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Huge budget deficits financing over the years responsible for Nigeria’s growing debt ~ DMO

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The Debt Management Office (DMO) on Wednesday explained that Nigeria’s debt stock is growing due to a combination of three major factors.

The DMO Director-General, Patience Oniha, who was a guest on a Channels Television programme, said Nigeria has been running a budget deficit for many decades.

She added that several loans have been contracted from multilateral and bilaterals while the federal government keeps issuing promissory notes to settle obligations for which it doesn’t really have the revenue.

According to the debt management boss, borrowing is an accepted form of funding government activities, though there should be revenues generated.

She noted that when borrowed funds are judiciously used to stimulate growth, revenue will be generated to offset the debt.

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“Nigeria’s debt stock is N46.25 trillion.” It includes the debt of the 36 state governments and the Federal Capital Territory. The federal government is responsible for 84 percent to 85 percent of this.

“What are triggers, and why is the debt stock growing? Because when the debt stock is growing, debt service also grows.

“The debt stock is growing because Nigeria has been running a budget deficit for many decades. In good and bad times with oil prices, we have borrowed. We’ve been running budget deficits, and those deficits are funded largely—85 to 95 percent—by borrowing, and that is cumulative. These are publicly available data.

“As we borrow each year, it adds up. So, the annual budget deficits are a major component. If you look at this year’s budget, the budget size is N21 trillion, and borrowing is N10 trillion.”

She added that Nigeria had contracted several loans in the past from multilaterals like the World Bank and the African Development Bank and bilaterals like Germany, India, and China, and disbursements are going on.

“The third part is that the government has been issuing promissory notes to settle obligations for which it doesn’t really have the revenue. So, that is why the debt stock has been growing.”

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