DEBT MANAGEMENT OFFICE, DMO, WARNS FEDERAL GOVERNMENT AGAINST ADDITIONAL BORROWING.

The Debt Management Office, DMO, has issued a warning to the Federal Government, FG, against additional borrowing, citing that 73.5% of this year’s revenue will be used to service debt. According to the DMO, this
high Debt Service-to-Revenue ratio is unsustainable and poses a threat to debt sustainability.

The DMO recommended that the FG focus on increasing revenue generation to achieve a sustainable Debt Service-to-Revenue ratio. It suggested raising the projected FGN revenue from ten point five trillion naira to about sixteen trillion naira. These recommendations were made after analyzing the nation’s debt profile in 2022.

DMO’s analysis revealed that the Total Public Debt-to-GDP ratio is projected to increase to thirty-seven percent 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%.

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 The DMO’s warning serves as a reminder of the challenges posed by Nigeria’s high debt burden.