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Mounting debt service amidst revenue crisis raises sustainability concerns



FG to tax banks 50% of profit realised from FX floating

…as Nigeria spends $6bn in 5 years

The disturbing upward trajectory of Nigeria’s debt servicing is raising sustainability questions among financial experts, who are mindful of the gloomy outlook of the nation’s revenue drive.

This comes as naira depreciation and interest rate are conspiring with other factors to inflate the debt profile figures, leaving the country worse off in terms of debt-to-revenue ratio.

According to the latest data from the Central Bank of Nigeria (CBN), the Federal Government has spent a total of $15.55bn on debt servicing between 2019 and 2024.

In 2019, Nigeria paid $588.33m in debt service between January and May, while the payment for 2020 was $5.40bn. The debt service payments continued to rise in subsequent years, with $2.02bn paid in 2021, $2.34bn in 2022, and $3.43bn in 2023.

The CBN data further revealed that between January and May 2024, the country has paid $2.18bn in debt service. This is 270.9 per cent increase compared to the first five months of 2019, which was $588.33m.

President Bola Tinubu had expressed his administration’s commitment to breaking the cycle of over-reliance on borrowing for public spending and the resultant burden of debt servicing it placed on the management of limited government revenues. The President recently said the country could not continue to service its debt with 90 per cent of its revenue, stressing that the country was heading for destruction if that continued.

The President had said, “Can we continue to service external debts with 90 per cent of our revenue? It is a path to destruction. It is not sustainable. We must make the very difficult changes necessary for our country to wake up from slumber and be respected among the world’s great nations.

“To build a great nation, we must make bold decisions; even though it may be painful, it is not about you and me. It is about generations yet unborn.”

Also, the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, has been vehemently making cases against loans, stating that to stabilise the economy the country would need to rely less on borrowing.

Conflicting reality

However, statistics coming from the Debt Management Office (DMO) do not suggest that the managers of the economy are ready to match words with action, at least, for now. Last week, the DMO announced that Nigeria’s total public debt had reached N121.67 trillion, increasing by N24.33 trillion or 24.99 per cent within three months from a total debt of N97.34tn ($108.23bn) as of December 2023.

The public debt comprises both the total domestic and external debts of the Federal Government of Nigeria, the 36 state governments, and the Federal Capital Territory between January and March 2024.

The DMO report said, “Nigeria’s total public debt stood at N121.67 trillion ($91.46bn) as of March 31, 2024. The comparative figure for December 31, 2023, was N97.34 trillion ($108.23bn). Total Domestic Debt was N65.65tn ($46.29bn) while total external debt was N56.02tn ($42.12bn).”

The office said that the increase in naira terms of N24.33 trillion between the fourth quarter of 2023 and the first quarter of 2024, did not strictly represent new borrowing, but was driven majorly by naira depreciation, as the total debt was reduced in dollar terms by $16.77bn or 18.34 per cent.

The DMO used an official exchange rate of N1,330/$ to convert external debts to naira from N899.39 used to convert the debt in December 2023. It added that excluding the impact of the naira exchange rate movement in the first quarter of 2024, the domestic debt saw a marked increase to N65.65tn on March 31, 2024, from N59.12tn on December 31, 2023. The 36 states and FCT also have an external debt of $3.1bn and N4.068tn domestic debt.


The rise is also attributed to a new borrowing undertaken to partly finance the 2024 budget deficit and the securitisation of a portion of the N7.3tn Ways and Means advances at the CBN by the previous government.

The statement added, “Excluding naira exchange rate movements in Q1 2024, only the Domestic Debt component of Total Public Debt grew from N59.12 trillion on December 31, 2023, to N65.65 trillion on March 31, 2024.

“The increase was from new borrowing to part-finance the 2024 Budget deficit and securitization of a portion of the N7.3 trillion Ways and Means Advances at the Central Bank of Nigeria.

“Whilst borrowing, as provided in the 2024 Appropriation Act, will continue, we expect improvements in the government’s revenue to enhance debt sustainability.”

Business Hallmark recalls that the government has borrowed a total of $4.95bn in loans from the World Bank in the past 12 months amidst worries about the increasing costs of servicing external debt. This came as the government still expects fresh loan approval worth $4.4bn from the Africa Development Bank over the next year.

It was learnt that the bank approved funding for six projects including $750m for power sector financing, $500m for women empowerment, $700m for girl child education, $750m for renewable energy solutions, $750m on resource mobilisation reforms and $1.5bn for economic stabilisation reforms.

Doubtful sustainability

In a document titled, ‘2024: The Hard Road Ahead,’ the Chief Executive Officer, Financial Derivatives Company, Mr. Bismarck Rewane, highlighted that Nigeria’s debt was becoming unsustainable and the country’s debt burden would be further worsened by high interest rates in 2024.

He said, “Nigeria’s debt is becoming unsustainable. Nigeria serviced its debt with 99 per cent of its revenue in H1’23. Nigeria’s debt burden will be exacerbated by high interest rates in 2024. Efficient use of borrowed funds is crucial for its debt sustainability. The Federal Government must spend on productive sectors to boost revenue sources.”

In his intervention, Tilewa Adebajo, CEO of The CFG Advisory, observed that Nigeria’s debt repayment currently surpasses both recurrent and capital expenditures, notwithstanding the bloated recurrent expenditures in the 2024 budget and a large infrastructure gap.

Speaking on “Nigeria’s Fiscal Environment in an Era of Monetary Policy Tightening”, at the June 2024 edition of the Finance Correspondents Association of Nigeria (FICAN) bi-monthly discussion in Lagos, Adebajo noted that the 2024 budget allocated N8.7 trillion for capital expenditures, of which N1.32 trillion will go towards infrastructure development.

According to him, debt repayment now exceeds both recurring and capital expenditure, meaning that Nigeria’s $130 billion current debt burden is being serviced by 95% of earnings.

He said, “Nigeria’s debt load is now obviously unmanageable. When you factor in an additional US$10 billion from the budget deficit for 2024, it raises the question of whether Nigeria will end up like Ghana, Zambia, or Ethiopia by default.

“To avert the imposition of the Paris and London Clubs, discussions about restructuring both domestic and external debt must begin alongside ongoing economic reforms and revenue drives.”

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