THUR, JUNE 22 2023-theGBJournal |The analysis of the results of 2022 MAC-DSA shows that the Total Public Debt-to GDP ratio is projected to increase to 37.1 percent in 2023 relative to 23.4 percent as at September 2022, says the Debt Management Office (DMO), Nigeria, in its latest report of the annual national market access country (MAC) debt sustainability analysis (DSA).
The increase will be driven by the inclusion of the N8.80 trillion (New Borrowings) for the year 2023, the FGN Ways and Means at the CBN of over N23 trillion and estimated Promissory Notes issuance of N2.87 trillion in the Debt stock under the Baseline Scenario.
”The Country’s Debt stock remains sustainable under these criteria,” the DMO notes, ”but the borrowing space has been reduced when compared to the Nigeria’s self-imposed debt limit of 40 percent set in the MTDS, 2020-2023.”
The report said the FGN Debt Service-to-Revenue ratio at 73.5 percent in 2023 exceeds the recommended threshold of 50 percent due to low revenue, ”which means that there is need to significantly increase Government revenue.”
”Under the Alternative Scenario, the Total Public Debt-to-GDP ratio at 45.4 percent in 2023 exceeds the Nigeria’s self-imposed debt limit of 40 percent, while the FGN Debt Service-to-Revenue also exceeds the recommended threshold of 50 percent.”
Based on the analysis of the MAC-DSA, the DMO said, although the Baseline analysis projects Total Public Debt-to-GDP ratio at 37.1 percent for 2023 indicating a borrowing space of 2.9 percent (equivalent of about N14.66 trillion) when compared to the self-imposed limit of 40 percent, it is recommended that this should not be used as a basis for higher level of borrowing as was the case in the 2023 Budget because the outcome of the Shock Scenario, which is more realistic in the circumstances, exceeded the self-imposed limit.
According to the debt management office, attaining a sustainable FGN Debt Service-to-Revenue ratio would require an increase of FGN Revenue from N10.49 trillion projected in 2023 Budget to about N15.5 trillion.
The DMO in its recommendations said:
”With respect to expansion in fiscal deficit, there is need to strictly adhere to the provision of extant legislations on Government borrowing, especially the Fiscal Responsibility Act 2007 and Central Bank of Nigeria Act, 2007 as it relates to Ways and Means Advances, in order to moderate the growth rate of public debt.
There is urgent need to pay more attention to revenue generation by implementing far
reaching revenue mobilization initiatives and reforms including the Strategic Revenue Growth Initiatives and all its pillars with a view to raising the country’s tax revenue to GDP ratio from about 7 percent (one of the lowest in the world) to that of its peer.
Government should encourage the private sector fund infrastructure projects through the
Public-Private Partnership schemes and take out capital projects in the Budget that are being funded from borrowing, thereby reduce budget deficit and borrowing.
Government can reduce borrowing through privatization and/or sale of Government assets.”
Scope of Debt Coverage
The 2022 MAC-DSA exercise used the Gross Public Debt, that is, the General Government Debt, comprising the External and Domestic Debts of the FGN, thirty-six (36) States and the Federal Capital Territory (FCT).
Under the Baseline, the FGN Domestic Debt stock includes the FGN Ways and Means Advances at the CBN in the sum of N22.72 trillion (which has now been approved by the National Assembly) and the additional N1.0 trillion in 2022 Supplementary Budget, totaling N23.72 trillion.
Also, included in the FGN Domestic Debt under the Baseline are contractual arrears and judgement debts of about N2.87 trillion that are being considered for possible clearance through issuance of Promissory Notes in 2023.
The FGN’s contingent liabilities, including Guarantees in the sum of N4.58 trillion as of December 2021 was considered in the Alternative Scenario.
Twitter-@theGBJournal|Facebook-the Government and Business Journal|email:gbj@govbusinessjournal.com| govandbusinessj@gmail.com
