The increasing rise of public debt in the country has been alarming. Several bankers in the country have expressed worries over the huge amount of budget apportioned to debt servicing.
The Details: This formed the bulk of members submission at a recent Monetary Policy Committee (MPC) meeting of the Central Bank of Nigeria.
The observation read: “The huge concerns expressed in the last MPC meeting about the increases in total public debt remain unabated.
“Based on the bond issuance calendar of the Debt Management Office, there were three additional FGN bond auctions in July, August and September to raise money to part-finance the 2019 Federal Budget while additional issuance of Eurobond is expected in the late part of 2019 or early 2020.
“As the threat of debt vulnerability continues, a coordinated domestic revenue expansion with simultaneous fiscal prudence as suggested in the last MPC meeting still remain the key to addressing the weak fiscal position of the economy.”
More Details: It was gathered that the Federal Government’s domestic debt outstanding grew by N1.26tn to N13.41tn as of June 2019, higher than the figure recorded in June 2018. This information is according to Central Bank’s half year report on Federal Government’s domestic debt.
The report explained that the debt stock for the period of under review consisted of Federal Government bonds worth N9.69 trillion or 72.26%, Nigerian Treasury Bills worth N2.65 trillion or 19.77% and FRN Treasury Bonds of N125.99 billion or 0.94%.
Others include FGN promissory notes of N707.76 billion or 5.28%, FGN Sukuk worth N200 billion or 1.49%, FGN green bonds worth N25.69 billion or 0.19% and FGN savings bonds of N10.43 billion or 0.08%.
Despite the higher debt stock, the cost of debt servicing decreased by 15.00% to N800.73 billion at end-June 2019, compared to N941.99 billion in the corresponding period of 2018.
Federal Government also disclosed that a whopping sum of N2.45 trillion was set aside for debt servicing, in its 2020 Appropriation Bill.
Reacting to the development, the President, Chartered Institute of Bankers of Nigeria, Uche Olowu, warned that newest trend of debt servicing is a warning signal. He also noted that if the expected impact outcome fails to come into fruition, things may only get worse.
Sam Nzekwe , a former President of the Association of National Accountants of Nigeria, (ANAN) said: “Amount for debt servicing is disturbing because when you spend about a quarter on debt servicing, the government must think twice, especially when you are funding the budget through loan. We need to see how to increase investment in capital project.