With the federal government’s increasing borrowing to
finance its budget deficit, domestic borrowing was pegged at N6.7 trillion in
2021, as against N2.6 trillion in 2020.
The N4.28 trillion 2021 budget of federal government had
huge debt components and this saw the apex bank to support with monthly primary
market auctions.
Checks revealed that the CBN conducted primary market
auctions three times every month in 2021, expect for May and September when
primary market auctions were conducted four times.
Data revealed that the CBN repaid N3.68 trillion when the
instrument matured in 2021, an increase of 65.2 per cent compared to N2.23
trillion repayment in 2020.
Demand for treasury bills surged in 2021 as yield-hungry
investors scampered away from stock market into risk-free government
securities.
Commenting on the development, Managing Director of Kairos
Capital, Mr. Sam Chidoka said the trend would continue and cautioned that it
was an unsustainable path.
He said: “Our borrowing in likely to continue in the same
traction for the simple reason that we have a budget for 2022 that is a deficit
budget.
“We have a budget of about N17 trillion and N10 trillion is
supposed to come from identified revenue heads. So, you probably have N6
trillion to N7 trillion budget deficits that has to be funded by borrowing both
local and foreign.
“So, we are likely to see the same traction as we saw last
year. But the question is whether our payment sources commensurate with what we
are borrowing? The question is whether our debt is sustainable or less thereof
and I think that is becoming less sustainable and we have to find a way of
either cutting government expenditure or increasing our revenue base in such a
way that we can fund some of the things we want to do especially on the capital
side.
Speaking further, Chidoka added: “Or borrowing exclusively
for capital part of the budget and then using those to capitalise revenue, but
I see that we are borrowing for debt service, recurrent expenditure and I don’t
think that it is sustainable. So, I think we are going to see the same high
level of borrowing in 2022.”
Also, Head Financial Institutions’ Ratings Agusto & Co,
Mr. Ayokunle Olubunmi, said the trend would continue and may be more
exaggerated because of plans towards the upcoming general elections.
He said: “It is not far-fetched from what we are seeing as
we have seen increased government borrowing basically because of the budget
deficit that we’ve had.
“Government is spending more than they are earning and
year-in year-out in the last four years, you see that the projected revenue is
way higher than the actual as they have been doing well in terms of generating
revenue.
“So whenever your expenditure is more than your income,
definitely you actually will see that there would be borrowing. And
unfortunately, we are still going to continue on the same path. The trend is
going to continue till 2023 because we have elections in 2023 and the major
campaign for election would be done in 2022 and whether we like it or yes, the expenditure
and campaign funding might still come from projects and more.”