The figures presented by the Debt Management Office as of March 2021 show that Nigeria’s total debt stock is N33.107 trillion. This comprises the debt stock of the Federal Government, 36 state governments and the Federal Capital Territory.

Further breakdown of the debt stock shows that promissory notes were in the sum of N940.220 billion, domestic debt stock stood at N20.637 billion while the external debt stock remained at $32.86 billion. The Federal Government went further to obtain another loan in June and as of July, the debt stock rose to N35.465 trillion.

Recurring debt of the federal and subnational governments has led to the continuous deficit financing of the national budget, with 30% of the annual budget allocated for debt servicing. In 2020, the sum of N3.7 trillion was utilised for debt service; in 2021 the sum was N3.12 trillion and the proposed 2022 budget has the sum of N3.60 trillion earmarked for debt service. Assuming Nigeria doesn’t borrow for the next 10 years, the current amount earmarked for debt service would clear off its debts, but with the level of fiscal indiscipline displayed by the various tiers of government, this remains mere wishful thought.

The national budget has been running on deficit financing for the past eight years. Worse still, is the fact that the Minister of Finance, Zainab Ahmed, has reaffirmed that Nigeria will continue to borrow to fund infrastructural projects. On the contrary, with the volatility of the exchange rate and the poor internally generated revenue, the only option available for Nigeria to rebound economically is to expand its tax net, develop and implement economic policies that would strengthen the naira and abide by the fiscal laws governing the country.

The Fiscal Responsibility Act in S.12 states that the aggregate expenditure and the aggregate amount appropriated by the National Assembly for each financial year shall not be more than the estimated aggregate revenue plus a deficit, not exceeding three per cent of the estimated Gross Domestic Product or any sustainable percentage as may be determined by the National Assembly. Also, S.41 (1) of the Act provides the rules for borrowing as follows: Government at all tiers shall only borrow for capital expenditure and human development, provided that, such borrowing shall be on concessional terms with low-interest rate and with a reasonable long amortisation period, subject to the approval of the appropriate legislative body.

This provision has been grossly violated as most recent borrowings have been used equally for recurrent expenditure. Expenditures related to COVID-19 interventions coupled with the heightened insecurity could be adduced to the increased recurrent expenditure. The continuous presentation of supplementary budgets after the main budget has been approved indicates that the process in the preparation and development of the Medium Term Expenditure Framework is not well-thought-out and can best be described as faulty. The FRA S. 36 1 provides that the creation, expansion or improvement in government action which results in an expenditure increase shall be accompanied by (a) an estimate of the budgetary or financial impact in the year it becomes effective and in two subsequent years, and (b) a statement by the person requesting the expenditure, stating that the increase is consistent with the Appropriation Act and the MTEF. Against the provision of the law, it has been observed that most of the supplementary budget requests are to be funded from borrowings that are not tied to the MTEF

In addition, S.44.(1) provides that any government in the federation or its agencies desirous of borrowing shall, specify the purpose for which the borrowing is intended and present a cost-benefit analysis, detailing the economic and social benefits of the purpose to which the intended borrowing is to be applied. Against the provision of the law, most of the recent debts were not accompanied by any cost-benefit analysis or repayment plans.

The Financial Reporting Council is mandated to publish on a quarterly basis, a list of governments in the federation that has exceeded the limits of consolidated debt, indicating the amount by which the limit was exceeded. The Act also provided that violators of the limit shall be prohibited from borrowing from internal or external sources except for refinancing existing debts. However, the Federal Government and states have repeatedly justified their continuous borrowing with the size of the GDP, which in actual terms does not show the true reflection of the gross national income.

In order to forestall the negative trend, the FRA should be amended to contain provisions that make it mandatory for the national and sub-national governments to provide information on their consolidated debt profile in the preparation of their MTEF. This information would be used as a guide for the approval or disapproval of future loans by the National Assembly. Also the provision of the Act mandating the government to ensure that the level of public debt is as a proportion of national income and held at a sustainable level as prescribed by the National Assembly be fully enforced with evidence. Sanctions for violations should be prescribed as well.

Victor Emejuiwe, a good governance and public affairs analyst.