Finance experts contradict FG over increase in debt stock

By Babajide Komolafe & Yinka Kolawole
A fresh controversy may have emerged over the true state of borrowings and indebtedness of the Nigerian government since inception of President Buhari’s regime in 2015 with BudgIT Foundation contradicting the Vice President, Prof. Yemi Osinbajo on actual figures.

BudgIT Lead Partner, Oluseun Onigbinde

Contrary to Osinbajo’s position that the government has borrowed only $10 billion in the past three years, BudgIT, a fiscal policy monitor house, has given a breakdown that indicated that actual borrowings in the past three years is about $22 billion.

Vice  President Yemi Osinbajo has said the Buhari-led administration inherited a debt of $63 billion and has only borrowed $10 billion since it took office in 2015.

Speaking at the 9th Public Lecture of Sigma Club at the International Conference Centre, University of Ibadan, last weekend, Osinbajo stated: “In 2010, our debt was $35 billion, $41 billion in 2011, $48 billion in 2012, $64 billion in 2013, $67.7 billion in 2014, $63.8 billion in 2015, $57.8 billion in 2016, $70 billion in 2017 and $73 billion in 2018”

“The nation’s debt as at today is $73 billion, an increment of $10 billion from the $63 billion inherited in 2015.”

However, in a statement yesterday by Niyi Soleye, Human Resources Manager, BudgIT, the organisation noted that while the external debt rose by $10.49 billion from $7.34 billion in June 2015 to $17.83 billion in June 2018, domestic debt increased by N3.76 trillion from N8.39 trillion to N12.15trillion within the same period, amounting to about $12 billion at an exchange rate of N305/$.

BudgIT stated further: “It is important to deconstruct the Federal Government debt into external and domestic debt to get a full understanding for purposes of accountability. The total FG Debt Stock totals the sum of External Debt and Domestic Debt.  The Debt Management Office figures showed that FG external debt alone grew from $7.34 billion in June 2015 to $17.83 billion in June 2018, that’s an additional $10.49 billion in 3 years.

Zainab Ahmed

“Domestic debt of FG as at June 2015 was N8.39 trillion while it stood at N12.15 trillion as at June 2018. That’s another increase of N3.76 trillion in 3 years. At an exchange rate of N305/$, that’s $12 billion. This means the total increase in external and domestic debt is $22 billion.

“It is public knowledge that the Naira was devalued in recent years, and this singular act shrunk and expanded a lot of indexes. Those who put forward $10 billion are comparing the wrong values without adding the important information that exchange rates for the times are different. From our research, we have observed that this administration (FG alone) borrowed $22 billion in three years but due to naira devaluation gains total public debt stock (for the entire Federation) increased by $10 billion, which makes current claims true.

“However, it is important to state that it is true that public debt is now $73 billion, grew by $10 billion, because FG domestic debt in USD terms was $42.63 billion in June 2015 and $39.75 billion as at June 2018.

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“This does not mean that FG borrowed less domestic debt in 3 years. It only goes to show that the domestic debt of FGN grew from N8.39 trillion to N12.15 trillion from 2015 to 2018 respectively. Devaluing exchange rate from N196.95/$ to N305.7/$ made the domestic debt in 2018 relatively smaller in USD terms.

“It is important to classify debt into two categories considering that external debt will be paid in USD or other currencies while domestic debt will be settled in Naira. This invariably has consequences for debt servicing costs in the near term.

Bismarck Rewane

“It is hoped that this “marginal” increase in debt in USD terms does not unleash excessive borrowing by the Federation considering that public revenue in USD equivalent has also severely shrunk”.

BudgIT also highlighted the sharp rises in sub-national borrowings in the past three years as well as the impacts of adjustments in exchange rate on overall debt burden.


It stated: “States’ domestic debt rose from N1.69tn in June 2015  to N3.477tn in June 2018. Adjusting this for USD also does not tell the full story. States debt costs are deducted in Naira equivalent at prevailing “official” rates.  “However, devaluation provides adjusted gains especially for monies earned in USD such as oil & gas revenues but losses for those earned in Naira such as CIT & VAT, when converted to USD.

“The devaluation of the Naira has impacted directly on the purchasing power of Nigerians, with income severely shrunk in Naira terms while those who export especially in non-oil sector have seen relative gains”.

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