Public Debt Stock Inches to N26.2tn, Inflation Jumps to 11.98%

Patience Oniha
Director-General, the Debt Management Office (DMO), Ms. Patience Oniha

Ndubuisi Francis and James Emejo in Abuja

Total public debt, comprising the federal government’s, those of the 36 states and that of the Federal Capital Territory (FCT), stood at N26.215 trillion as at September 2019, the Debt Management Office (DMO) has stated.

Also yesterday, it emerged that the Consumer Price Index, (CPI), which measures inflation, increased to 11.98 per cent (year-on-year) in December 2019, compared to 11.85 per cent in the preceeding month.

The latest public debt figures released yesterday indicated a 2 per cent growth when compared with the N25.701 trillion recorded as at June 30, 2019.

The DMO Director General,  Ms. Patience Oniha, who unveiled  the figures during an interactive session with journalists in Abuja, said the total debt stock implied that in the 3rd quarter (July to September 2019), a 2 per cent growth was recorded, adding that the debt included Promissory Notes of N821.651 billion which had been issued to settle federal government’s arrears to oil marketers and state governments under the  Promissory Programme approved by the Federal Executive Council and the National Assembly.

A breakdown of the N26.215 trillion debt shows that the domestic component accounted for N17,943.94 trillion, while external debt stood at N8,271.15 trillion.

When compared with the N22,428.80 trillion in the corresponding period of 2018, it shows a 16.88 per cent growth in public debt.

Oniha explained that the ratio of domestic debt to external debt at 69:31 as at September 30, 2019 was an improvement over the ratio of 71:29 as at September 2018, when juxtaposed with the target of 60:40 in the Medium-Term Debt Management Strategy.

“The ratio of long term to short term debt in the domestic debt as at September 2019 was 80:20, which shows that the target of 75:25 had been outperformed by September 2019. Furthermore, it was an improvement over the ratio of 73:23 recorded in September 2018.

“Similarly, total debt as a percentage of GDP of 18.47% as at September 2019 was well within the limit of 25% and fares better in comparison with the debt/GDP ratios of countries such as the United States of America, United Kingdom and Canada with ratios of 105%, 85% and 90%, respectively for the same period.

“However, because they generate adequate revenues, their debt service/revenue ratios for the same period were much lower at 12.5%, 7.5% and 7.5%, respectively when compared to Nigeria’s 51% in 2017,” she explained.

On criticisms of the nation’s increasing borrowing, Oniha said: “Public borrowing is not done by one person. It is not approved by one man. It is a collective decision. So, when we take on this administration as having borrowed, let us bear in mind that borrowing is cumulative and there are rules and regulations about borrowing. There are laws and procedures that must be complied with.

“In fact, that the document must be presented to the National Assembly is in compliance with the Fiscal Responsibility Act and the DMO Act. So, we are complying with the laws on public borrowing.”

According to Oniha, the relatively high level of new borrowing in recent years was triggered by the economic downturn which required increased government spending, stressing that a higher level of borrowing was included in the Economic Recovery and Growth Plan (ERGP) as a strategic tool for stimulating growth, job creation and increasing external reserve.

The DMO DG stressed that the low revenue base of Nigeria relative to its GDP was clearly reflected in the high debt service to revenue ratio, adding that this clearly brings to fore the need for revenues to grow.

“The efforts towards increasing and diversifying revenue such as the passage of the Finance Act and Strategic Revenue Growth Initiative of the Federal Ministry of Finance, Budget and National Planning should thus be supported,” she said.

On the 2020 fiscal year, Oniha said the new borrowings are N850 billion and N744 billion, external and domestic, respectively.

External borrowings, she disclosed, would be sourced from concessionary and semi-concessionary loans due to the lower interest rate and longer tenors, while domestic borrowings will come from federal government bonds, Sukuk, FGN savings bonds and possibly Green bonds.

According to her, any shortfall thereafter may be raised from commercial sources.

Oniha, who explained that the third Sukuk, which is being planned as a source of financing for the 2020 budget, would be in the region of N150 billion and that it would be used to fund 44 road projects, as against 25 in 2017 and 28 in 2018.

She also expressed satisfaction with the introduction of the FGN 30-year Bond in April which she noted, has been a success with well over N500 billion invested by various sectors, particularly insurers.

“The introduction of the 30-year bond was to meet the investment needs of long-term investors such as insurance companies and support the development of domestic financial markets in areas such as mortgages,” she said.

The 30-year bond, she added, also contributed to reducing the refinancing risks of the public debt stock.

Oniha noted that the outcome of the implementation of DMO’s Debt Management Strategy had resulted in many of the targets been achieved.

Meanwhile, the National Bureau of Statistics (NBC) has said the Consumer Price Index, (CPI), which measures inflation, increased to 11.98 per cent (year-on-year) in December 2019, compared to 11.85 per cent in the preceding month.

Food inflation rose to 14.67 per cent in December compared to 14.48 per cent in November 2019. 

According to the CPI figures for December 2019, which was released yesterday by the statistical agency, core inflation, which excludes the prices of volatile agricultural produce also increased to 9.33 per cent compared to 8.99 per cent in the preceding month.

The NBS stated that the rise in the food index was caused by increases in prices of bread and cereals, meat, fish, oils and fats, potatoes, yam and other tubers. 

Also, highest price increases were recorded in hospital services, hairdressing saloons and personal grooming establishments, garments, repair and hire of footwear, vehicle spare parts, passengers’ transport by air, shoes and other footwear.

Others include appliances, articles and products for personal care, clothing materials, other articles of clothing and clothing accessories and cleaning, repair and hire of clothing.

On month-on-month basis, the food sub-index increased by 0.97 per cent in December, down by 0.28 per cent from 1.25 per cent recorded in November 2019. 

The urban inflation rate increased further to 12.62 per cent (year-on-year) in the period under review, compared to 12.47 percent in November.

In the he same vein, the rural index increased to 11.41 per cent in December from 11.30 per cent in November.

On a month-on-month basis, the urban index rose by 0.90 per cent in December down by 0.17 from 1.07 per cent recorded in November, while the rural index also rose by 0.82 per cent in December down by 0.16 from the 0.98 per cent recorded in November.

The headline index has continued to defy monetary policy measures to limit it to single digit.

The uptick is a setback for both monetary and fiscal authorities, which had only managed to curtail its rise for a few consecutive months before a rebound that had seen inflation again on an upward trajectory lately. 

The Central Bank of Nigeria (CBN), which has the mandate to stabilise prices, had set an inflation target of about 6 per cent to 9 per cent in its current five-year roadmap. 

Inflation had assumed a downward direction in recent consecutive months when it dropped in January 2019 to 11.37 per cent from 11.44 per cent in December in 2018.

The headline index further reduced to 11.31 per cent in February and 11.25 per cent in March but resorted to the upward trajectory in April when it climbed to 11.37 per cent- and further to 11.40 per cent in May- before falling to 11.22 per cent in June, 11.08 per cent in July, 11.02 per cent in August before returning to 11.24 per cent in September, 11.61 per cent in October and 11.85 per cent in November and now 11.98 per cent in December.

The rise further dampens the prospects for lower interest rate regime, as well as reduction in the cost of borrowing.

The MPR, the rate at which the apex bank lends to commercial banks is currently at 13.5 per cent.