Nigeria 's total external debt stood at $5.6 billion, its domestic debt was N5.3 trillion ($34.4 billion).
The Debt Management Office (DMO) has put Nigeria’s total debt ( external and domestic debt) as at the end of September this year, at $40 billion.
Director-General, DMO, Dr. Abraham Nwankwo, who disclosed this at the weekend in an interactive session with journalists in Lagos, however allayed fears that the country’s debt profile had risen astronomically.
A breakdown of the figure by Nwankwo, showed that whereas the country’s total external debt stood at $5.6 billion, its domestic debt was N5.3 trillion ($34.4 billion).
He argued that the total debt figure at 19.6 per cent of the nation’s Gross Domestic Product (GDP), was sustainable.
Nwankwo explained: “Now, the global standard for all countries that are in our peer group is that you total debt to GDP should be about 40 per cent.
That is the global standard. We did not set the standard and we are at 19.6 per cent. So, if you ask me, I will say that in view of the benchmark, we are doing very well in terms of being comfortable to be within the sustainable limit. However, even though the global standard is 40 per cent, Nigeria had set for itself, a limit of 25 per cent. So even if you look at that, we are still below the standard we set for ourselves.
He however added: “Our plan is that Nigeria should not reach 25 per cent, even by 2015 and then we can look at the figures again and see whether we have improved in our ability to manage resources better before we can borrow additional resources.”
He further explained that when analysing the debt of any country and particularly Nigeria, the debt level should always be related to another variable.
“You relate debt stock to the GDP, you relate debt service to your export earning, relate debt service to your revenue. So, with that, you get the appropriate sovereignty ration, liquidity ratio, because if you don’t do that, you take a wrong decision.
“I challenge you to go and look at Nigeria’s GDP five years ago, either in nominal or real terms and look at the GDP currently. You have to relate the resources to the level and volume of economic activities. So, when you look at Nigeria’s domestic debt, it is not too big. It has grown because when you relate it to the GDP, it is about 16 per cent and when you add that to the external ratio which is about 2 per cent, it gives your 19.6 per cent. So we are stable,” Nwankwo declared.
Responding to question on the high demand for bond by state governments, the DMO helmsmen said that for any state to issue such debt instrument, there are certain criteria and conditions that must be met.
He however challenged the Securities and Exchange Commission (SEC) , government agencies responsible for project monitoring, civil society groups and individuals in the country to ensure that funds raised by states, are properly utilised for the projects that had been indicated in the prospectus before such funds were raised.
L-R: Sanusi,Christine Lagarde (C), Okonjo_Iweala in Lagos (AFP/IMF, Stephen Jaffe)
“Amongst other things, for a state to borrow, its total debt service deduction is established. That is, the amount of debt owed by state that is being deducted from their revenue –particularly from their Federation Account Allocation Committee (FAAC) revenue, to service the debt.
“Now, the rule is that your (states) total monthly debt service deductions should not be more than 40 per cent of your FAAC allocation average for the past 12 months. So, you can see that states do not just go to the debt market and borrow nor do they just go to the bank and borrow. There is a serious level of control and they must follow certain guideline,” he added.