•Says Nigeria’s total debt stock dipped by 15% in dollar term
•Puts outstanding Ways and Means at N3.4tn
•DMO: FX, interest rates, securitisation of Ways and Means pushed up public debt
•Multilateral creditors owed $20.82bn, China $5bn
CHIGOZIE AMADI
Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, yesterday, painted an optimistic outlook of the country’s economy, saying it has been revamped, citing what he called positive trends in key economic indicators.
Edun made the submission while speaking to reporters at State House, Abuja, after the Federal Executive Council (FEC) meeting chaired by President Bola Tinubu.
The minister’s declaration came as the Debt Management Office (DMO) explained that the ongoing economic reforms by the federal government, which had impacted foreign exchange (FX) and interest rates, partly contributed to the latest spike in public debt stock. DMO alluded to the depreciation in the official naira exchange rate, from N899.39/$ in Q4, 2023 to N1,330.26/$ in Q1, 2024.
Edun explained the worrisome indices that had beclouded the true state of the economy, and said the administration had straightened out practices that had hitherto burdened the economy.
According to him, the country’s total debt stock in US dollar terms decreased by 15 per cent in the first quarter (Q1) of 2024, a development he described as “very positive”.
He, however, pointed out that when factoring in exchange rate movements and domestic debt issuance, the total debt stock in naira terms, increased by 25 per cent.
Edun stressed that the government’s revenue collection mechanism had been robust due to technology-driven initiatives, adding that expenditure controls are also being implemented.
He stated that the federal government had not relied on Ways and Means advances to fund its operations, a departure from past practices.
The minister highlighted that the current administration inherited a legacy of N22.7 trillion in outstanding Ways and Means, which were being audited and securitised. He further explained that despite this, the current Ways and Means deficit stood at N3.4 trillion, which was offset by operating surpluses from revenue-generating agencies.
According to the minister, “I gave the council a verbal briefing that I’m giving now, and I will start by saying that when we interrogate the figures over the first quarter of this year, starting end of December and end of March, if we want to be positive, all we will say is that the glass is half full.
“We are halfway there. If not, we can be negative and try and say the glass is half empty.
“Why do I say this? The debt stock, the total debt stock of Nigeria in US dollar terms fell by 15 per cent. That is very positive, any rating agency, any creditor, any investor looking at that will see it as a positive move.
“We’re a country that has petro-dollars. We have ability to earn in dollars. So it’s highly relevant that we look at what is our exposure in dollar terms. On the other hand, given the exchange rate movements, even though there was like an N8 trillion increase in actual debt issuance, the total debt stock, when you count domestic debt, which, as I said, there was increase in issuance. When you count the total external debt and domestic debt in naira terms, it has increased by 25 per cent.
“That’s mainly due to the foreign exchange movement, which can change tomorrow, as we know. Linked to that is the all-important question of the government’s capacity to pay its way, debt.”
Edun maintained, “Credit is all about the revenue to service and, of course, to use those funds properly, judiciously, accountably and in a way that gives positive returns.
“I can say quite categorically that under President Bola Tinubu, the federal government does not rely on Ways and Means in order to fund itself. At no time have we gone to Mr. President and requested permission to seek funding from central bank to pay anybody, be it external debt service, be it share capital cash calls, or any other of the liabilities that the government has.
“As with all agencies, we are focused on ensuring that the revenue that is due to the federal government is collected robustly, using technology, avoiding the blockages, which manual processing can cause, and it has led to a very robust revenue effort and likewise, we are implementing expenditure controls, also very ably empowered by technology.
“So within that context, what we have is that we had legacy. Mr. President inherited a legacy of N22.7 trillion in outstanding Ways and Means, which have been securitised on the eve of the entry of President Tinubu’s administration.
“Naturally, we are auditing, we’re doing a forensic audit and interrogating that figure, because it’s a liability which we have to pay interest on…But as a matter of fact, the current Ways and Means deficit is N3.4 trillion.”
The minister also explained, “As I said, we collect the operating surpluses of revenue generating agencies by law under the Fiscal Responsibility Act and other legal guidelines and when we look at how much is outstanding, and how much is owed, we are actually positive.
“The amount that is owed and that we are claiming far outweighs the N3.4 trillion in Ways and Means and as I’ve said before, we do not rely on Ways and Means to pay salaries.
“We don’t rely on it to pay external debt servicing or other obligations. That is the situation, the finances of Nigeria have been revamped.”
Hower, DMO said the ongoing economic reforms by the federal government, which had impacted foreign exchange (FX) and interest rates, partly contributed to the latest spike in public debt stock, citing the
depreciation in the official naira exchange rate from N899.39/$ in Q4, 2023 to N1,330.26/$ in Q1, 2024.
