How Nigeria Borrowed N3.5 Trillion In 21 Months and Why You Should Be Worried

The Federal Government said it borrowed N3.57tn between June 2015 and March 2017 to finance budget deficits.

Details of the figure emerged Tuesday after an enquiry by Punch Newspaper, which was addressed to the Minister of Finance, Mrs. Kemi Adeosun, under the Freedom of Information Act.

The enquiry sought to ascertain the specific projects that the borrowed funds were used to execute.

Here is what the Debt Management Office said:

- the domestic borrowing was not tied to any specific projects but warehoused in the Consolidated Revenue Fund Account with the Central Bank of Nigeria for funding budget deficit

- the foreign loans were tied to specific projects.

Nigeria's rising debt profile:

Statistics obtained from the DMO showed that the Federal Government’s domestic component of the national debt rose from N8.39tn as of June 2015 to N11.97tn by March 2017. This means that the domestic debt of the Federal Government rose by N3.57tn within the period.

According to the 2016 Appropriation Act, the Federal Government budget deficit for 2016 amounted to N2.22tn, while the deficit for 2017 amounted to N2.36tn. For 2015, the budget deficit stood at N755bn or 0.79 per cent of the Gross Domestic Product.

How Government Borrow:

On monthly basis, the Federal Government uses a number of instruments to borrow money from the debt market.

These include FGN Bonds, the Nigerian treasury bills and the Nigerian treasury bonds. It recently added a new instrument to the pack, the FGN Savings Bond.

Of the Federal Government’s domestic debt of N11.97tn as of March 31, FGN Bonds accounted for N8.18tn or 68.31 per cent; Nigerian treasury bills accounted for N3.6tn or 30.08 per cent; Nigerian treasury bonds, N190.99bn or 1.6 per cent; while the FGN savings bond accounted for N2.07bn or 0.02 per cent.

The nation’s domestic debt stood at N19.16tn as of March 31, 2017.

According to the DMO, the official exchange rate of N306.35 to $1 was used in calculating the country’s external debt for March 31, 2017.

The domestic debt component of the states stood at N2.96tn as of March 31, 2017, up from the figure of N1.69bn as of March 31, 2015.

Should we worry?

Within the period of two years of President Muhammadu Buhari's led administration, the domestic debt of the states rose by 75.15 per cent.

With drying revenues from oil and gas, shortage in foreign exchange earnings, the government in the last two years has increasingly depended on borrowing even to carry out routine responsibilities.

Although foreign debts are seen as cheaper than domestic debts, the government has increasingly depended on local debts as foreign donors place more stringent conditions on its path.

The debt are accrued for future generations and yet, the government keeps using various instruments to extend its borrowing stretch.