Nigeria’s government borrowing rose dramatically in the third quarter by N2.5 trillion and increasing total debt to N38 trillion. The nation’s Debt Management Office (DMO) made the announcement noting the increased status of borrowing by the two tiers of the country’s government – federal and states.
Public concern about the rapid rise in government borrowing has risen as the number of Nigerians under the poverty threshold rose in recent years. At the same time, allegations of public fund theft have also increased. The borrowing and theft situations raise concerns about the state’s ability to defray its debt and its ability to deliver on the plans that led to the borrowing in the first place. Recently The Conversation reported that Nigeria is fifth on a list of 10 countries with the highest debt exposure.
Although The Conversation notes that Nigeria’s current debt profile is harmless, given the country’s debt/GDP ratio, there is still trepidation given the fears about the use of borrowed finances. Moreover, Nigeria’s debt service is largely dependent on oil revenue that has been unstable in recent times. The Conversation states that expected oil revenue fell to 64% in 2020.
The Organization for Impact and Reform’s (OFIAR) analysts, while acknowledging importance of borrowing to developing an economy, called for a streamlined plan that clearly delineates factors to support borrowing in specific sectors. An analyst adds: “Borrowing is essential to all economies, both developed and developing, but the key is following a clearly specified short-, medium-, and/or long-term plan that are stable over time.” The analyst adds; “…borrowing plans cannot be frequently fluctuate based on change in government but should be based on development plans that are stable and resistant to electoral changes.”
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