ATTENTION:
BEFORE YOU READ THE CHAPTER ONE OF THE
PROJECT TOPIC BELOW, PLEASE READ THE INFORMATION BELOW.THANK YOU!
INFORMATION:
YOU CAN GET THE COMPLETE PROJECT OF THE
TOPIC BELOW. THE FULL PROJECT COSTS N5,000 ONLY. THE FULL INFORMATION ON HOW TO
PAY AND GET THE COMPLETE PROJECT IS AT THE BOTTOM OF THIS PAGE. OR YOU CAN
CALL: 08068231953, 08168759420
THE
STRUCTURE OF THE NIGERIAN DOMESTIC DEBT AND ITS IMPACT ON FOREIGN EXCHANGE
EARNING
TABLE OF
CONTENT
Cover page
Title
page
Approval
page
Dedication
Abstract
Acknowledgment
Table of
content
CHAPTER ONE
1.0 Introduction
1.1 Background of the research
1.2 Statement of research problem
1.3 Objectives of the study
1.4 Significance of the study
1.5 Scope of the study
1.6 Research question
1.7 Limitation of the study
1.8 Definition of terms
Reference
CHAPTER TWO:
LITERATURE REVIEW
2.0 Introduction
2.1 Source of literature
2.2 Review of concept
2.3 Review of related work
2.4 Empirical studies
2.5 Summary of review
Reference
CHAPTER
THREE: RESEARCH METHODOLOGY
3.1 Research method
3.2 Fact finding method
3.2 Sources of Data
3.3 Population of the study
3.4 Sample and Sampling
3.5 Research Instrument
3.6 Method of Investigation
3.7 Method of Data Analysis
CHAPTER FOUR
Data
presentation and analysis
4.1 Data
presentation and Analysis
4.2
Discussion
CHAPTER FIVE
SUMMARY,
CONCLUSION AND RECOMMENDATIONS
5.1 Summary
5.2 Conclusion
5.3
Recommendation
References
Bibliography
CHAPTER ONE
1.0
INTRODUCTION
Domestic debt reduction in Nigeria
has taken centre stage for conversing realistic pricing of petroleum products
in Nigeria as the domestic debt profile has been rising astronomically and if
not controlled could create some unfavorable consequences as crowding out
private sector investment, poor GDP growth etc,(Okonjo-Iweala,2011). On the
other hand, government has to continue to finance projects to grow the economy
and one viable option of doing so is by issuing debt instruments. For example,
the 2012 national budget presented to the national assembly contains a deficit
of N1.11trillion which has to be financed majorly through domestic debt. As at
September 2011, Nigerian domestic debt stood at N5.3 trillion, an equivalent of
$34.4 billion while external debt was
$5.6 billion bringing the National debt to a total of 40 billion dollar which amounted to 19.6
percent of GDP, (Nwankwo2011) showing that the debt ratio is still below the
internationally unacceptable standard of 40 percent of GDP. However, beyond consideration of maximum acceptable debt-GDP ratio of 0.40
a more critical consideration for economic growth is the country’s absorptive
capacity which might be quite be low a given threshold. Domestic debt is therefore a topic to examine
at this point of national development when unemployment is critically high and
the global economic crisis is far from being resolved.
Domestic
debts are debts instrument issues by the federal government and denominated in
local currency. State and local government
can also issue debt instrument, but debt instrument currently in issue consists
of Nigerian treasury bills, federal government development stocks and treasury
bonds. Out of these treasury bills and development stocks are marketable and
negotiable, while treasury bonds; ways and means advances are not marketable
but held solely by the central bank of Nigeria, (Adafu et al 2010). The central
bank of Nigeria (CBN) as banker and financial adviser to the federal government
is charged with the responsibility for managing the domestic public debt.
