Federal government’s borrowings are fuelled by persistent budget deficits, the Director-General of the Debt Management Office, DMO, Ms. Patience Oniha, said yesterday.
There have been concerns about the nation’s rising debt profile but the DMO boss told journalists, in Abuja that the current economic situation in the country had made borrowing inevitable. She explained, however, that even governments of developed economies borrow and that the proper utilization of such borrowed funds should be the most important concern of the Nigerian public.
She said: “Governments borrow. I am sure you know it is not only in Nigeria that the government borrows. I am sure you know how indebted the United States (US) is. Even when the Congress or the Senate says it will not approve it because the borrowing is to high, after one or two days, they settle because they know that government must run. “The fact that some governments run on borrowing does not mean that borrowing is wrong. So the US borrows, the UK (United Kingdom) borrows, France borrows, Germany borrows. Many countries borrow- be it Russia, be it Qatar- all those countries that have oil and so have huge Sovereign Wealth Funds – they borrow. The point I am making here is that borrowing is not wrong.
“Sometimes even a country that has surplus budget can actually decide to borrow because it wants to keep its financial market open. The government needs to keep the market open for the private sector to operate because the private sector is needed to support total growth.
“The issue is why do we borrow, and this is where I give a charge to journalists and others. Every year you see us prepare a budget. In the budget, you see all the items, you see the personnel cost, capital expenditure, you see revenue projections, you see deficit. The deficit means our revenue is less than our expenditure.
“So if there is deficit, how do you finance that deficit? You borrow or undertake assets sale. You see the new borrowings, you see domestic, you see external. It starts from there. Our borrowing sticks out because our revenue is very low.”
The DG boss explained that in a situation where the revenue was far less than government obligations, there was hardly any option to borrowing. She said: “When we talk about the growth in the debt stock, we forget the origin. You have an outstanding debt, when you run a deficit budget and you borrow, it adds up and goes like that incrementally, unless the ones that mature and you re-pay.”
Ms. Oniha noted that the crash in oil price from over $100 at a point to as low as less than $20 created, at a point, created huge budget deficit problems for the nation.
She added that the COVID-19 pandemic worsened the nation’s revenue problems as oil prices further fell coupled with unexpected health expenditure, thereby increasing the 2020 deficit from less than N2 trillion to about N4.2 trillion.
The DMO DG said that as unattractive as borrowing was, the alternative was to stop infrastructure development being financed with loans and use whatever revenue the government earnings might be, no matter how small. She urged those who analyse the rise in debt services to be holistic, rather than pick a figure and run with such a figure.
She assured however, that current borrowings were being refocused on concessional multilateral loans with low interest rates and long re-payment periods of between 20 to 30 years, in order to mitigate the debt stock.