The Director-General of the Debt Management Office, Patience Oniha, has said borrowings by countries to finance budget deficits and critical infrastructure is not necessarily a bad idea.
The DG disclosed this in an interview with the News Agency of Nigeria on Thursday in Lagos, while speaking during an awareness programme on security issuance organised by the Debt Management Office (DMO).
According to her, government borrowings were done by all countries across the world, mostly to finance critical infrastructure, the multiplier effects of which could not be overemphasised.
Oniha reckoned that successive Nigerian governments have had to recourse to borrowing to fund budget deficits, adding that annual budgets would be affected if funds were not raised to support them.
“The issue of debt has become topical in Nigeria that sometimes it almost looks as if borrowing is an offence or a crime. The first thing we must understand is that countries across the world borrow, be it poor countries, advanced countries, developed countries, emerging markets, they all borrow.
“We usually hear complaints that debt levels are rising in Nigeria. Globally, debt levels are rising – not just in Nigeria,” she remarked, stressing that the advent of COVID-19 had also made borrowing imperative for many countries, regardless of size, population, or economic growth.
“What has happened with COVID-19 is that countries needed to spend more, not only on health needs but on social needs as well, because we need to take care of the people who are losing their jobs. We need to create incentives for the private sector to continue operating in order to avoid a big recession because most countries experienced (recession).
We did as well, but we came out of it after two quarters. Government spending is one of the tools you can use properly to exit a recession,” she affirmed.
The DMO boss clearly made a case for the Federal Republic of Nigeria with regards to financing budget deficits, financing specific projects and services like railways, roads, airports, et al., opining that infrastructural financing is in “itself an economy”, capable of creating enormous jobs across all sectors in the country.
“We also borrow to finance maturing loan obligations like the Federal Government of Nigeria bonds and Nigeria Treasury Bills,” Oniha said, observing, however, certain statutory norms regulating government’s borrowings at various levels and guarding against fiscal impropriety arising from the process.
“The Fiscal Responsibility Act states that borrowing should be for capital purposes and for human capital development.
“The DMO Act is also clear, especially on external borrowings. No arm of government can borrow on its own. It has to conform with those provisions and pass through the Federal Executive Council and the National Assembly,” the DG spotted.
Recently, some stakeholders in Nigeria have raised a stink over the country’s rising debt profile, with some sending strong notes of an ‘impending storm’, as food prices soar even annoyingly higher to the chagrin of the masses, whilst the nation keeps lumbering to meet its local demand for food, staggered by inadequacies, insecurities and most recently the Russia-Ukraine global crisis, which had led to a surge in food prices in most parts of the world.
The DMO had earlier revealed that the country’s total debt stock as of December 2021, was pegged at a whopping N39.55 trillion, vaticinated to hit N45 trillion 2022, just as the government planned to borrow an additional N6.39 trillion to finance the 2022 budget deficit.
Oniha had explained that the overall deficit in the 2022 budget was N6.30 trillion, representing 3.46 per cent of the country’s Gross Domestic Product.
She observed that the budget deficit was to be financed mainly by borrowings from both domestic and foreign sources including privatisation proceeds.
“About N2.57 trillion will come from domestic sources; N2.57 trillion from foreign sources; N1.16 trillion from multilateral and bilateral loan drawdowns, and N90.7 billion from privatisation proceeds,’’ she revealed.