Abuja spends N2.05tr on debt servicing amid rising loans
By Jeph Ajobaju, Chief Copy Editor
Abuja spent N2.05 trillion to service domestic debt in 2021, a 10.8 per cent rise on N1.85 trillion in 2020, according to latest data released by the Debt Management Office (DMO).
DMO Director General Patience Oniha had disclosed on 17 March that total external and domestic debts of the federal government, the 36 state governments, and the Federal Capital Territory (FCT) rose to N39.55 trillion in 2021.
DMO figures newly released show that N1.66 trillion was paid as interest on federal government bonds, which account for 80.8 per cent of total domestic debt servicing.
- The amount spent on servicing domestic debts in 2021 is the highest on record.
- Domestic debt rose to N23.7 trillion in 2021 from N20.21 trillion in 2020, a rise by N3.49 trillion.
- Domestic debt accounts for 59.9 per cent of total debt, external 41.1 per cent. Debt rose in 2021 because of N5.6 trillion deficit in the N13.59 trillion federal budget.
- The deficit necessitated N2.34 trillion new loans each from both domestic and foreign sources, N709.69 billion multilateral/bilateral loan drawdowns and N205.15 billion privatisation proceeds.
- Domestic debt service incurred N81.81 billion as charges for Nigerian treasury bills or 4 per cent of the total cost.
- Some N219.41 billion was paid back as part of the principal for promissory notes and N25 billion for treasury bonds.
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Revenue problem persists
Nairametrics reports that Nigeria spends huge sums on servicing domestic and foreign debts, and accumulates new loans, but its revenue bucket is shrinking further, largely due to decline in oil revenue.
- There was N876.54 billion net oil and gas revenue between January and May 2021 (5M 2021), 49.5 per cent lower than N1.74 trillion prorated in the Medium-Term Expenditure Framework and Fiscal Strategy Paper (MTEF & FSP) of the Ministry of Finance.
- Oil revenue decline is caused by inability to raise production quota, which was reduced by OPEC+ in 2020 due to the pandemic, and drove oil prices up to around $80 per barrel.
- Since the cartel increased production, however, Nigeria has not met its quota despite significant surge in the price of crude oil.
- Non-oil revenue surpassed target by 7.2 per cent with N1.97 trillion over prorated N1.78 trillion in 5M 2021.
Mounting loans
Abuja continues to obtain loans from both local and foreign sources, despite growing debt and servicing cost, because revenue is hampered by decline in crude oil earnings and fuel subsidy, among other factors.
Nigerians have been trooping to subscribe to FGN savings bond issuance which have been oversubscribed in three consecutive months, January to March 2022.
The DMO auctioned a bond issuance of N150 billion in two tranches in March, which was oversubscribed by N448.42 billion.
The rally for government-issued securities is not surprising, despite the low-interest rate environment, because there is volatility in other local markets. Government securities are secure, with capital and returns sure to be paid.