The Debt Management Office (DMO) has issued a warning to the Bola Tinubu-led Federal Government (FG) against additional borrowing.
OsunDailyNG reports that the DMO gave the warning on Thursday following an analysis of the nation’s debt profile in 2022.
The DMO advised the federal government to focus on increasing revenue generation, stressing that 73.5% of this year’s revenue will be used to service debt.
It asserted that attaining a sustainable Debt Service-to-Revenue ratio will require increasing revenue from N10.49 trillion projected in the 2023 budget to about N15.5 trillion.
The agency added that the government can reduce borrowing through privatization and/or the sale of government assets.
DMO’s analysis revealed that the Total Public Debt-to-GDP ratio is projected to increase to 37.1% in 2023, mainly due to new borrowings, FGN Ways and Means at the CBN, and estimated Promissory Notes issuance.
While the baseline scenario indicates that the debt stock remains sustainable, the borrowing space has been reduced compared to the self-imposed debt limit of 40%.
The projected FGN Debt Service-to-Revenue ratio of 73.5% for 2023 exceeds the recommended threshold of 50% due to low revenue. This highlights the urgent need to significantly increase government revenue.
The DMO emphasized the importance of adhering to existing legislation on government borrowing, such as the Fiscal Responsibility Act 2007 and the Central Bank of Nigeria Act 2007, to moderate the growth rate of public debt.
Furthermore, the DMO called for a focus on revenue mobilization initiatives and reforms to increase the country’s tax revenue to GDP ratio.
It also suggested encouraging private sector involvement in funding infrastructure projects through Public-Private Partnerships (PPP) and reducing borrowing by privatization or sale of government assets.
