In the first half of 2024, the Federal Government significantly ramped up its borrowings from the capital market, which stood at N8.48 trillion. This marks an 11.9% increase from the N7.58 trillion borrowed in the same period of 2023.

According to Cordros Securities’ H2 2024 Outlook titled “Bridging Reforms to Recovery/Financial Market Review and Outlook,” the borrowings were divided between bond auctions and net treasury bills (NTBs) issuances. The report detailed that bond issuances amounted to N3.83 trillion, representing 69.7% of the volume borrowed throughout the 2023 fiscal year. Meanwhile, net primary market treasury issuances totaled N4.65 trillion, 122.9% higher than net NTB issuances for the 2023 fiscal year.

The borrowing surge was anticipated due to the significant deficit profile and the halt in ways and means drawdowns. On December 30, 2023, the National Assembly (NASS) passed a total budget of N28.80 trillion, including Government-Owned Enterprises (GOEs) and project-tied loans. The NASS raised the budget revenue by 6.99% to N19.6 trillion while maintaining a budget deficit of N9.18 trillion. The deficit was to be financed through a combination of domestic borrowings (N6.04 trillion), foreign borrowings (N1.77 trillion), multilateral/bilateral loan drawdowns (N941.19 billion), and privatization proceeds (N298.49 billion).

An economic expert, Jolomi Odonghanro, commented on the report, indicating that the FG might slow down its borrowing pace going forward.

“However, a portion of the borrowings in H1 2024 was used to pay off excess ways and means borrowing from 2023 (N4.83 trillion). Adjusting for that amount, domestic market borrowings in H2 2024 are expected to be quite significant,” Odonghanro explained.

Boniface Okezie, National Coordinator of the Progressive Shareholders Association of Nigeria, highlighted both the challenges and opportunities presented by the FG’s significant borrowing in H1 2024. “While borrowing can provide necessary funds for development, it also poses risks if not managed prudently. Ensuring that borrowed funds are used effectively for productive investments, maintaining fiscal discipline, and implementing sound economic policies are crucial to mitigating risks and maximizing the benefits of increased borrowings,” Okezie emphasized. He further stressed the importance of prioritizing expenditures to ensure efficient utilization of borrowed funds, which is vital for achieving desired economic outcomes and maintaining sustainable debt levels.

Sun