According to the latest figures released last weekend, total public debt, comprising that of the federal government, the 36 states of the federation, and the Federal Capital Territory (FCT), stood at N121.67 trillion as of March 31, 2024, compared to N97.34 trillion in December 31, 2023 (Q4, 2023). This represents an increase of N24.33 trillion in the country’s debt portfolio within three months (January to March 2024).
DMO, in a statement issued yesterday, said it was important to recognise the fact that Nigeria had undergone some major reforms, which had impacted economic indices, such as the dollar/naira exchange rate and interest rates.
The statement, titled, “Explaining the Q1 2024 Public Debt Data,” read, “The Total Public Debt Data as at March 31, 2024 (Q1, 2024), showed that the total public debt in Naira terms stood at N121.67 trillion compared to N97.34 trillion as at December 31, 2023 (Q4, 2023).
“While detailed information was provided on the data, such as the split between external and domestic debt, as well as the fact that the debt stock includes the domestic and external debt stock of the 36 states and the Federal Capital Territory, it has become imperative to provide some explanations.
“It is important to recognise the fact that Nigeria has undergone some major reforms, which have impacted economic indices, such as the USD/Naira Exchange Rate and Interest Rates. These two, in particular, affect the Debt Stock and Debt Service.”
DMO explained that returning to the trend in the total debt data between Q4 2023 and Q1 2024, the increase in naira terms of N24.33 trillion was being misinterpreted as New Borrowing.
According to the agency, only N2.81 trillion
of the new debt stock emanated from New Borrowing as part of the N6.06 trillion New Domestic Borrowing captured in the 2024 Appropriation.
The DMO added that another New Domestic Borrowing of N4.90 trillion was part of the securitisation of the N7.3 trillion Ways and Means Advances approved by the National Assembly.
It stated, “The amount actually represents New Borrowing of N2.81 trillion as part of the New Domestic Borrowing of N6.06 trillion provided in the 2024 Appropriation Act, New Domestic Borrowing of N4.90 trillion as part of the securitisation of the N7.3 trillion Ways and Means Advances approved by the National Assembly, as well as, the depreciation in the official Naira Exchange Rate from USD/899.39 in Q4, 2023 to USD/N1,330.26 in Q1, 2024.
“Consequently, whereas, the Total External Debt Stock was relatively flat at USD42.50 billion and USD42.12 billion in Q4, 2023, and Q1, 2024, respectively, the naira values were significantly different at N38.22 trillion and N56.02 trillion respectively, representing a difference of N17.8 trillion.
“This explains the perceived sharp increase of N24.33 trillion in the total debt stock in Q1 2024. The difference in the Exchange Rate for the two periods also explains why in US Dollar Terms, the Total Debt Stock actually declined in Q1, 2024 (USD91.46 billion) when compared to Q4, 2023 (USD97.34 billion).”
While the debt stock was growing, DMO pointed out that it should be understood that this was coming from approved new external and domestic borrowing, as well as the securitisation of the Ways and Means Advances.
The various measures to attract foreign exchange inflows should increase external reserves and support the naira exchange rate, it stressed.
Meanwhile, the latest debt figures showed that Nigeria’s multilateral debt obligation stood at $20.82 billion or 49.45 per cent of the $42.115 billion external debt burden as of March 31, 2024.
Multilateral debts are those owed to international creditors, such as the World Bank Group (WBG), International Monetary Fund (IMF), African Development Bank (AfDB), Islamic Development Bank (IsDB), International Fund for Agricultural Development (IFAD), and European Development Fund (EDF), among others.
Latest data released by DMO showed that
Nigeria’s total external debt obligation to multilateral agencies stood at $20.82 billion at the end of March 2024. Of this amount, the World Bank Group, comprising the International Development Association (IDA) and International Bank for Reconstruction and Development (IBRD), accounted for $15.102 billion, followed by IMF at $2,032 billion, and the AfDB Group with $1.628 billion.
The latest DMO data actually indicated that Nigeria’s external debt obligation posted a decline in real terms, despite recent borrowings by the federal government.
While the external debt stock stood at $42.495 billion as of December 31, 2023, it declined to $42.115 billion as captured in the latest figures of March 31, 2024, indicating a decline of about $380 million.
China remains Nigeria’s biggest bilateral creditor, with debt in excess of $5 billion out of an aggregate bilateral debt burden of $5.9 billion or 14 per cent of the nation’s external debt load.
Commercial loans (Eurobonds) accounted for 35.9 per cent of Nigeria’s external debt obligation during the review period of March 31, 2024.
Approximately N1trillion (N989,242,923,163.46) went into domestic debt service between January and March 2024 (a period of three months).
Interest on FGN Bonds, totalling N796. 938 billion (N796,938,801,773.36) took the lion’s share of the debt service burden, followed by Nigerian Treasury Bills (NTBs) at N96,512,153,923.49.
