President Goodluck Jonathan
In the over five years that President
Goodluck Jonathan has been presiding over the affairs of the country,
the Federal Government has borrowed N5.04tn from the domestic debt
market.
Jonathan became Nigeria’s acting
President on February 10, 2010 and substantive President on May 6,2010
following the death of President Umaru Yar’Adua on May 5,2010. On May
29, 2011, he was sworn in as an elected president.
Records at the Debt Management Office
showed that the domestic debt of the Federal Government stood at
N3,466,360,000,000 (N3.47tn) as of March 31, 2010.
The
latest debt statistics from the DMO as of March 31, 2015 showed that
the domestic debt had risen to N8,507,545,474,000 (N8.51tn).
This means that in the last five years,
the Federal Government had borrowed N5.04tn from domestic lenders. It
also means that within the period, the domestic debt of the Federal
Government grew by 157.48 per cent.
A breakdown of the domestic debt profile
of the Federal Government by instruments showed that FG Bonds accounted
for N5.37tn or 63.13 per cent of the total domestic debt.
The Nigerian Treasury Bills, on the other
hand, accounted for N2.87tn or 33.68 per cent of the Federal Government
total domestic debt profile.
Similarly, the Nigerian Treasury Bonds
accounts for N271.22m or 3.19 per cent of the Federal Government’s total
domestic debt profile.
The DMO statistics also showed that the domestic debts of the states grew by 116.83 per cent within the same period.
As of March 31, 2015, the domestic debts
of the states stood at N1.69tn or $10.87bn. However, as of March 31,
2010, the domestic debts of the states which were only given in dollars
stood at $5.01bn.
This means that in dollar terms, the domestic debts of the states rose by $5.85bn or 116.83 per cent in the last five years.
Within the same period, the external
debts of both the federal and state governments rose from $4,306,180,000
($4.31bn) to $9,464,110,000 ($9.46bn).
This means that within the five-year
period, the external debts of both tiers of government rose by
$5,157,930,000 ($5.16bn). In percentage terms, the external debts of
both tiers of government rose by 119.78 per cent.
The latest debt figures released by the
DMO did not segregate the external debts of the country into the
proportions owed by the Federal Government and the various states of the
federation.
As of December 31, 2014 when the debt
figures were last segregated, the states’ component of the nation’s
external debt profile stood at 33.63 per cent while the Federal
Government’s component stood at 66.37 per cent.
With $1,169,712,848.66, Lagos State occupied the top position on the list of the most externally indebted states.
It was followed by Kaduna,
$234,416,052.15; Cross River State, $131,469,661.94; Edo State,
$123,128,295.53; and Ogun State, $109,154,553.08.
The least exposed states in terms of
external debts were Taraba, $22,780,063.89; Borno, $23,067,549.16;
Delta, $24,233,639.67; Plateau, $30,947,579.75; and Yobe,
$31,237,619.25.
The increasing profile of the nation’s domestic debt has been reflecting on the cost of debt servicing.
According to budgetary provisions, the
cost of debt servicing went up from N591.76bn in 2013 to N712bn in 2014.
This was made up of N663.61bn for servicing domestic debt and N48.39bn
for the foreign debt component.
A statement by the DMO last week said the
debts of the country, especially that owed by the Federal Government
had not grown unusually in the last four years. It also explained that
the debts had been rising because of budget deficit financing.
According to the office, the increase in
public debt between 2011 and 2014 was the lowest compared to the period
2004–2007 and 2008–2011.
The DMO said, “In 2010, there was a
general wage increase (53.7 per cent average increase) for all
categories of public servants, including political appointees. The
funding of this depended on increased domestic borrowing.
“The global economic and financial crisis
(2008-2010) occurred within the same period. All economies engaged in
counter-cyclical public spending, using what was popularly referred to
as stimulus package.
“In Nigeria, the government was able to
effectively play the role by borrowing from a domestic bond market,
which to the country’s credit, had been developed as an alternative
source of funding after the exit from the Paris and London Clubs debts
in 2005 to 2006.
“While the Federal Government’s debt
stock has grown, a comparison with the figures before the exit from the
Paris Club should not be on absolute figures alone. The size of the GDP
and the structure of the debt must be taken into consideration.
“The increase in the domestic debt was
due principally to the financing of the deficits as appropriate in the
annual budgets. The budgets include both capital and recurrent
expenditure; thus, the deficit cannot be attributed to a single item on
the budget.
“In the case of external borrowings,
which are mostly from the multilateral financial institutions; the
utilisation of the proceeds are tied to projects – in power,
agriculture, health, education – and other infrastructure and human
development projects.”
The Debt Office added that public borrowings were done in accordance with the mandate of the National Assembly.
Finance experts, who spoke to our
correspondents, on the issue, called on the DMO to ensure that it did
not go beyond the acceptable limit of debt to Gross Domestic Product
Ratio
An Associate Professor of Finance,
Nasarawa State University, Keffi, Uche Uwaleke, said that the increase
in the debt could also be looked at from the standpoint that the
economy was growing.
He said, “One important point you should
realise is if the debt is sustainable. If it is sustainable relative to
the size of economy, then it should not call for concern. As long as we
are operating within the acceptable threshold of debt to GDP ratio, then
it shouldn’t be of much concern.
“But that doesn’t mean we should continue
to borrow, the DMO should do all within its powers to manage the debt
stock within a sustainable level.
“Again, the worrying aspect of it is the
fact that in the past for instance, we borrowed money to finance
consumption. We borrowed money to meet the demand for increase in wages
and salaries and we have not recovered from that up till now because if
you check the 2015 budget, the provision that has been made for debt
servicing is as a result of the impact of that borrowing area.”
Also, Bismarck Rewane, who is the Chief
Executive, Financial Derivatives Company, who described the debt as
huge, said that Nigeria was spending about 25 per cent of its revenue on
debt servicing.
He said, “The debt servicing burden is
quite high. The debt has to be restructured because what we are seeing
now is that the debt-to-GDP is high. We are spending almost 25 per cent
of our revenue to service debt and that is why I say it is quite high,
and again we have another large percentage that is spent on subsidy.
When you consider all these, you will find out that there will be
nothing left to run the economy.”
A former President, Association of
National Accountants of Nigeria, Samuel Nzekwe, said the country’s
debt would slow down the development of capital projects across the
country.
The Chairman, Institute of Chartered
Accountants of Nigeria, Abuja District, Mr. Adewale Gbakinro, said it
was wrong for the Federal Government to borrow as much as N5tn in the
last five years when oil sold for more than $100 per barrel for most of
the period under review.
Gbakinro said, “Much of the borrowings were spent on recurrent expenses. It does not make sense to me to borrow to pay salaries.
“The amount of money being spent in
Nigeria to run government is not right. I know that democracy is costly
but a lot could have been done through financial discipline.”
Gbakinro listed the budget for feeding at
the Presidential Villa and the maintenance of the presidential fleet as
some areas that government could have cut down on the cost of
governance.
