The Federal Government spent a total of N1.54tn to service the country’s debt obligations to local and foreign debtors between January and September last year, a report obtained from the Budget Office has indicated.
The amount is contained in the third quarter 2017 budget implementation report prepared by the Budget Office of the Federation.
According to PUNCH, an analysis of the report showed that the sum of N624.15bn was used to service the nation’s debts in the first quarter while the second and the third quarters had N303.59bn and N613.21bn, respectively.
A further breakdown of the whole amount showed that domestic debt servicing accounted for a huge chunk of the debt service obligations with a total of N1.48tn.
The N1.48tn is about 96.1 per cent of the entire amount spent by the nation in servicing its debt. The foreign debt servicing obligation accounted for the sum of N55.8bn or 3.9 per cent of the entire debt service amount.
The report read in part, “The total debt services in the third quarter of 2017 stood at N613.21bn, signifying N197.24bn or 47.42 per cent increase above the N415.97bn projected for the quarter.
“A quarterly projection of N372bn was made for domestic debt services but the sum of N613.21bn was actually spent in the third quarter of 2017. This portrayed an increase of N241.21bn or 64.84 per cent above the quarterly estimate.
“The sum of N43.97bn was proposed for the servicing of external debt in the quarter under review. External debt service payment was, however, not made during the review period.”
Finance and economic experts who spoke on the development on Friday cautioned the Federal Government against further borrowing.
They stated that the country’s debt profile of N19tn was becoming unsustainable as it might be difficult to service it owing to revenue challenges facing the country.
They advised that rather than continue to rely on borrowing to finance its activities, the Federal Government should adopt other sources of funding the infrastructure needs of the country such as concession, privatisation and public-private partnership arrangement.
Those that spoke with our correspondent in separate telephone interviews are the President, Institute of Fiscal Studies of Nigeria, Mr. Godwin Ighedosa; and the Director-General, Abuja Chamber of Commerce and Industry, Mr. Chijioke Ekechukwu.
Ekechukwu said, “It is expected that the debt profile of a country would rise considering the fact that we have a deficit budget and even the deficit side of the budget was not met in the last budget year.
“With the recession of last year, government would need to continue borrowing to meet the increased size of the deficit. Of course, the borrowing portends danger for the economy because our debt profile is rising and we do not know when we are going to scale it down.”
Ighedosa said while it was not a bad idea to borrow, there was a need for a reduction in government expenditure.
He said, “We have a high fiscal deficit, which can only be funded through borrowing. When you borrow for investment, it improves the position on your balance sheet. But when you borrow for consumption, it can cause problems for the economy as it will affect the level of confidence in the economy from investors because they will assume we can’t manage our economy.
“We already have a debt overhang; and as it is, we are building that up and so there is a need to reduce the rate of borrowing.”