FG, States, FCT was due N35.5trn June 2021

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With President Muhammadu Buhari’s fresh request to borrow an additional $ 4.054 billion and € 710 million in external loans, the Debt Management Office (DMO) revealed on Wednesday that the federal government, state governments and the Federal Capital Territory (FCT) owed a total of 35,465 billion naira at the end of June 2021.

This is apart from the overdraft of at least 10,000 billion naira by the Central Bank of Nigeria (CBN) which is already long overdue for settlement.

The figure is a 2.358 billion naira increase in debt stock from the end of the first quarter of the year to the end of the second quarter.

The total amount of debt stood at 33.107 trillion naira or 87.239 billion US dollars as of March 31, 2021.

The stock of debt is made up of N13. 711 trillion representing 38.66 percent of the external debt while the domestic debt amounted to 21,754 trillion naira or 61.34 percent of the total.

The federal government represented N11. 828 trillion in external debt and N17. 632 trillion in domestic debt.

External debt of states and CTFs stood at 1,883 billion naira, with an outstanding domestic debt of 4 naira. 122 trillion.

The breakdown of external debt showed that most of the debt was owed to the multilateral (World Bank Group and African Development Bank Group) which accounted for 54.88 percent.

The second highest category was commercial debt (Eurobonds and diaspora bonds) which accounted for 31.88 percent; while bilateral agreements (China, France, Japan, India and Germany) amounted to 12.70 percent and promissory notes to 0.54 percent.

DMO Managing Director Ms Patience Oniha, who made the disclosure in a presentation, said work had already started to add federal government debt to the Central Bank of Nigeria, which stood at around $ 10,000 billion. naira at the start of the process.

“We are working on its recognition, on obtaining the appropriate approvals to include it in the outstanding public debt. Where we are at is getting the necessary approvals to convert it to permanent debt. “

She explained that domestic debts have several advantages by going to the source of funds, including portraying Nigeria to the world in a positive light in international financial markets where large pools of capital are available.

“Sovereign Eurobonds serve as the benchmark on the basis of which several local banks have issued Eurobonds. Among them are Zenith Bank, Access Bank, UBA, FBN, Ecobank Nigeria and Fidelity Bank. This window opened by the sovereign has enabled these Nigerian banks to raise Tier 2 capital to meet regulatory requirements and has strengthened their capacity to lend and support local borrowers.

“The issuance of Eurobonds has been a powerful tool in increasing Nigeria’s external reserves. A healthy level of external reserves supports the exchange rate of the Naira and the sovereign rating of Nigeria.

“Raising funds abroad through Eurobonds to finance budget deficits reduces the level of sovereign borrowing in domestic markets. The advantages are numerous: mitigates the risk of crowding out the private sector (more funds available at moderate rates for other borrowers in the national economy)

“Eurobonds are also listed on Nigeria’s two (2) stock exchanges: The Nigerian Exchange Limited and FMDQ Securities Exchange Limited. This increases the size of these exchanges and the diversity of listed instruments.

“Eurobonds are in fact issued as part of the approved government borrowing plan, usually in the annual budgets of the FGN, to finance investment projects, thereby reducing the infrastructure deficit. “

She advised members of the public to remember that “a huge infrastructure deficit, a recession (twice in the past six years), consecutive budget deficits, a low income base, compounded by dependence on one source – crude oil whose prices collapsed and at one point at the peak of the COVID-19 pandemic had no buyers were the reasons requiring the loans.

According to her, the tax of five percent as a percentage of gross domestic product (GDP) was too low for Nigeria and concerted efforts must be made to increase the country’s income.

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