Abuja borrows new N5.3tr, shooting total debt above N42.84tr
By Jeph Ajobaju, Chief Copy Editor
Abuja exceeded its borrowing target by N1.26 trillion in the first eight months of the year to August (8M 2022), increasing both domestic and foreign loans which had totalled N42.84 trillion in the second quarter (Q2 2022).
A copy of the public presentation of the proposed 2023 budget by Finance Minister Zainab Ahmed shows the federal government plans to borrow N6.10 trillion in 2022, broken down as follows:
- Domestic sources – N3.53 trillion
- Foreign sources – N2.57 trillion
The government planned to borrow N4.07 trillion in 8M 2022 but accumulated N5.33 trillion debt, up by N1.26 trillion.
- Domestic loans – N4.82 trillion
- Foreign loans – N510.21 billion
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Borrowing from CBN
Domestic debt includes loans from the Central Bank of Nigeria (CBN) through Ways and Means Advances; facilities through which the CBN finances government budget shortfalls.
The government in 8M 2022 borrowed N4.61 trillion from the CBN, the provider of most of its domestic loans, per reporting by The PUNCH.
But the CBN warns on its website that Abuja borrowing from it could have adverse effects on monetary policy to the detriment of domestic prices and exchange rates.
“The direct consequence of central banks’ financing of deficits are distortions or surges in monetary base leading to adverse effects on domestic prices and exchange rates i.e macroeconomic instability because of excess liquidity that has been injected into the economy,” the CBN says.
World Bank warning
The World Bank in November 2021 warned Abuja against financing deficits by borrowing from the CBN because it puts pressure on Nigeria’s expenditure.
The warning is often echoed by experts and organisations.
The N22.07 trillion owed the CBN is not part of Nigeria’s debt which, according to the Debt Management Office (DMO), reached N42.84 trillion in Q2 2022.
DMO data also shows Nigeria’s debt rose by N30.72 trillion in the seven years between July 2015 and June 2022.
The debt, which was N12.12 trillion on 30 June 2015, jumped 253.47 per cent to N42.84 trillion by 30 June 2022.
Abuja plans to borrow N8.4 trillion in 2023.
