Nigeria’s Debt Profile Rises By N2.04trn, Hits N41.6trn In Q1

Nigeria’s debt position worsened in the first quarter of this year as the country’s debt stock rose by N2.04trn to hit N41.60tn in the first three months of this year.

The N41.6trn represents a quantum leap from the N39.56tn debt figure recorded by the country as of December 2021.

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The public debt stock covers the total domestic and external debt of the federal government, state governments and the Federal Capital Territory.

According to the DMO, the total public debt stock includes new domestic borrowing by the federal government to partly finance the deficit in the 2022 Appropriation Act, the $1.25bn Eurobond issued in March 2022 and disbursements by multilateral and bilateral lenders.

The DMO said on its website that there were also increases in the debt stock of the state governments and the FCT.

It added that the total public debt to Gross Domestic Product is now 23.27 per cent, which is still below Nigeria’s self-imposed limit of 40 per cent.

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The International Monetary Fund had last week warned that except the federal government put in place adequate measures to improve revenue generation, it’s entire earnings may be spent servicing debt by 2026.

The Fund had revealed that based on a macro-fiscal stress test that it conducted on Nigeria, interest payments on debts may wipe up the country’s entire earnings in the next four years.

The IMF’s Resident Representative for Nigeria, Mr. Ari Aisen stated these while presenting the latest Sub-Saharan Africa Regional Economic Outlook, in Abuja.

Nigeria is experiencing a worsening debt level as the country’s indebtedness is likely to reach N45tn following plans by the Debt Management Office plans to borrow an additional N6.39tn to finance the 2022 budget deficit.

The administration of President Muhammadu Buhari had been under series of attacks on the country’s rising debt levels.

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Nigeria’s debt service to Gross Domestic Product ratio had hit 73 per cent based on figures released by the Finance Ministry in October last year.

But despite the fact that Nigeria’s debt to GDP ratio is one of the highest in Sub-Saharan Africa, senior government officials still maintained that the country’s debt profile is still within sustainable limit.

The Minister of Finance, Mrs Zainab Ahmed had said that government borrowings are done for capital project execution and that the government has the ability to meet it’s obligations to creditors.

But speaking in Abuja, Aisien expressed worry that many African countries, including Nigeria risk sliding into critical debt servicing problem unless urgent actions were explored to significantly raise revenue.

He revealed that over 80 per cent of the federal government’s revenue was committed to debt service.

Aisien said, “The biggest critical aspect for Nigeria is that we have done a macro-fiscal stress test, and what you observe is the interest payments as a share of revenue and as you see us in terms of the baseline from the federal government of Nigeria, the revenue almost 100 per cent is projected by 2026 to be taken by debt service.

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“So, the fiscal space or the amount of revenues that will be needed and this without considering any shock is that most of the revenues of the federal government are now in fact 89 per cent and it will continue if nothing is done to be taken by debt service.

“It is a reflection of the low revenue of the country. The country needs to mobilise more revenue to be able to have macroeconomic stability. It has become an existential issue for Nigeria.

“The war in Europe is hunger in Sub-Saharan Africa and Africa. So, I think we should pay very close attention to this issue.

He lamented that being an oil exporter, Nigeria was not only unable to take advantage of the current global high oil prices to build reserves, but also confronted by low earnings due to the subsidy on petroleum products.

He said Nigeria received a total of $6.8bn facilities from the IMF following the outbreak of the COVID-19 pandemic in 2020.

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