According to Ms. Patience Onisha, the Director-General of Debt Management Office, The nation’s debt profile stood at ₦33.107 trillion, or $87.239 billion, as of March 31, 2021. The whole debt stock is made up of ₦13. 711 trillion in external debt (38. 66 percent) and ₦21.754 trillion in domestic debt (61. 34 percent). A total of ₦11. 828 trillion in external debt and ₦17. 632 trillion in domestic debt owed by Nigeria’s Federal Government.
The Federal Capital Territory (FCT) had an external debt stock of ₦1.883 trillion, while states had an internal debt stock of ₦4.122 trillion. The foreign debt analysis showed that multilateral organizations were owed 54.88 percent of the debt (World Bank Group and African Development Bank Group).
Following commercial debt, which accounted for 31.88 percent, bilateral debt (China, France, Japan, India, and Germany) accounted for 12.70 percent while promissory notes accounted for only 0.54 percent.
The Director-General of DMO, Ms. Patience Onisha indicated that the process of adding the federal government debt to Nigeria’s Central Bank, which was roughly ₦10 trillion at the time, had already begun.
She also noted that attempting to source funds has various advantages, including presenting Nigeria in a favorable light in international financial markets with vast pools of capital. Several local banks have issued Eurobonds as a result of the sovereign Eurobonds serving as a benchmark. Zenith Bank, Access Bank, UBA, FBN, Eco bank Nigeria, and Fidelity Bank are just a few of the banks involved.
The establishment of this window enables these Nigerian banks to meet regulatory obligations while also increasing their ability to lend to local borrowers.
“Issuing Eurobonds has proven to be a successful means of raising Nigeria’s foreign reserves. Nigeria’s sovereign rating and the Naira Exchange Rate are both backed up by a large amount of external reserves. To finance budget shortfalls, sovereign borrowing in domestic markets is lowered by raising funds overseas through Eurobonds. There are various benefits to doing so: minimizes the risk of the private sector being forced out (more funds available at moderate rates for other borrowers in the domestic economy) They can also be found on the Nigerian Exchange Limited and the FMDQ Securities Exchange Limited, two of Nigeria’s securities exchanges.”
Huge infrastructure deficits, (two recessions in the last six years) triggered by repeated budget deficits, a low revenue base exacerbated by reliance on a single source, crude oil, whose prices collapsed and had no buyers at one point during the COVID-19 pandemic, were all causes for the loans, she claimed. Five percent tax rate as a percentage of GDP was insufficient for Nigeria, she said, and targeted steps were needed to raise the country’s revenue.
Read Also: FASHOLA: THOSE CRITICIZING GOVERNMENT’S BORROWING SHOULD PROVIDE ALTERNATIVES!