Against the backdrop of the recent comments on Nigeria’s debt profile, the Debt Management Office (DMO) yesterday explained the country’s debt is on the increase due to low revenue, as well as increasing interest rates in the domestic and international markets.
Mrs. Patience Oniha who is the DMO Director General made this known when she appeared before the House of Representatives Committee on Aids, Loans and Debt Management to defend the agency’s 2023 budget proposal on Monday.
Oniha also explained to the lawmakers that the government also borrows directly from the Central Bank of Nigeria ( CBN), under a system known as ‘ways and means’, stressig that this has also increased the cost of debt serving.
Read Also: DMO Puts Nigeria’s Debt Profile At ₦25.7trn
She also clarified that by the end of December, this year, the cost of debt services will be higher than what was budgeted in 2022, because of the interest on the ‘Ways and Means’.
According to her, ‘there is a new line called Ways and means advances. This is a process where the Federal Government borrow from the Central Bank directly. It is when the government runs an overdraft with the Central Bank. It is not free, you pay interest on it. For clarity, the ways and means advance is under the management of the Office of the Accountant General but supervised by the Minister of Finance.
‘In 2022, no provision was made for payment of interest on ways and means. But if you look at the actual, you will discover that some amount has been incurred on ways and means advances. It is not free. So, we pay interest.’
Furthermore, Oniha said ‘For domestic debt, the budget (2022) was N2.5 trillion, but we have spent N1.86. External debt is N866 billion compared to N1.123 trillion. These figures are for three quarters.
‘On the sinking fund, we have N286 billion, while ways and means advances which were not provided for in the budget, the Central Bank has charged over a trillion naira as interest.
‘That is why in the MTEF/FSP, you discover that revenue to debt service was very high. For January to April, we actually exceed 100 per cent of revenue. So, apart from revenue being very low, there is this issue of ways and means advances.
‘So, by the end of December, debt services will be higher than what was budgeted, largely because of ways and means advances.’
Africa Today News, New York reports that there has been recent outrage against the rising debt profile of Africa’s most populous country.