The nation's appetite for borrowing to finance projects and budget deficits shows no sign of waning. In 2012, the government raised the external debt profile to $6.53bn.

The Federal Government, the 36 states and the Federal Capital Territory have borrowed a total of $860m (N134.16bn) in the last one year from external sources, information available from the Debt Management Office has shown.

Statistics from the DMO showed that the total external debt rose to $6.53bn as of December 31, 2012, as against $5.67bn on December 31, 2011, representing an increase of 15.19 per cent.

The breakdown of the external debt as of December 2012 showed that 80.7 per cent was owed to multilaterals, including the World Bank Group, International Fund for Agricultural Development, African Development Bank Group, International Development Bank and Economic Development Fund; while 11.64 per cent was owed to non-Paris Group of creditors and 7.66 per cent to others.

Further analysis of the external debt profile showed that the Federal Government had the biggest portion as it had borrowed $4.14bn as of December 31, 2012.

The 36 states of the federation, on the other hand, accounted for $2.38bn of the nation's external debt profile last year.

This means that the states were responsible for 36.53 per cent of the country's total external debt stock.

Among the states, Lagos, Kaduna, Cross Rivers and Ogun emerged tops according to the sizes of their borrowings.

Borno, Delta, Plateau and Taraba states are the least indebted states as far as external debt is concerned.

The Lagos State external debt stock as of December 31, 2012 stood at $611.25m, while Kaduna's was $215.68m. Cross River State owed $113.03m and Ogun, $102.06m.

On the other hand, Borno owed $14.15m; Delta, $18.99m; Plateau, $21.93m; and Taraba, $23.03m.

Meanwhile, the debt to Gross Domestic Product ratio as of September 31, 2012 stood at 18.26 per cent and could hit 19 per cent for the year ended 2012.

The debt-to-GDP ratio is one of the indicators of the health of an economy. It is the amount of national debt of a country as a percentage of its GDP.

A low debt-to-GDP ratio indicates an economy that produces a large number of goods and services and probably profits that are high enough to pay back debts. Governments aim for low debt-to-GDP ratios and can stand up to the risks involved by increasing debt as their economies have a higher GDP and profit margin

Although Nigeria's debt to GDP is not yet at the 30 per cent threshold set by the government, two alarming trends are beginning to develop. The first is the rate at which the debt level is currently rising, and the second is the rising cost of government's borrowing.

While Nigeria is still a fair distance from reaching the 30 per cent threshold, analysts have warned that it is important for policy-makers to recognise these trends and learn from the country's past mistakes and those of European countries.

Reacting to the debt position, the Managing Director, Financial Derivatives Company Limited, Mr. Bismark Rewane, said there was a key difference in Nigeria's debt and those of other advanced economies.

"Instead of using debt for investment in government capital expenditure projects or fundamental transformation of essential services, the majority of Nigeria's debt has been used to plug holes in its budget, while the rest has been spent on recurrent expenditure," he said.

Rewane said the nation's increasing debt-to-GDP ratio had not been matched by investments in infrastructure projects or by increased spending on healthcare and education.

"If the government deficit is spent on infrastructure, basic research, public health and/or education, it can increase its potential output in the long run. There are also issues surrounding the crowding out effect of the private sector," he added.

The Federal Government alone borrowed a total of N914bn from domestic sources in the last one year.

The DMO statistics showed that as of December 31, 2012, the Federal Government's domestic debt stock stood at N6.54tn, which is N914.69m higher than the 2011 figure of N5.62tn.

The latest statistics on domestic debts showed that the Federal Government of Nigeria Bonds accounted for N4.08tn or 62.41 per cent of the total domestic debt.

Nigeria Treasury Bills accounted for N2.12tn or 32.47 per cent of the government's total domestic debt, while Nigeria Treasury Bonds accounted for N334.56bn or 5.12 per cent of the debts.

The National Assembly recently approved external debt borrowings for some states and that will change their external debt profiles when the draw down begins.

Similarly, the Federal Government, in the last six months, concluded arrangements for some external debts that would take its borrowings from outside beyond $10bn when they are fully drawn down.

The Medium Term Expenditure Framework 2012 - 2014 showed that the Federal Government would also resort to the domestic debt market to raise N633.85bn in 2013.

The MTEF, prepared by the Budget Office of the Federation, stated that the Federal Government would run a deficit of N833.85bn in 2013 and 76.01 per cent of this would be funded through borrowings from the domestic debt market.

Other sources of funding the deficit are N50bn to be obtained from signature bonuses and N150bn to be obtained from the Stabilisation Fund/Excess Crude Account.

Source: http://odili.net/news/source/2013/feb/4/826.html

Given the size of the domestic debt, the government in the 2012 budget provided a total of N511.98bn for its servicing.

The amount proposed for servicing of domestic debt is expected to increase to N543.38bn, reflecting the increment expected in the volume of domestic debt in 2013.

Later people will be quick to hound on the govt.

The $860 million caused the increase with Lagos accounting for more than 71%...