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Buhari thinking

• FG owes N26.91tn, states, FCT, N6.01tn

• Debt, revenue ratio shows danger – Experts

• Federal Government borrowing not transparent, its purpose not known, says economist

The country’s debt rose by N20.8tn between July 2015 and December 2020, data obtained from the Debt Management Office on Wednesday showed.

This period corresponds with the Presidency of Major General Muhammadu Buhari (retd.) who assumed leadership of the country on May 29, 2015.

According to the statistics obtained from the DMO, Nigeria’s total debt as of June 30, 2015 stood at N12.12tn.

However, as of December 31, 2020, the country’s debt portfolio had risen to N32.92tn.

This shows that within a period of 66 months (five and half years), the country’s debt has risen by N20.8tn.

It also means that within the period, the country’s debt portfolio rose by 171.62 per cent.


Most of the country’s debts were incurred by the Federal Government.

Of the total debt of N32.92tn, the Federal Government has a total of N26.91tn, leaving a balance of N6.01tn to sub-national governments, mainly, the 36 state governments and the Federal Capital Territory Administration.


The implication of this is that 83.78 per cent of the nation’s debt stock belongs to the Federal Government, with the sub-national government accounting for 16.22 per cent.

Further analysis shows that domestic sources accounted for N20.21tn while external sources accounted for N12.71tn.


In percentage terms, external debts accounted for 38.6 per cent of the total debt portfolio while domestic debts accounted for 61.4 per cent.

The country’s increasing debt profile is also reflected in the growing cost of debt servicing which has ridiculed the nation’s dwindling revenues in recent years.

Within the period of 66 months under review, the country spent N10.26tn on debt servicing.

While servicing local debts gulped N8.53tn between July 2015 and December 2020, servicing external debts gulped N1.72tn from 2016 to December 2020 (external debt servicing converted to Naira at the exchange rate prevailing at the time, provided by the DMO).


The data provided by the DMO showed that from July to December 2015, N489.59bn was expended on servicing local debts.

From January to December, a total of N1.23tn was spent to service the country’s domestic debts in 2016. The figure rose to N1.48tn in 2017.


In 2018, the country’s domestic debt servicing bill rose to N1.8tn. The cost of domestic debt servicing came down a bit in 2019 to N1.69tn. In 2020, it rose again to N1.85tn.

On the other hand, external debt servicing consumed $353.09m in 2016. In went up to $464.05m in 2017 and jumped up to $1.47bn in 2018.

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In 2019, the nation spent $1.33bn on external debt servicing. In 2020, external debt servicing gulped $1.56bn.

The rise in the country’s debt servicing reflected the nation’s increasing commitment to external loans.


Given the high cost of local debt servicing previously, the Federal Government deliberately moved to secure more external loans.

The government’s policy was to rebalance the country’s debt portfolio to 60 per cent local debts and 40 per cent foreign debts.


However, dwindling revenues arising from low receipts from oil and gas exports presented the government with a dilemma.

Falling local currency had brought to the fore the foreign exchange risk inherent in securing foreign loans while the need to shore up foreign exchange proceeds had made it difficult for the government to wean itself from foreign borrowings.

In fact, the President had about a fortnight ago asked the Senate to approve another $6.18bn external borrowing for the government.

Buhari said the proposed loan which is equivalent to N2.3tn is to finance the 2021 budget deficit of N5.6tn.


He said the loan would enable the Federal Government to fund critical infrastructural projects in transportation, health, and education among others.

When the National Assembly eventually approves the new debt plan, the implementation will take the country’s debt portfolio higher.

There are also approved borrowings that have not been disbursed by the lending agencies. The disbursement of these loans will also take the debt portfolio a notch higher.

The DMO recently disclosed that Nigeria had more than $5.83bn foreign loans that had been approved but not yet disbursed as of December 31, 2020.

A larger percentage of the loans would come from the International Development Association, a member of World Bank Group. The outstanding loans from the group stood at about $3.27bn as of December 2020.

Another $1.25bn was supposed to come from the Export-Import Bank of China. Apart from multilateral agencies, China has remained the nation’s largest creditor.

