Nigeria’s debts at critical levels, Agura policy warns

Agora Policy, an Abuja-based think tank set up to find practical solutions to urgent national challenges has warned that Nigeria’s debt reached a critical level in 2022, adding that Nigeria’s domestic debt is being largely understated.

In its maiden policy report on revamping Nigeria’s economy, the group revealed that fresh data showed that debt service in the first four months of 2022 exceeded revenue generated by the country.

According to the report published on Monday, CBN’s ways and means of lending to the federal government has increased from N265.7 billion in January 2014 to N18.89 trillion in March 2022 — representing a more than 7,000 percent jump.

Using the official figures, Agora Policy said “the total debt stock of FGN has increased by 436% from N6.17 trillion in December 2011 to N33.11 trillion in December 2021.

“Domestic debt increased by 242%, from N5.6 trillion to N19.2 trillion; while foreign debt increased by 2,435% from N546 billion to N13.86 trillion.”

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The report added that “the official debt stock statistics do not include FGN’s borrowing from the Central Bank of Nigeria (CBN) through Ways and Means which increased by over 7,000% from N265.7 billion in January 2014 to N18.89 trillion in March 2022”.

“Thus, if the debt from Ways and Means as of December 2021 (N17.4 trillion) is added to official debt, the domestic debt stock as of December 2021 rises to N36.6 trillion.”

From January 2022 to April 2022, debt service was the largest component of expenditure by the federal government. In those four months, the country’s debt service exceeded revenue by N308 billion, meaning that the government borrowed to pay back debt.

Agora Policy said CBN’s continuous intervention through the ways and means is illegal and “poses many problems”.

“First, the CBN Act is clearly being contravened. Second, FGN’s revenue is obviously not enough to fund expenditure,” the report read.

“Third, since this figure is not included in official statistics for debt stock, the size of FG’s debt is distinctly understated.”

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According to section 38, sub-section 1 and 2, of the CBN Act, “the Bank may grant temporary advances to the Federal Government in respect of temporary deficiency of budget revenue” and “the total amount of such advances outstanding shall not at any time exceed five per cent of the previous year’s actual revenue of the Federal Government”.

For years now, CBN’s lending to the federal government has exceeded five percent of the previous year’s revenue by a lot more.

“Aggregate FGN retained revenue for January to April 2022 was N1.63 trillion, while aggregate expenditure was N4.72 trillion.

“Alarmingly, debt service was the largest component of expenditure with N1.94 trillion, followed by non-debt recurrent expenditure (N1.7 trillion), capital expenditure (N773.63 billion) and statutory transfers (N289.89 billion).

“Thus, the country is in the precarious situation of borrowing to pay back debt. Since revenue was N1.63 trillion and debt service was N1.94 trillion, the government borrowed N308 billion to pay back debt.”