‘Budget Deficits, Promissory Notes’: Why Nigeria’s Debt Stock Is Growing

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 Channels Television’s Sunrise Daily, said Nigeria has been running a budget deficit for many decades.

She added that several loans have been contracted from multilaterals 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 to fund government activities though there should be revenues generated.

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

Oniha said, “Nigeria’s debt stock is N46.25trn. It includes the debt of the 36 state government and the Federal Capital Territory. The Federal Government is responsible for 84% to 85% 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% from 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, budget size is N21trn, borrowing is N10trn.”

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

“The third part – 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.”