Nigeria’s Debt Portfolio May Rise To N50 Trillion By 2023

EMEKA EJERE

Current actions from the federal government of Nigeria suggests that Nigeria’s debt may rise to N50 trillion by 2023 . Recall that the government requested the approval of a $4,2 billion loans as a result of “emerging needs”

This was disclosed in a letter titled Addendum to Request For Senate’s Concurrent Approval of Multilateral Fund Projects Under the 2018-2021 Federal Government External Borrowing (Rolling) Plan,

“The plans listed in the addendum of the Federal Government External Borrowing Plan, are to be financed through sovereign loans from the World Bank, French Development Agency (AFD), China-Exim Bank, International Fund For Agriculture Development (IFAD), Credit Suisse Group and Standard Chartered/China Export and Credit (SINOSURE) in the total sum of USD4 million plus Euro 710 million grant component of USD 125 million”.

Nigeria took her first foreign loan in 1964 for about $13 million to finance the construction of the Kainji dam. Today, the nation is locked in a debt crisis, spending 97 per cent of her revenues in 2020 on debt servicing.

Findings revealed that in 2020, the federal government collected N3.42 trillion as revenues and spent N3.34 trillion to service her obligations. In effect, every other expenditure of the FG was done via borrowings.

PwC Nigeria, an company of accounting professionals, said in a recent report that the increasing cost of servicing debt continued to weigh on the federal government’s revenue profile.

It said, “Actual debt servicing cost in 2020 stood at N3.27tn and represented about 10 per cent over the budgeted amount of N2.95tn. This puts the debt-to-revenue ratio at approximately 83 per cent, nearly double the 46 per cent that was budgeted.

The Debt Management Office (DMO) two weeks ago disclosed that Nigeria’s total public debt, comprising states and federal government debt obligations, grew by 7.75 per cent, from N32.916 trillion in December 2020 to N35.465 trillion as of June this year.

Latest data from the DMO showed that Nigeria spent N445.4bn on debt servicing payments in the second quarter of this year. From April to June 2021, Nigeria spent N322.7bn on domestic debt servicing, while $299m (N122.7bn) was spent on external debt servicing.

A breakdown of the statistics shows that the federal government spent a total of N322.7bn on the payment of interest, with N50.3bn expended on the redemption of matured Nigeria Treasury Bills between April and June 2021.

For external debt servicing, commercial loans had 53 per cent with a cost of $157,012.17, multilaterals had 35 per cent with a cost of $103,732.70, and bilateral had 13 per cent with a cost of $38,220.88.

The total external debt stock rose from N12.47tn as of March 31 to N13.71tn as of June 30, indicating an increase of N1.24tn or 9.94 per cent. The total domestic debt stock rose from N20.64tn as of March 31 to N21.75tn as of June 30, indicating an increase of N1.11tn or 5.38 per cent.

At the end of Q2 2021, external debt stock made up 38.66 per cent while domestic debt stock made up 61.34 per cent of the total public debt stock. The debt to Gross Domestic Product ratio rose from 21.13 per cent to 21.92 per cent within the second quarter.

At the end of the second quarter, a breakdown of external debt stock showed that multilateral debt (from World Bank Group and African Development Group) led the list of Nigeria’s creditors with a share of 54.88 per cent.

The second highest was commercial debt (from Eurobonds and Diaspora Bonds) with a share of 31.88 per cent. It was followed by bilateral debts (from China, France, Japan, India and Germany) with a share of 12.70 per cent. Promissory Notes had a share of 0.54 per cent.