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In recent times, analysts have said that a moderate amount of debt is not bad for the growth of the economyAccording to IMF report, domestic debt starts to impede growth over a ratio of 35% of bank depositsBased on data presented by the Debt Management Office, Lagos leads on the list of the most indebted stateLegit.ng journalist Zainab Iwayemi has over three years of experience covering the Economy, Technology, and Capital Market.
While many tend to shy away from debt, regarding it as a slavery tool to creditors, recent analysis has proven that a moderate amount of debt is functional for economic growth.
IMF report cited some evidence that domestic debt starts to impede growth over a ratio of 35% of bank deposits. Photo Credit: Lagos
Source: UGCModerate levels of noninflationary domestic debt as a percentage of GDP and bank deposits are said to have a favourable overall effect on economic growth.
When domestic debt is held outside the banking system, carries favourable real interest rates, and is marketable, its growth contribution increases.
IMF report cited that domestic debt starts to impede growth over a ratio of 35% of bank deposits, supporting conventional worries about crowding out and bank efficiency.
The negative impact of domestic debt on private-sector investment indicates that government domestic borrowing crowds out private-sector investment.
In light of this, it is advised that the government try to borrow domestically through the capital market by expanding the Nigerian equity and bond markets.
This is expected to enable these markets to have the capacity to provide the needed funds rather than relying solely on foreign borrowing, which inhibits private-sector investment and slows economic growth in Nigeria.
According to the Debt Management Office, Nigeria’s total domestic debt has been highlighted.
The Domestic Debt Data Report is generated from the signed-off submissions received from the 36 States of the Federation and FCT.
Lagos State – N1.05 trillionDelta – N373.41 billionOGUN State – N278.68 billion Rivers State – N232.58 billionCross River State – N220.20 billionImo State – N217.11 billionAkwa Ibom State – N190.48 billionBenue State – N187.18 billionPlateau Enugu State – N173.93 billionBauchi State – N160.81 billionFG settles necessary debt with domestic creditorLegit.ng reported that the Nigerian government has allocated about N4.83 trillion from the earnings of Nigerian Treasury Bills (NTBs) and Bonds issued in 2024 to settle the Ways and Means advances from the Central Bank of Nigeria (CBN).
The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, said this during his presentation at the Lagos Business School Breakfast Club.
In 2023, the Nigerian government obtained about N2.94 trillion from the apex bank via the Ways and Means advances to service domestic debts.
Source: Legit.ng
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