Huge debt incured by President Jonathan for Buhari – As Mohammadu Buhari takes up the mantle of leadership of the country come May 29, his greatest challenge starts with the huge debt profile President Jonathan incurred during his tenure, among other debts.
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Statistics released by the Debt Management Office, DMO, showed that Buhari has a deluge of debts to contend with. These include the heavily incurred domestic and external debts by the federal government and the avalanche of debts incurred by various states.
In the last five years, the federal government under President Goodluck Jonathan’s has borrowed N5.04tn from the domestic debt market.
According to the statistics, the domestic debt of the Federal Government as at March 31, 2010 was N3.47tn. But the latest statistics showed that the domestic debt had risen to over N8.51tn as at March 31, 2015.
This implies that Jonathan’s administration had borrowed N5.04tn in the last five years while the debt profile had risen by 157.48 per cent.
DMO release showed FG Bonds accounted for N5.37tn or 63.13 per cent of the total domestic debt.
While the Nigerian Treasury Bills accounted for N2.87tn or 33.68 per cent, Nigerian Treasury Bonds formed 3.19 per cent, about N271.22m of the Federal Government’s total domestic debt profile.
In the same manner, the domestic debts of the states grew by 116.83 per cent within this stipulated period.
This means, as Buhari-led federal government battles with its huge debt profile left for him by his predecessor, the incoming governors in the affected states will also have their own share.
As stated by DMO, domestic debts of the states as at March 31, 2010 stood at $5.01bn. But as at March 31, 2015, the domestic debts of the states ballooned to $10.87bn (N1.69tn). Consequently, the domestic debts of the states rose by $5.85bn or 116.83 per cent in the last five years.
As regards the external debts of both the federal and state governments, DMO reports that it rose from $4.31bn to $9.46bn. The external debts of both tiers of government rose by $5.16bn (119.78 per cent).
DMO did not release official figures on the external debts of the country as regard the proportions owed by the Federal Government and the various states of the federation in its latest release. But at December 31, 2014, the external debt profile stood at 33.63 per cent while the Federal Government’s component stood at 66.37 per cent.
Lagos State top the list as the most externally indebted states with $1,169,712,848.66.
Kaduna followed with $234,416,052.15; Cross River State, $131,469,661.94; Edo State, $123,128,295.53; and Ogun State, $109,154,553.08.
The least states on the table of external debts were Taraba, $22,780,063.89; Borno, $23,067,549.16; Delta, $24,233,639.67; Plateau, $30,947,579.75; and Yobe, $31,237,619.25.
Explaining the rationale behind the rise in debt profile, DMO explains that the debts had been rising because of budget deficit financing “The increase in the domestic debt was due principally to the financing of the deficits as appropriate in the annual budgets. The budgets include both capital and recurrent expenditure; thus, the deficit cannot be attributed to a single item on the budget. In the case of external borrowings, which are mostly from the multilateral financial institutions; the utilisation of the proceeds are tied to projects – in power, agriculture, health, education – and other infrastructure and human development projects.” The statement reads.
DMO states that the increase in public debt between 2011 and 2014 was the lowest compared to the period 2004–2007 and 2008–2011. It further explains that the global economic and financial crisis (2008-2010) occurred within the same period. All economies engaged in counter-cyclical public spending, using what was popularly referred to as stimulus package.
The Debt Office, however, maintained that all public borrowings were done with the consent of the National Assembly.
In reaction, the Chairman, Institute of Chartered Accountants of Nigeria, Abuja District, Adewale Gbakinro, faulted the move to borrow as much as N5tn in the last five years when oil sold for more than $100 per.
Gbakinro explained that it is not financially expedient for government to spend bulk of its borrowed funds on recurrent expenses neither does it make sense to borrow to pay salaries.
Making reference to the budget for feeding at the Presidential Villa and the maintenance of the presidential fleets, Gbakinro said there is need to cut down the cost of governance in the country.
By the huge debt profile, Gbakinro opined that financial discipline becomes is now a must for all public office holders if the country will escape this pitfall.
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