Nigeria’s debt burden to hit N19.3tn by December
Analysts have cautioned the government against plunging the nation into another debt trap, even as there are plans to raise funds from external sources to finance critical infrastructure, If the federal and state governments continue to rely heavily on debt instruments for the financing of the country’s infrastructure needs, then, Nigeria’s total debt burden will be hitting the N19tn mark by the end of this year.
Based on figures obtained from the Ministry of Budget and National Planning, the country’s total debt stock is expected to rise by N6.72tn this year from the 2016 figure of N12.58tn, making the total debt liability to rise to N19.3tn by the end of 2017.
The frequency of borrowing by the federal and state governments has become a source of worry to many analysts, who sound a note of caution that the country may be heading for another debt trap if restraint is not exercised.
According to the Economic Recovery and Growth Plan, Nigeria’s public debt has increased in recent years as the Federal Government has increased borrowing to finance budget deficits owing to declining revenue.
The country’s domestic debt profile is expected to rise by N2.34tn to N12.43tn this year from N10.09tn in 2016, while the foreign component is being projected to increase by N4.38tn from N2.48tn to N6.86tn.
The document stated that the focus of the government’s debt would be shifted from domestic borrowing to foreign sources, as loans from international financial institutions are cheaper and have longer repayment periods.
For instance, the ERGP stated that while the proportionate share of foreign financing would increase from the current level of about 28 per cent to almost 72 per cent in 2020, that of domestic financing would decrease gradually from about 54 per cent in 2016 to about 26 per cent by 2020.
The Federal Government is currently seeking $29.96bn in loans from the World Bank, African Development Bank and Japan International Cooperation Agency.
The other international financial agencies the government plans to borrow from are the Islamic Development Bank and China Exim Bank.
Some of the projects to be funded by the loans are the Mambila hydroelectric power, $4.8bn; railway modernisation (Calabar-Port Harcourt-Onne Deep Seaport segment), $3.5bn; Abuja mass rail transit project (phase two), $1.6bn; and Lagos-Kano railway modernisation project (Lagos-Ibadan segment, double track), $1.3bn.
The rest are Lagos-Kano railway modernisation project (Kano-Kaduna segment, double track) $1.1bn; ‘others’, $6bn; Eurobond, $4.5bn; Federal Government Budget Support, $3.5bn; social (education and health), $2.2bn; agriculture, $1.2bn; and economic management and statistics, $200m.
The Budget and National Planning ministry said with the shift in focus to more foreign borrowing, the domestic financing sector would be more available and accessible to the private sector, thus avoiding crowding out.