Nigeria’s external and domestic debt service swallows N15.22trn

Director General of DMO, Patience Oniha

Over the past 10 years, Nigeria has spent a colossal N15.22 trillion to service its domestic and external debts, data collected from the official website of the Debt Management Office (DMO) has revealed. ).

Further analysis of the DMO figures showed that domestic debt service contributed 88.7% or 13.5 trillion naira, while external debt interest/service contributed 11.35% or 1 .73 trillion naira ($5.3 billion) on total debt service of 15.1 trillion naira between 2012 and 2021.

Further verification revealed that in 10 years, the Federal Government has always paid interest on its Nigerian Treasury Bills (NTBs), FGN Bonds, Sukuk Bonds, Savings Bonds and Nigerian Treasury Bills, while that interest on multilateral loans and Eurobonds, among other things, continued to rise steadily. .

Data from the DMO revealed that interest on NTBs and FGN bonds, two major instruments used by the government to borrow funds to bridge the budget gap, amounted to N3.4 trillion and N9.27 trillion respectively. naira in 10 years.

Foreign debt interest/service on Multilateral and Eurobond, two main sources of federal government borrowing from foreign financial institutions, amounted to $940.86 million and $3.42 billion over the years considered.

The multilateral financial institutions FG pays interest/service on borrowed loans are: International Bank for Reconstruction and Development, Africa Dev. Bank, International Fund for Agriculture. Dev., Africa Dev. Funds, Dev. Fund, Arab Bank for Economic Development in Africa (BADEA), among others.

A closer look at the data showed that the stock of FG domestic debt by instrument increased to N19.24 trillion as of December 31, 2021 from N6.54 trillion reported by DMO in 2012, while the Nigeria’s outstanding external debt closed 2021 at $38.391 million compared to $6.527 million in 2012.

In addition, Nigeria’s total public debt portfolio as of December 31, 2021 stood at $95.779 million (external) and 39.556 billion naira (domestic) compared to $48,496.23 (foreign) and 7,554,258, 00 naira (domestic) as of December 31, 2012.

However, the domestic debt service breakdown showed a movement from 720.55 trillion naira in 2012 to 2.05 trillion naira in 2021, while external debt service closed 2021 at 1.10 trillion naira. dollars or 455.99 billion naira compared to 131.48 million dollars or 20.35 billion naira reported by DMO in 2012.

It should also be noted that 2.05 trillion naira and $1.10 billion spent on servicing domestic debts and external debts in 2021 was the highest ever recorded by the DMO.

Unless plans change, the FG is to spend a cumulative $10.19 billion on servicing the country’s external debt over a 10-year period spanning 2021 and 2030, according to the DMO.

As FG continues to spend heavily to service domestic and external debts and accumulate new loans, its revenue bracket is shrinking further, largely due to the underperformance of oil sector revenues amid an economic downturn. increase in oil thefts in the Niger Delta region of the country.

However, since the cartel decided to increase production, Nigeria has struggled to meet its own quota, despite a major spike in the price of crude oil.

Analysts have raised concerns as the federal government continues to secure new loans from local and external sources, despite the growing debt profile and service charges.

The International Monetary Fund (IMF) predicted that Nigeria’s debt service-to-revenue ratio would rise from 76% in 2021 to 92% in 2022.

Former Chartered Institute of Bankers of Nigeria (CIBN) President Professor Segun Ajibola said, “If you look at the fiscal budget for the past two years, budget funding has been around 30 to 40 % and that alone has put pressure on Nigeria’s funding profile.

“Of course, our main source of income which is oil is currently unstable due to global and domestic oil price issues.

“These challenges initially reduced Nigeria’s ability to generate revenue. However, governance must continue and there is a need to borrow both local and foreign. Remember, when you borrow, you will have to pay it back, which has contributed substantially to our debt service burden and should hurt other aspects of government financing, especially capital spending.

Also Read: New Data Reveals NNPC Debts To FG, States Hit Trn 1,055 In Six Months

Also speaking, Professor Hassan Oaikhenan from the Department of Economics at the University of Benin argued that the increase in borrowing and debt servicing has negative implications for the country’s economy.

“There is nothing wrong with borrowing if its essence has been used to finance key projects. If the borrowing was used to finance consumption, this means that the borrowing presents a deadweight loss to the economy.

“It is clear that the higher the debt, the higher the debt service and this has implications for intergenerational well-being. This is what a responsible government cannot ignore.

“Unfortunately what we have had over the past seven plus years is that this government has been rather irresponsible in borrowing because we continue to take on debt without really seeing the productive use to which that debt has been put. borrowed.”

He thus called on the government to be responsible in its spending and to reduce the cost of governance, two starting points for lifting the Nigerian economy out of debt service which has stumbled.

For his part, the CEO of Wyoming Capital & Partners, Mr. Tajudeen Olayinka, said that debt servicing by the federal government over the years has encouraged investors to provide additional support to the government regarding investments. additional in public securities.

According to him, “it presents the government in a good light, with the possibility of financing development projects across the country.

“The negative aspect of debt servicing in Nigeria is the sustainability issue which has now greeted the current administration of President Muhammadu Buhari whereby over 100% of revenues are now spent on debt servicing, leaving the room for potential default and government failure in the near future, especially with respect to the external debt component.”

Commenting on the rising debt profile, the CEO of the Center for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, noted that “when we take into account CBN borrowings and AMCON debt stock , the debt profile would be in excess of N60 trillion. Although the government tends to argue that the conditions were not a debt problem, but an income challenge. But debt becomes a problem if the revenue base is not strong enough to service the debt on a sustainable basis. This invariably becomes a debt problem and possibly a debt crisis. Actual government revenues can barely cover debt service obligations.

“Which implies that the entire investment budget and recurrent expenditure may have to be financed by borrowing. Surely it’s not sustainable. The finance minister recently reported that in the first four months of this year, the debt service to revenue ratio was over 100%. What is needed is the political will to cut spending and undertake reforms that could reduce the size of government, reduce the cost of governance, and lighten the government’s tax burden.

Shirlene J. Manley