Other major sources of the undisbursed funds included Agence Francaise de Development from where the country will get more than 500 million Euros and the European Development Fund from where the country will collect about $425m.

The DMO also listed the projects and agencies that would benefit from the undisbursed funds.

These included Nigerian Supply of Rolling Stock and Depot Equipment for Abuja Light Rail Project, the Nigerian Greater Abuja Water Supply Project, Nigerian National Information Communication Technology Infrastructure Backbone Phase II Project; Four Airport Terminals Expansion Incremental Project, the Nigerian Four Airport Terminals Expansion Ancillary Project.

Others are Nigerian 40 Parboiled Rice Processing Plants Project, Say No to Famine of Nigeria, Nigeria Transmission Expansion Project Phase I, Nigeria Transmission Expansion Project Phase I,  Second Africa Higher Education Centers of Excellence for Development Impact  Project; Rural Access and Agricultural Marketing Project; the Northern Corridor Power Transmission Project; and the Enhancing Vocational Training Delivery for the Power Sector in Nigeria.

While the government hinges its borrowings on low debt-to-Gross Domestic Product ratio as well as the need to roll out infrastructure, experts say a better measure is to look at debt servicing to revenue ratio which has for some time been above 50 per cent.

The government also said the COVID-19 pandemic increased the nation’s appetite for borrowing.

Director-General of DMO, Patience Oniha, recently told one of our correspondents that crashed revenue and COVID-19 increased the quest of the nation to borrow more.

She said the rate of borrowing had started to come down until COVID-19 forced Nigeria, like many other nations, to increase its borrowing in order to buoy the economy.

Oniha had said, “The higher level of borrowing from 2015 due to the revenue crash occasioned by crude oil started trending downwards thereafter.

“Unfortunately, COVID-19 reversed that trend. That became necessary and many countries including the UK and USA also embarked on new borrowing.”

She added, “It is not correct to say that the economic team is not concerned about how the debt will be repaid. You know that a Debt Sustainability Analysis and Medium Term Debt Strategy are done.”

Although experts say that borrowing is necessary to buoy an economy especially in recession, many Nigerians fear that government borrowings often lack transparency and are often spent on recurrent expenditure.

FG borrowing not transparent, its purpose not known – Economist

In his reaction to the rising debts, a Professor of Economics and Public Policy at the University of Uyo, Akpan Ekpo, said there was nothing wrong in borrowing if it was used to finance infrastructure.

He stated, “The problem with our borrowing is that it is not transparent enough, we don’t know what they are borrowing for.

Debt, revenue ratio shows we are in trouble – Expert

“They tell us they are borrowing for infrastructure but they keep borrowing. It is a problem. They need to be more transparent so we would know what they are borrowing for. I suspect most of the borrowing is used to pay expenses, which is wrong. The debt-GDP ratio allows them to borrow, but the point is that GDP does not pay debt. Revenue pays debt. If you look at the debt revenue ratio, we are in trouble, so the borrowing is becoming disturbing especially the debt servicing. It is worrisome. Because we are servicing debt without utilizing the principal. I think they need to be more transparent, they need to look at more domestic resource mobilisation, and avoid more borrowing.

“When you borrow today, you are trying to make the future generation pay for it. And if we are not seeing the impact, in terms of infrastructure then it becomes worrisome. If they are going to finance infrastructure say constant power supply for 24 hours, and factories open and people are employed. We have reduced unemployment, because unemployment is linked to poverty rate but we are not sure. Recently the president sent a letter to the Senate for some more borrowing. I think the Senate needs to have a public debate whether we should continue borrowing.”

Another  financial analyst, Prince Bassey, affirmed that constant borrowing of funds would  hinder infrastructural development in the country.

He said, “Based on the budget, debt servicing has taken a huge chunk of the total expenditure. This means that infrastructural development will suffer. As the money we are supposed to use for infrastructural development will be used to service debt.”

“We have not created the right infrastructure to service the debt. Therefore, money from other sector of the economy is taken to service the debt. This has a ripple effect on the economy in general.”

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