(a) Explain the term national debt. (b) State any four instruments of government borrowing in...
(a) Explain the term national debt.
(b) State any four instruments of government borrowing in Nigeria.
Explanation
(a) National or public debt is the debt a country owes to its citizens or other countries or organisations such as International Monetary Fund and the World Bank. The debt which a country owes its citizens is known as internal debt, while the debt owed foreign governments and organisations is known as external debt.
(b) Instruments of government borrowing in Nigeria are:
(i) Treasury certificate:These are securities for medium term borrowing. They are for a period of one to two years and they carry higher rate of interest than treasury bills.
(ii) Treasury bills: These are securities used for short-term borrowing for about 90 days. This carries low rate of interest.
(iii) Development stock:These are referred to as government stock and they are used for long-term borrowing of up to five years and above.
(iv)Negotiations: The government can borrow from external financial institutions
(v) National savings scheme.