By Jonathan Nda-Isaia
Abuja (Precise Post) – The federal government may need to borrow to finance infrastructure no doubt, but it needs to pay attention to the cost of servicing public debt (domestic and external), Director General of National Institute of Legislative and Democratic Studies (NILDS), Professor Abubakar Sulaiman has said.
He stated this on Monday in Abuja at the one day public lecture organised by the Institute on Public Debt in Nigeria: Trend, Sustainability and Management.
He said it is imperative that the quantum and structure of national debt be carefully managed in a manner that is consistent with the Fiscal Responsibility Act.
According to him, “The theme of today’s public lecture has been chosen in view of the ongoing debate and increasing concern over the rapid growth of Nigeria’s public debt profile and its implications for national development.
“Although, we may need to borrow to finance infrastructure, we need to pay attention to the cost of servicing public debt (domestic and external). It is imperative that the quantum and structure of national debt be carefully managed in a manner that is consistent with the Fiscal Responsibility Act.”
To appreciate the dimension of Nigeria’s public debt burden, the DG pointed out that it is important to undertake a quick review.
He explained “According to the Debt Management Office (DMO), Nigeria’s total public debt in 2015 was $63.80 billion, comprising $10.31 billion of external debt and $53.49 billion domestic debt.
“Nigeria’s debt has been increasing since 2015. It increased by 3.11 percent from $81.27 billion (recorded in the first quarter of 2019 to $83.88 billion (N25.70 trillion) at the end of June 2019. A further breakdown revealed that external borrowing rose by 32.38 percent to $27.16 billion, while States’ debt, including FCT grew by 5.10 percent to $4.27 billion.
“On the domestic front, the federal government debt increased by 52.19 percent to $43.78 billion while the states and the FCT debt rose by 15.43 percent to $12.94 billion as at June 2019. Overall, total external debt stood at $27.16 billion, while total domestic debt stood at $56.72 billion.
He further explained that the federal government plans to finance Nigeria’s 2.16 trillion naira budget deficit in 2020 through foreign and domestic borrowing.
The DG stated “I will like to point out that deficit budgeting is not a critical issue of concern, it is rather the site, source of financing and quality of expenditure.
“From an economic perspective, effective debt management requires that borrowed resources must be productively utilised such that the economic and social rate of return is higher than the future servicing cost of the loan.
“A debt problem may naturally ensue when resources that should have been used for the execution of productive projects are used to finance current or past consumption.
In view of the ongoing global economic instability occasioned by falling crude oil prices, and dwindling oil revenue, Prof Suleiman lamented that a rising debt burden may Inhibit government’s ability to undertake productive investment programme in health, and education.
He also noted that there is need to resolve the question of inter-generational equity which may arise when the present generation incurs debt that is left for the next generation to repay.
