Why Nigeria’s Public Debt Is N69 Trillion And Not N46.2 Trillion

Key highlights

• Nigeria’s public debt is $103.1 billion as of Dec 31, 2022, but the actual owed amount is $153.9 billion due to Ways and Means deficit financing by the Central Bank of Nigeria.
• The Ways and Means debt is not recognized as public debt by the DMO because it is a short-term loan not approved by the National Assembly or owed to multilateral/bilateral creditors.
• The Ways and Means debt is still part of the government’s public debt and is serviced by the federal government. It may be converted to a 100-year bond to officially recognize it as debt.

According to the Debt Management Office, Nigeria’s total public debt is N46.2 trillion or $103.1 billion as of December 31, 2022.

The public debts are divided into domestic loans denominated in naira and foreign currency loans denominated in United States dollars.

However, the total debt actually owed by the Nigerian Federation is actually N69 trillion or $153.9 billion as of December 2022, representing a N22 trillion difference.

Why the difference?

The difference between the N46.2 trillion and N69 trillion is the Ways and Means deficit financing lent to the federal government by the Central Bank of Nigeria.

In Nigeria, Ways and Means refer to a provision that allows the government to borrow from the Central Bank of Nigeria (CBN) if it needs short-term or emergency finance to fund delayed government expected cash receipts of fiscal deficits.

Provisions in the act cap monetary financing of fiscal deficits at 5% of the prior year’s revenues but this has been breached by the Buhari government.

The current figure of Ways and Means extended to the government by the central bank is about N22.8 trillion as of September 2022. Add that to the official public debt figure of N46.2 trillion, then the total public debt should be N69 trillion or $153.9 billion. 

Why is the DMO not capturing Ways and Means?

The Debt Management Office is yet to recognize the Ways and Means as a public debt for a number of reasons.

Firstly, by law, the Ways and Means debt is meant to be a short-term loan between the central bank and the federal government.

However, because of the chronic nature of Nigeria’s budget deficit, the central bank has had to extend even more loans to the FG under the guise of Ways and Means at levels never seen in this country. Based on this, the DMO is technically not involved in the procurement of this debt as such cannot statutorily recognize it. The debt is purely between the central bank and the Ministry of Finance.

Secondly, for a debt to be classified as public debt, it needs to have been approved by the National Assembly through the passage of the federal budget or by a state House of Assembly as approved as a state budget. This is not the case with the Ways and Means and as such it is not officially recognized by the national assembly which means it cannot also be recognized by the Debt Management Office.

Finally, the ways and means are not a debt to a multilateral creditor, bilateral creditor, or from general investors like a domestic or foreign fund. These are the sort of debts currently captured and classified as such by the DMO.

Why is still part of public debt?

Despite these reasons, the debt owed to the central bank of Nigeria is still part of the government’s public debt. In fact, in addition to servicing loans recognized by the DMO, the federal government services the Ways and Means.

As of August 2022 YtD the federal government via the budget office reported that it paid the central bank about N1 trillion in servicing of the Ways and Means loans. The repayment was not budgeted for but it was paid by the government (see the image below).

It is important to also add that the federal government is considering converting the Ways and Means into a 100-year bond by an act of the national assembly. If this is approved, then it will officially be a debt recognized by the Debt Management Office.

Nigeria’s Public Debt Breakdown and Ways and Budget Implementation

Related