The Central Bank of Nigeria (CBN) has disclosed that Nigeria paid $11.17 billion to service debt between January and September 2020.
The apex bank, however, did not reveal if the said amount was used to pay foreign or domestic debts, but Nigerian NewsDirect can report that the above amount was used to service foreign debts.
The latest payment statistics, the apex bank revealed that a total of $16.54 billion was used to service debt in nine months of 2019.
Nigerian NewsDirect gathered that payment of debt, according to CBN reached lowest and highest in September and February 2020 at $246.9 million and $5.48 billion respectively.
Further breakdown revealed that total amount in servicing debt in January was $2.22 billion, while in March, a total of $707.24 million was used to service debt by the federal government.
The statistics by CBN also revealed that $472.4 million was used to service debt in April; $516.57 million in June; $476.24 million in July and $492.68 million in August.
Specifically, the country’s total debt stock constitutes both external and domestic debts. As at June 2020, the country’s total public debt portfolio stood at N31.01 trillion, according to the Debt Management Office (DMO).
The DMO had disclosed that actual domestic debt service between April – June, 2020 was N312.8 billion.
Nigeria’s debt profile continues to snowball and its attendant cost is worrisome as members of the CBN’s Monetary Policy Committee (MPC) at the September meeting noted the rising burden of debt services and urged the federal authority to strengthen its debt management strategy, explore other sources of revenue, as well as enhance efficiency in public expenditure.
A member of the MPC, a professor at the University of Ibadan, Festus Adenikinju in his personal statement, said “The fiscal system continues to pose significant challenges arising from current underperformance of government revenue, unrestraint growth in government recurrent expenditure, underperformance of capital expenditure and rising debt service ratio.
“Debt service rate rose to 84.1 per cent of government revenue between January and August 2020 compared to 51.5 per cent in January to August of 2019.”
The country pays a lump sum to several external organizations that grant loans to it, and these include the World Bank, African Development Bank (AfDB), Exim Bank of China, Exim Bank of India and so on.
In 2015, which marked the start of President Muhammadu Buhari’s first term administration in office, Nigeria paid $16.34 billion to service debt payment.
Fast forward to 2018, the sum of $13.74 billion was recorded while $21.22billion was paid in 2019.
The budget office of the federation in a report stated that “Total debt service in the half year of 2020 stood at N1.1trllion indicating a decrease of N234.04 billion (17.47 percent) from the N1.34trillion projected for the half year period.
“The sum of N853.61 billion was used for domestic debt servicing while N251.76 billion was spent for external debt servicing during the period under review. The amount used for domestic debt servicing revealed a difference of N83.06 billion (8.87 per cent) from its half year projection.”
Experts stressed that while the country’s debt to GDP ratio is sustainable for now, the cost of servicing the debt eats deep into the country’s already depleting revenue.
Critics of the government have complained about the government’s penchant for debts, believing that it could put the future of younger Nigerians in jeopardy.
The Deputy Governor, Financial System Stability, CBN, Mrs. Aisha Ahmad, started that, “low oil prices, muted fiscal revenues and significant debt service obligations have dramatically restricted the already fragile fiscal space.
“Further fiscal adjustments will be required to curtail rising public debt and budget deficit, in addition to prioritization of government spending to support the Economic Sustainability Plan (ESP).”
AfDB early in the year said debt servicing gulps more than 50 per cent of Nigeria’s revenue.
The bank, which said this in its West Africa Economic Outlook last year, said the servicing of the country’s external debt gulped about 50 per cent of the country’s revenue.
According to AfDB, the average revenue spent by West African countries on external debt servicing is 17 per cent. This is high and even higher in Nigeria which spends about 50 per cent revenue on external debt servicing. It added that with the increasing domestic debt burden, the percentage of revenues spent on debt servicing in Nigeria was even higher.
The bank said that even though the country’s debt burden had increased by as much as 128 per cent in the last eight years, Nigeria’s debt to Gross Domestic Product remained low.
The low debt-to-GDP ratio notwithstanding, it added, the problem with the nation’s increasing debt burden was the high proportion of revenue spent on debt servicing.
It said, “Cape Verde had the highest external debt-to-GDP ratio in 2018, an estimated 103 per cent, followed by Senegal, Niger, and Sierra Leone. Liberia had the highest rate of debt accumulation between 2010 and 2018, at 329 per cent, followed by Nigeria at 128 per cent.
“Despite the increase, Nigeria still has one of the lowest external debt-to-GDP ratios, at 15.2 per cent. Benin, Guinea-Bissau and Togo also have a ratio below 25 per cent.
“The rapid increase in external indebtedness remains a challenge, especially given the shift toward non-concessional external debt. Debt service payments have also increased since 2010 and are projected to remain high in the medium term.”
The bank added, “The increase has heightened the fiscal burden in an already fiscally and growth-constrained environment. This raises important concerns regarding the sustainability of external debt. West African countries spend an average of 17 per cent of revenue on servicing external debt.
“In Nigeria, about half of the revenue is used to service external debt. The increasing domestic debt burden means that the total proportion of the revenue spent on servicing debt is even higher. In a country where only six per cent of GDP is collected in revenue, the high burden of debt service is a major concern.”