is, when your revenue is low, the more you continue to borrow to be able to sustain the system. Remember that the N23tn from the CBN Ways and Means is not part of this. If we add that, it will make it almost N80tn.”

On possible solutions, Yusuf stated that removing fuel and foreign exchange subsidies would increase the nation’s revenue.

Yusuf added: “A possible solution is to increase our revenue through the removal of fuel subsidies and foreign exchange subsidy. This will bring relief of N8trn. We must also address increasing oil production, curb leakages, and cut our spending.”

Borrowing For Deficit Not Good For Nigeria

A professor of Economics at the University of Uyo, Akpan Ekpo, expressed his view on the worrisome development, saying that borrowing to fill the deficit is unhealthy for Nigeria.

Ekpo expressed concerns that Nigeria’s revenue base is generally shallow and that there will be more trouble if the projects the money is spent on cannot generate funds to pay the debts.

He also hopes that the government is transparent about what the borrowings are spent on.

“Those debts should not be on recurrent expenditure because that is a waste. Borrowing to fill up the deficit is not good for our economy either. Can the projects pay the debts back if it was spent on capital projects? The debt is for future generations. We need to get information on debt servicing revenue ratio or debt revenue because our revenue base is not healthy at all,” Ekpo said.

On his part, a professor of Financial Economics at the University of Uyo, Leo Ukpong, posited that the country’s inability to service might lead to increased taxes.

He said, “Borrowing tends to have a negative effect on the credibility of the borrower. We know that public debt is very high, and this increase is not good for the country.

“When debts rise, you run the risk of bankruptcy but since a country can’t be declared bankrupt, it is likely that taxes will be increased, reducing our purchasing power.”

Nigeria Not Likely To Make Progress If…

Also showing concern are members of the organized private sector who observed that borrowing to fund projects that do not generate income could hinder Nigeria’s progress.

In an interview with reporters, the Deputy-President of the Lagos Chamber of Commerce and Industry, Gabriel Idahosa, described Nigeria’s continued recourse to borrowing as worrisome for the economy.


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Idahosa said, “We are looking at external borrowing that is not tied to specific revenue-generating projects, that are not collateralised. For example, if you want to take a loan to build a seaport, to be paid from the operations of the seaport, it can still raise money. But if you want to borrow money and use it for various projects that do not generate income, hoping to pay from the federal budget, then you are not likely to make any progress.”

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