(Alison et al 2003) reveal three principal reasons often advanced for
government domestic debt. The first is for budget deficit financing, second, is
for implementing monetary policy and the third is to develop instruments so as
to deepen the financial market. Whatever
the purpose, the government should find a way of managing the domestic debt so
that the level of debt is not counter productive. The researcher therefore set
out to investigate the structure and effects of rising domestic debt and for
this purpose, the paper is divided into five sections. Besides the introductory
section, section two, examines the relevant literature exploring the genesis of
public debt financing and its management, section three examines the methodology of investigation,
section four discusses the research
findings and section five raps it up
with summary and policy prescriptions.
1.1
BACKGROUND OF THE STUDY
Debt is created by the act of
borrowing. It is defined according to Oyejide et al (1985) as the resource or
money in use in an organization which in not contributed by its owner and does
not in anyway belong to them. It is a liability represented by a financial
instrument or other formal equivalent. In modern law, debt has no precisely
fixed meaning and may be regarded essential as that which one person legally
owes to another or an obligation that is enforceable by legally action to make
payment of money. When a government borrows, the debt is a public debt. Public
debts either internal or external are debts incurred by the government through
borrowing domestic investments. Debts are classified into two i.e. reproductive
debt and dead weight debt. When a loan is obtained to enable the state or
nation to purchase some sort of assets, the debt is said to be reproductive
e.g. money borrowed for acquiring factories, electricity refineries etc.
However, debt undertaken to finance wars and expenses on current expenditure
are dead weight debts.
Developing
countries, like Nigeria, were characterized by inadequate internal capital
formation arising from the vicious circle of low productive, low income and low
savings. Nigeria is the world’s seventh-largest oil exporter but also one of
the poorest. Nigeria’s domestic debt has been rising fuelled primarily by
escalating fiscal. At the end of 2002, total federal government domestic debt
outstanding amounted to 1,166. 0 million and in 2003, it rose to 1,329 million
and in 2005, it amounted to 1,525,906 million and in 2006 it rose to 1,753,259,
million (source: CBN statistical bulletin (2006).
The dramatic
growth in the domestic debt outstanding has raised many doubts about fiscal
sustainability of the current economic policy. The concerns about
sustainability have also been compounded by those related to the very short
maturity of most of the government domestic debt, and also the fact that the
central bank of Nigeria (CBN) still remains the dominant holder of federal
government domestic debt instrument.
The need to
issue domestic debt can arise both from government deficits that are not fully
foreign financed sand from implementation of monetary policy. Generally a
deficit leads to a change in government net assets. Hence, a budget deficit can
be financed by either drawing down assets or incurring new liabilities, either
domestic or foreign. The choice between foreign and domestic borrowings, turn
depends on cost (interest rates), maturity structure and risks. The terms of
foreign borrowings are often more favorable than for domestic borrowing. Since
domestic borrowings, carry much higher interest rates and have shorter
maturities. Another advantage of foreign borrowing is that it increases the
supply of foreign exchange, which is critical to meet important requirements.
One drawback to foreign borrowing is currency risk, which may increase along
with foreign indebtedness, given that a growing foreign debt service increases
the demand for foreign exchange. Despite the attractiveness of foreign
borrowing, governments may still consider domestic borrowing for a number of
reasons. First, the supply of foreign (concessional) financing may be
determined by the bid agencies, budgets and their assessment of the economic
performance of the recipient country. Secondly international aid is very often
linked to project financing and therefore cannot finance a government’s
recurrent expenditure not supported by donors. Hence, government with large
recurrent budget deficits may be forced to tap domestic savings, including
through issuance of domest5ic debt, to close their budget gaps.
Economic
theory suggests that reasonable levels of borrowing by the federal government
are likely to enhance it s economic growth (Pattilo, Ricci and Poirson 2002).
When economic growth is enhance (at least more than 5% growth rate), the
economy’s poverty situation is likely to be affected positively. In order to
encourage growth, the federal government buys debt instruments for a specified
period of time. The instruments are used to finance government deficits in a non-
inflationary and sustainable manner to enhance fiscal discipline and for the
management of monetary policies. As escalating debt profile presents serious
obstacles to a nation path to economic growth and development. The cost of
servicing public debt (domestic and external) may expand beyond the capacity of
the economic to cope, there by impacting negatively on the ability to achieve
the desired fiscal and monetary policy objectives. Furthermore, a rising debt
burden may constrain the ability of the government to undertake more productive
investment programmers’ in infrastructure, education and public health.
