Nigeria spent N2.34 trillion on debt service within six months, according to the new report by the Debt Management Office (DMO).
Nigeria’s debt servicing spending in the second quarter of 2023 saw a slowdown, amounting to N849.58 billion.
This marked a 43.04% decline from the N1.49 trillion spent on debt servicing in the first quarter of 2023.
Data from the DMO reveals that in the first quarter of 2023, Nigeria allocated N874.13 billion for servicing domestic debt and $801.36 million (equivalent to N617.35 billion) for external debt servicing, totaling N1.24 trillion.
Meanwhile, during the second quarter of 2023, Nigeria’s domestic debt servicing expenses amounted to N565.88 billion, while external debt servicing costs reached $368.26 million (N283.7 billion), resulting in a combined total of N1.24 trillion, according to data obtained from the Debt Management Office.
The exchange rate of the DMO, which was $1 to N770.38, was used for external debt servicing.
In contrast to the previous quarter, during which Nigeria allocated around $131.13 million for servicing Exim Bank of China loans, no funds were dedicated to Chinese loan servicing in the first quarter of 2023, as reported by DMO.
Rise in Public Debt
Nairametrics reported earlier that Nigeria’s public debt saw a rise to N87.38trn by the close of the second quarter of 2023.
Hence, despite the decline in the cost of debt servicing, the public debt continues to maintain an upward trend.
The figure indicates a significant rise of 75.29% or N37.53tn, in contrast to the N49.85tn reported at the close of March 2023.
DMO indicated that the reason for the upward trend in debt is partly because of the inclusion of N22.71tn Ways and Means Advances of the Central Bank of Nigeria to the Federal Government.
Also, the management noted that apart from the above, the expansion of the debt stock was driven by new loans acquired by the Federal Government and sub-national authorities, originating from both domestic and foreign channels.
Notably, there was a significant increase in both domestic and external debt within the timeframe of three months.
Forecast and Implications
Meanwhile, DMO has expressed concern about the 73.5 percent projected government debt service-to-revenue ratio in 2023, deeming it a substantial threat to debt sustainability.
It was noted that the government’s present revenue structure cannot sustain an increase in the level of borrowing.
According to the International Monetary Fund’s recent statement, the Federal Government is forecasting that a substantial 82 percent of its revenue will be used for interest payments in 2023.
In addition, The World Bank’s outlook for 2023 suggests that debt servicing will represent an alarming 123.4 percent of the Federal Government’s revenue.
President Bola Tinubu recently said the country could not continue to service its debt with 90 percent of its revenue.
He noted that the country was headed for destruction if that continued.