By Emeka Mamah, with agency report
Apparently worried over the country’s huge domestic debt put at over N6.153 Trillion the Minister of Finance, Dr Ngozi Okonjo-Iweala, yesterday warned governors against further exessive borrowing to ensure the economic growth of the country.
Okonjo-Iweala spoke in Enugu while delivering a lecture entitled ‘Managing Public Finance for Agricultural and Industrial Growth’ at the 2012 South East Economic Summit.
She said that the mounting domestic debt was as dangerous as the external one, adding that strategies were being put in place to reduce the country’s debt.
“I want to give advice to our governors here. Those who are taking domestic debt need to watch it because it is as dangerous as or even more so than the external debt.
“When you have domestic debt, you must service it because it is your institutions, your pension funds, your banks who owe this debt and you must have to pay it otherwise it leads to other consequences within the economy.
“I am happy to say that we have put in place a very good strategy to manage the national domestic debt which is to decelerate the rate at which we borrow,” she warned.
On agriculture in the South East, the minister said the zone had a comparative advantage for the production of some food crops but was being hampered by limited land and tremendous gully erosion.
Okonjo-Iweala said the World Bank had provided a credit of $450 million for the South East to decisively deal with gully erosion to promote agriculture.
The minister stressed the need for an increase in the financial mortgage system to create opportunity for youths to own houses.
On his part, the former Governor of the Central Bank of Nigeria, Prof. Chukwuma Soludo, explained that the zone would not progress without developing a sound vision.
According to Soludo, developing the vision would help to drive the economy of the zone to greater heights.
He, however, called on the governors of the South East to create an enabling environment for investors to thrive in the zone.
The country’s domestic debt profile rose to N6.153tn in June.
Statistics obtained from the Debt Management Office showed that the domestic debts had increased from N5.966tn ($37.71bn) at the end of the first quarter ended March 31, 2012, to N6.153tn ($38.89bn) at the end of the second quarter ended June 30, 2012.
This represents an increase of N187bn or three per cent over the figure recorded in the first quarter.
Details of the domestic debts showed that Federal Government of Nigeria, FGN, bonds accounted for N3.71tn or 60.37per cent of the money borrowed by the Federal Government from internal sources as at June ending.
The Nigerian Treasury Bills accounted for N2.08tn or 33.88 per cent, while Treasury Bonds accounted for N353bn or 5.75 per cent.
As at March 31, 2012, the domestic debt component of the total debt profile, which stood at N5.966tn, showed that FGN bonds accounted for N3.67trillion or 61.44 per cent of the money borrowed by the Federal Government.
The Nigerian Treasury Bills accounted for N1.95tn or 32.63 per cent, while Treasury Bonds accounted for N353.73m or 5.93 per cent.
Presenting the 2012 budget proposal to the National Assembly, President Goodluck Jonathan had lamented that the domestic debt had been growing at an alarming rate in recent years with the clearest evidence of this being that in 2012, the Federal Government earmarked N560bn for debt servicing.
Jonathan had spoken of curtailing domestic debts, but ostensibly gave room for the government to accumulate more debts with a caveat that the debts should not go beyond 30 per cent of Gross Domestic Product.
At the moment, the debt to GDP ratio is slightly less than 20 per cent. With latitude of 30 per cent debt to GDP ratio, the government can add up to 50 per cent of the current debt level.
The Head of Research and Strategy at BGL Securities Limited, Mr. Olufemi Ademola, recently attributed the increase in domestic debts to a shortfall in revenue and the controversial oil subsidy expenditure.