The Debt Management Office (DMO), says the country’s increasing debt profile is mainly used to finance Capital Projects and Human Capital Development.
The Director-General of DMO, Patience Oniha said this on Thursday in Abuja, while giving an update of the country’s debt profile.
Oniha said that the various social challenges in the country, as well as global occurrences had also increased the country’s debt.
“Borrowings are essentially for Capital Expenditure and Human Capital Development as specified in the Fiscal Responsibility Act 2007.
“Having witnessed two economic recessions, we have had to spend our ways out of recession, which contributed significantly to the growth in the public debt.
“It is unlikely that our recovery from each of the two recessions would have been as fast without the sustained government expenditure funded partly by debt,’’ she said.
According to her, the insecurity situation has also resulted to increased borrowings.
“To compound matters, the country has technically been at war with the pervasive security challenges across the nation.
“This has necessitated massive expenditures on security equipment and operations, contributing to the fiscal deficit. Defence and security sector accounts for 22 per cent of the 2021 budget,’’ she said.
Oniha said that the most viable solution to the country’s fiscal challenge was to grow sources of revenue and plug all leakages.
“We must, however, continue to rationalise our expenditure as we cannot afford waste.
“In reality, our largest expenditure items are currently personnel cost, debt service and capital expenditure, which between them account for 85 per cent of the 2022 budget.
“There is very little scope for cut in any of these over the medium term,’’ she said.
According to her, revenue generation remains the major fiscal constraint of the Federal Government.
“Systemic resource mobilisation problem was also compounded by the recent economic recessions.
“Several measures are being instituted under government’s Strategic Revenue Growth Initiatives to improve revenue and entrench fiscal prudence with emphasis on achieving value for money,’’ she said.
She, however, said that borrowing was not a bad thing as governments around the world borrow whenever they needed to.
The director-general said that borrowing for infrastructure development did not also imply that the government was creating a burden for the future generations as the infrastructure would eventually be inherited and utilised by that generation.