According to findings by Eyewitness9ja, Nigeria’s debt servicing expenses have surged by 55.71% to reach N1.24tn within three months.
Data obtained from the Debt Management Office show that between October and December 2022, Nigeria spent N406.77bn on servicing domestic debt and $312.27m (equivalent to N143.74bn) on servicing external debt, resulting in a total of N550.51bn.
However, between January and March 2023, Nigeria’s domestic debt servicing rose to N874.13bn, while external debt servicing amounted to $801.36m (equivalent to N368.87bn), bringing the total to N1.24tn.
The exchange rate of $1 to N460.3 was applied for external debt servicing, as per the DMO’s data.
The International Monetary Fund (IMF) recently disclosed that the Nigerian government is projected to allocate 82% of its revenue to interest payments in 2023.
According to the IMF, Nigeria’s external debt, including that of the private sector, will increase to $121.6bn, while external reserves are expected to rise to $37.5bn.
These projections were presented in the IMF’s ‘IMF Executive Board Concludes 2022 Article IV Consultation with Nigeria Summary report.
The report also indicated an improvement in the share of the government’s revenue allocated to interest payments, with interest payments decreasing from 96.3% in 2022 to 82% in 2023.
In a document obtained by The PUNCH, the Director-General of the DMO highlighted that high debt levels often result in increased debt servicing costs, which, in turn, impact investments in infrastructure.
The Director-General emphasized the importance of debt sustainability, defined as the ability to service current and future obligations while maintaining the capacity to finance policy objectives without resorting to drastic measures or exceptional financing that could jeopardize the economy’s stability.
A joint report by the Nigerian Economic Summit Group and the Open Society Initiative for West Africa revealed that Nigeria and ten other countries in the Economic Community of West African States are currently experiencing debt distress based on debt sustainability analysis. The other countries include Benin, Burkina Faso, Cabo Verde, the Gambia, Ghana, Guinea Bissau, Liberia, Niger, Senegal, and Togo.
The World Bank recently cautioned that Nigeria’s debt, although currently considered sustainable, remains vulnerable and costly. The Washington-based institution warned that the country’s debt could become unsustainable during macro-fiscal shocks.
Dr Muda Yusuf, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, highlighted various economic vulnerabilities in the Nigerian economy, including the rising public debt and debt service burden.