Nigeria’s Struggle with Debt: Over 2.3 Trillion Naira Devoted to Servicing The Country’s Debts in 6 Months, Reveals DMO Director-General
In the second quarter of 2023, Nigeria’s debt servicing expenditure exhibited a notable deceleration, dwindling to N849.58 billion, as revealed by meticulous investigation conducted by The PUNCH.
This marked a substantial reduction of 43.04 percent when contrasted with the N1.49 trillion expended in Q1 2023 for debt servicing purposes. Insights garnered from the Debt Management Office unveiled that from January to March 2023, Nigeria allocated N874.13 billion for the servicing of domestic debt, alongside a disbursement of $801.36 million (equivalent to N617.35 billion) to service external debt, amassing a total of N1.24 trillion.
Conversely, in the period spanning April to June 2023, Nigeria allocated N565.88 billion for the servicing of domestic debt and $368.26 million (approximately N283.7 billion) for external debt servicing, summing up to N1.24 trillion.
This calculation employed an exchange rate of $1 to N770.38, as specified by the DMO, for the external debt servicing. Over the course of six months, Nigeria disbursed a cumulative total of N2.34 trillion in servicing the nation’s debt. It is noteworthy that during Q1 2023, there were no expenditures related to servicing loans from the Exim Bank of China, unlike the preceding quarter.
Despite this reduction in the cost of debt servicing, Nigeria’s overall public debt surged to N87.38 trillion by the conclusion of June 2023. This figure represented an alarming escalation of 75.29 percent, equivalent to N37.53 trillion, in contrast to the N49.85 trillion recorded at the close of March 2023.
In an official statement, the DMO clarified that this debt encompassed the N22.71 trillion Ways and Means Advances extended by the Central Bank of Nigeria to the Federal Government. The statement additionally acknowledged that the augmented debt stock incorporated fresh borrowings procured by both the Federal Government and sub-national entities from domestic and external sources.
This three-month interval bore witness to a substantial spike in both domestic and external debt, with domestic debt escalating by 79.18 percent from N30.21 trillion and external debt increasing by 69.28 percent from N19.64 trillion, as observed in Q1 2023.
Forewarnings from the DMO in its 2022 Debt Sustainability Analysis Report emphasized the fragility of the Federal Government’s fiscal situation. The projected revenue of N10 trillion for 2023 was viewed as inadequate to sustain additional borrowings. The projected government’s debt service-to-revenue ratio of 73.5 percent for 2023 was deemed perilously high and posed a looming threat to debt sustainability. The report underscored the insufficiency of the government’s current revenue profile to shoulder expanded levels of borrowing.
External entities also expressed apprehension regarding Nigeria’s debt situation. The International Monetary Fund recently projected that the Federal Government was on course to allocate 82 percent of its revenue to interest payments in 2023, while the World Bank estimated that debt servicing would absorb a staggering 123.4 percent of the Federal Government’s revenue in the same year.
President Bola Tinubu, in response to this precarious financial predicament, voiced his concern, asserting that the nation could not persist in dedicating 90 percent of its revenue to debt servicing, cautioning that such a trajectory could lead to catastrophic consequences.