Following the release by the Debt Management Office (DMO) that Nigeria’s entire public debt stock was N87.4 trillion, stakeholders have called for greater restraint to reduce excessive borrowing at all levels of government.
Recall that the June 30, 2023 report of the DMO consists of N54.1 trillion ($70.3 billion) in domestic debt and N33.3 trillion ($43.2 billion) in external debt.
As of June 30, 2023, the total domestic debt for 36 states and the FCT was N5,815,684,819,242.35.
Reports have also shown that some states borrow money to pay salaries rather than for development projects, according to experts at a stakeholder dialogue on the implementation of Section 45 of the Fiscal Responsibility Act FRA) 2007 in Lagos.
They added that this can impede the growth of the capital market and threaten financial stability, which may put pressure on the federal government to provide financial assistance to ensure the continuation of public services.
George Akume, the Secretary to the Government of the Federation (SGF), asserted that the discussion is not against borrowing, but rather, borrowing done correctly and for the benefit of Nigerians.
He urged government officials at all levels to follow the due process when it came to borrowing.
Akume, who was represented by an official of the office of the SGF, Dr David Eze, however, gave assurance on implementing the recommendations from stakeholders at the forum, while applauding the Fiscal Responsibility Commission (FRC) for carrying out its functions under the FRA 2007, which, among other achievements, has helped to hugely improve the federal government independent revenue by mopping up surpluses in government-owned enterprises.
Section 44 (1) of the Act stipulates that any government in the federation or its agencies and corporations desirous of borrowing shall specify the purpose for which the borrowing is intended and present a cost-benefit analysis, detailing the economic and social benefits of the purpose to which the intended borrowing is to be applied.
The deputy speaker, House of Representatives, Benjamin Kalu, who was represented by the chairman of the House of Representatives Committee on Aids, Loans and Debt Management, Abubakar Hassan Nalaraba, said the stakeholders’ meeting is crucial considering the rate at which state governments are borrowing, just as he stressed the need for them to desist from borrowing for consumption, which, he says, is worsening the country’s inflation.
“We encourage states to stop depending on the federal government and focus on what they can do to boost their internally generated revenue,” he added.
In his remark, Hon Nalaraba averred that billions of dollars come into Nigeria in the form of aid and grants, but that the country has no record of these funds.
“Those grants don’t come into Nigeria without processes and commercial banks are part of the processes. So it is important and imperative for commercial banks to work with the government to make disclosure on how those grants are coming in, for accountability,” he said.
The Executive Chairman of the FRC, Victor Muruako, revealed that in the past two years, the Commission had reviewed some loans contracted at different times by 11 state governments and public institutions across six geopolitical zones of Nigeria, from five local banks,
“We note, with a sense of alarm, that none of these loans passed FRC’s basic test of compliance! This 100 per cent failure rate is enough to warrant a discussion of this nature,” he said.
He claimed that disregarding the FRA’s rules could have serious ramifications for both the banks and the Nigerian economy. Muruako proclaimed.
Asishana Bayo Okauru, the director general of the Nigeria Governors’ Forum (NGF), said that over 25 states had domesticated the basic principles of the FRA addressing fiscal planning and management by passing the Fiscal Responsibility Law (FRL) and 30 states had done the same with debt management laws.
However, Okauru, who was represented by Olanrewaju Ajogbasile, senior programme manager, NGF, promised that the Secretariat would continue to promote the principles and provisions of the Act through engagements, initiatives, and discussions centered on fiscal transparency, accountability, and sustainability.
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