Debt servicing eats up N1.24tr in Q1 2023 alone
By Jeph Ajobaju, Chief Copy Editor
Debt servicing cost rose 55.71 per cent to N1.24 trillion in the first three months of this year alone (Q1 2023), according to data compiled by the Debt Management Office (DMO).
The data shows Nigeria spent N406.77 billion to service domestic debt and $312.27 million (N143.74 billion) on external debt service in Q4 2022, a total N550.51 billion.
The treasury spent N874.13billion on domestic debt service and $801.36 million (N368.87 billion) on external debt servicing in Q1 2023, a total N1.24 trillion.
The DMO used $1=N460.3 for external debt servicing.
The International Monetary Fund (IMF) recently reiterated the federal government projected to spend 82 per cent of its revenue on interest payments in 2023.
The IMF said external debt (including that of the private sector) will rise to $121.6 billion, with external reserves rising to $37.5 billion, as disclosed in a table of projections in its “IMF Executive Board Concludes 2022 Article IV Consultation with Nigeria Summary.”
The projections showed an improvement in the share of the government’s revenue used as interest payment, which dropped from 96.3 per cent in 2022 to 82 per cent in Q1 2023.
The DMO disclosed interest payment took 86.1 per cent of federal revenue in 2020 and 87.8 per cent in 2021.
“High debt levels lead to heavy debt service which reduces resources available for investment in infrastructure and key sectors of the economy,” DMO Director General Patience Oniha said in the document.
She stressed the need for debt sustainability, which she defined as the ability to service all current and future obligations while maintaining the capacity to finance policy objectives without resorting to unduly large adjustments or exceptional financing such as arrears accumulation and debt restructuring, which could otherwise compromise the economy’s stability.
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Nigeria among 11 ECOWAS countries in debt distress
A report by the Nigerian Economic Summit Group and the Open Society Initiative for West Africa has warned Nigeria and 10 other Economic Community of West African States (ECOWAS) countries are currently in debt distress based on debt sustainability analysis, per The PUNCH.
The 10 other countries are: Benin, Burkina Faso, Cabo Verde, the Gambia, Ghana, Guinea Bissau, Liberia, Niger, Senegal, and Togo.
The World Bank recently alerted Nigeria’s debt, which may be considered sustainable for now, is vulnerable and costly.
The Bank warned Nigeria’s debt is also at risk of becoming unsustainable in the event of macro-fiscal shocks.
Muda Yusuf, Centre for the Promotion of Private Enterprise (CPPE) Chief Executive Officer, has also expressed concern Nigeria’s economy is fraught with diverse economic vulnerabilities, including rising public debt and debt service burden.
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