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The nation’s debt has climbed to more than a five-year high at $47.9 billion (about N7.47 trillion) after it was restructured by former President Olusegun Obasanjo. The real worry is that it might take more than 13.4 years for the Federal Government to finish paying both external and domestic debt going by the trend in debt servicing between 2006 and 2010.
According to the report of the annual national debt sustainability analysis for 2011 by the Debt Management Office (DMO) made available to LEADERSHIP, “Under the optimistic Scenario, designed within the framework and aspirations of Nigeria’s vision 20:2020, Nigeria could borrow up to $57.4 billion (N8.95 trillion) in 2012 and still remain within sustainable limits”.
That means Nigeria currently owes about $47.9 billion.
DMO’s argument is that a debt stock of $57.4 billion would amount to 20 percent of projected nominal Gross Domestic Product (GDP) ($277 billion) as at 2012.
The confidence of the DMO lies in the fact that at that level next year, Nigeria’s debt will be five percent below the country-specific debt/GDP threshold of 25 percent set for 2010 to 2014, and below the global threshold of 40 percent of GDP.
It however warned that, “this outcome should be applied with caution due to the ambitious assumptions used in the simulations, such as high and steady oil price; robust GDP growth rate; single digit inflation rate; low budget deficit; among others”.
On that cautious note, the report said another module of Country-Specific prudential ceiling versus available borrowing space was considered.
“The Country-Specific threshold of debt/GDP ratio is set at 25 percent for 2010 – 2014, which is projected to reach 22.2 percent by the end of 2011, thereby leaving only 2.8 percent borrowing space for the rest of the period till 2014.
But the worrying part is the fact that government appears to be finding it difficult to pay debts. Between 2006 and 2010, the DMO said the Federal Government paid an average of $2.2 billion, about N343.2 billion yearly.
If the debt as at 2010 is anything to go by, then the Federal Government alone would spend over 13 years in debt servicing, outside the additional ones that would accrue. According to the total public debt stock (external and domestic debt of the federal and state governments) stood at $40.1 billion as at 2010 ending.
During the year, the Federal Government alone accounted for 76.09 percent of the total debt stock at $30.51 billion, while the states accounted for 12.48 percent of total debt or $5.01 billion, and the proportion of external debt to total debt was 11.42 percent or $4.58 billion.?