The Debt Management Office (DMO) has issued a warning to the Federal Government of Nigeria against further borrowing, stating that 73.5% of the revenue generated this year will be used to service debt. The DMO expressed concern that the projected Debt Service-to-Revenue ratio of 73.5% for 2023 is high and poses a threat to debt sustainability. Consequently, the DMO advised the government to focus on increasing revenue generation.
The DMO’s analysis of the nation’s debt profile in 2022 also revealed that the Total Public Debt-to-GDP ratio is projected to increase to 37.1% in 2023, compared to 23.4% as of September 2022. This increase is attributed to new borrowings of N8.80 trillion planned for 2023, FGN Ways and Means at the Central Bank of Nigeria (CBN) amounting to over N23 trillion, and estimated Promissory Notes issuance of N2.87 trillion.
The DMO’s recommendations to the government include the need to adhere to existing legislation on government borrowing, such as the Fiscal Responsibility Act 2007 and the Central Bank of Nigeria Act 2007, in order to moderate the growth rate of public debt. They also emphasize the importance of revenue generation through initiatives and reforms, encouraging private sector participation in infrastructure projects through Public-Private Partnerships (PPP), and reducing borrowing through privatization or the sale of government assets.
In summary, the DMO has cautioned against additional borrowing due to the high Debt Service-to-Revenue ratio and has advised the government to focus on increasing revenue generation and exploring alternative sources of funding for infrastructure projects.