Many, developing countries resort to
domestic borrowing to bridge the domestic resources gap in order to accelerate
economic development. It means that the federal government can resort to
domestic borrowing provided that the proceeds are utilized in a productive way
that will facilitate the eventual servicing and liquidation of debt. Stieglitz
(2002) contributed that government borrowings can crowd out investment, which
will reduce future output and wages. When wages and output are affected the
welfare of the citizens will be made vulnerable.
Soludo
(2003), opined that federal government for two broad categories.
a) Macroeconomic reasons (higher
investment, higher consumption (education and health).
b) To finance statutory balance of payment
deficits.
This implies
that the economic indulges in debt to boost the economic growth. He is also of
the opinion that once an initial stock of debt grows to a certain threshold,
servicing them becomes a burden and countries find themselves in a wrong side
of the economy’s development, with debt
crowding out
investment and growth. The sharp increase in the domestic debt stock, over the
years was attributable largely to the failure to embark on necessary
adjustment, particularly at the time of declining revenue that resulted in
growing fiscal deficits and further domestic debt accumulation. The bulk of
domestic debt has been in short term treasury securities with maturities of
less than one year. Nigeria’s debt burden has grave consequence for the economy
and the welfare of the citizens. The servicing of domestic debt has severely
encroached on resources available for socio-economic development and poverty
alleviation. Nigeria’s domestic debt has been rising over the years. Table 1
below shows data on Nigeria’s domestic debt has increased steadily under
Obasonjo’s Administration, it increased by almost 50% between 2000 and 2002. It
is confirmed from an analysis of the data that, during the entire period, a
majority of the domestic debt was held in short term instruments, the 91-day
Treasury bills constituted over 57% of total domestic and approximately 63% in
2002. The rest of the public domestic debt stock has been generally held in
treasury bonds and development stocks. The CBN has been ascertained the leading
holder of domestic debt. In 199, the CBN held 65% of the total domestic debt,
in 2000 its percentage share was 57.9 while in 2001, and its share rose to
66.9%.
However, its share fell to 46% in 2002.
Also because of the short-term nature of the domestic debt, an amount
equivalent to 20% of the GDP comes due for payment every three months. The
government strategy has been to borrow the same amount to pass off the maturing
debt and interest due. CBN, as the under writer of government securities, has
stood ready to absorb the under subscribed amount of securities in the weekly
primary actions.
Table
1: Nigeria: Federal Government
Domestic Debt Outstanding 1998-2002 (in million of Naira)
Year
1998
1999
2000
2001
2002
Total
404
794.8
898.2
1,016.9
1,169.9
By
Instrument
Treasure
Bills
221.8
361.7
465.5
584.5
430.6
Treasure
Certificate
0
0
0
0
0
Development
Stock
2.6
2.4
2.1
1.8
1.6
Others
133.4
0
0
0
0
By Holders
Banking
Sector
489.2
765.1
855.9
919.2
980.0
Central Bank
HOW TO GET THE FULL PROJECT WORK
PLEASE, print the following
instructions and information if you will like to order/buy our complete written
material(s).
HOW TO RECEIVE PROJECT MATERIAL(S)
After paying the appropriate amount
(#5,000) into our bank Account below, send the following information to
08068231953 or 08168759420
(1) Your project
topics
(2) Email
Address
(3) Payment
Name
(4) Teller Number
We will send your material(s) after
we receive bank alert
BANK ACCOUNTS
Account Name: AMUTAH DANIEL CHUKWUDI
Account Number: 0046579864
Bank: GTBank.
OR
Account Name: AMUTAH DANIEL CHUKWUDI
Account Number: 2023350498
Bank: UBA.
FOR MORE INFORMATION, CALL:
08068231953 or 08168759420
AFFILIATE
Comments
Post a Comment