Experts reveal how to tackle national debt challenge

Experts indicated on Sunday that continuing to implement ongoing fiscal and monetary reforms, as well as redesigning the national debt issuing plan, will help to reduce Nigeria’s public debt.

Some analysts who reacted to the weekend revelation of new national debt data noted that while debts are inescapable, a rearrangement of the issuing framework and ongoing reforms might make national debts more impactful and less oppressive.

The Debt Management Office (DMO), which oversees issuance and management of Nigeria’s sovereign debts, released its latest report, showing that the country’s public debts rose from N87.91 trillion in third quarter 2023 to N97.34 trillion or $108.23 billion in fourth quarter of 2023. This represented an increase of 10.7 per cent or N9.43 trillion within the three-month period.

The public debt included N59.12 trillion domestic debts and N38.22 trillion external debts. The increase was mainly due to new domestic borrowing by the Federal Government to finance deficit in the 2023 Appropriation Act. Nigeria has been issuing sovereign debts at the domestic market on monthly basis to augment revenue shortages.

Finance and economy experts agreed that the nation’s debt outlook remains manageable, especially in the light of ongoing reforms to improve the efficiency of national revenue generation and enforce the sanctity of the mandate and independence of the Central Bank of Nigeria (CBN).

They called for a redirection of the bond issuance strategy from largely general-purpose, revenue bonds to project-tied issuances, with outlined and assessable benefits of the issuance and project to the Nigeria’s overall development.

Professor of Capital Markets and President, Association of Capital Market Academics in Nigeria, Uche Uwaleke said incurring debt is almost inevitable for a country, especially a developing one like Nigeria, but the debt strategy and overall economic management will to a large extent determine whether the debt is a burden or a catalyst.

According to him, it will be difficult for a developing country like Nigeria to achieve strong and sustainable growth without borrowing, given the low revenue to Gross Domestic Product (GDP) ratio and the country’s huge infrastructure gap.

“Against this backdrop, the best approach to deal with the debt challenge is to ensure that borrowing is long-term, from concessional sources, and loans should be tied to self-liquidating projects.

“Over the years, we have relied so much on general-obligation bonds in contracting domestic debt, and this has largely contributed to the present debt burden. Going forward, effort should be made to use more of infrastructure bonds such as Sukuk, which are project-tied,” Uwaleke said.”

 

(Nation)