FG spent N2.49trn on debt servicing in nine months – DMO report

Nigeria spent N2.49tn on debt servicing payments in the first nine months of 2021, data obtained from the Debt Management Office (DMO) have shown.

Between January and March 2021, Nigeria spent N612.71bn on domestic debt servicing, while it spent $1bn (N410.83bn) on external debt servicing, giving a total of N1.02tn.

From April to June 2021, the country spent N322.7bn on domestic debt servicing and $299m (N122.83bn) on external debt servicing, showing a total of N445.53bn.

From July to September 2021, Nigeria spent N808.49bn on domestic debt servicing and $520.78m (N213.95bn) on external debt servicing, giving a total of N1.02tn.

The official exchange rate of the Central Bank of Nigeria (CBN), which showed $1 =N410.83 as of December 15, was used for the external debt servicing.

For domestic debt, the government spent N219.29bn in January, N125.09bn in February, N270.33bn in March, N258bn in April, N42.4bn in May, N22.3bn in June, N354.07bn in July, N100.66bn in August, and N353.75bn in September.

DG, Debt Management Office, Patience Oniha

In Q1 and Q3, the government focused on principal repayments, while in Q2, the government focused on interest payments. Throughout, the Federal Government bonds had the largest chunk of debt servicing payments.

A breakdown of the statistics in Q2 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.

For external debt servicing in Q1, commercial loans had 76 per cent with a cost of $763.04m (N313.48bn), multilateral had 13 per cent with a cost of $134.04m (N55.05bn), and bilateral had 11 per cent with a cost of $106.33m (N43.68bn).

For external debt servicing in Q2, commercial loans had 53 per cent with a cost of $157m (N64.4bn), multilateral had 35 per cent with a cost of $103.7m (N42.5bn), and bilateral had 13 per cent with a cost of $38.2m (N15.7bn).

For external debt servicing in Q3, commercial loans had 47 per cent with a cost of $246.16m (N101.13bn), multilaterals had 32 per cent with a cost of $165.37m (N67.94bn), and bilateral had 21 per cent with a cost of $109.25m (N44.88bn).

Earlier, the Minister of Finance, Zainab Ahmed, had blamed Nigeria’s high debt service to revenue ratio on the country’s large expenditure base.

She noted that a large proportion of Nigeria’s budget catered to payroll.

She said, “Our debt service to overall revenue is high because we have a very large expenditure base. We have a large proportion of our budget dedicated to payroll, and Mr President had decided from the beginning of his administration that we were not going to disengage staff.

“So, you have to pay salaries, you have to pay pensions. And also, we have to fund the other arms of government, which are the judiciary and the legislature.”

It was also reported that the amount budgeted for personnel costs increased from N2.29tn spent in 2019 to N4.11tn in the proposed 2022 budget, showing an increase of N1.82tn or 79.48 per cent in three years, signalling a rise in the cost of recurrent expenditure.

Despite the increasing cost of debt servicing, the World Bank said that Nigeria and some other countries refused to participate in a temporary suspension of debt-service payments due to concerns about future access to debt and credit-rating downgrades.

The lending bank added that Nigeria could save about $432.6m between May 2020 and December 2021 through the debt service suspension initiative.

The DMO on Tuesday emphasized the need for the Federal Government to increase revenue momentum to lower the country’s debt profile and reduce new loans.

The Director-General, DMO, Ms Patience Oniha, said the government must prioritise and invest heavily in sectors capable of generating higher income such as agriculture, mining, and ICT to grow the economy.

Oniha said the country’s debt profile had been on the rise due to the impact of falling revenues and the crises that followed the coronavirus pandemic on the economy.

Despite the increasing debt stock and debt service payments, the House of Representatives, on Tuesday, approved external borrowings totalling $5.8bn and a grant of $10m for the Federal Government as part of the proposed 2018–2020 External Borrowing (Rolling) Plan No.3.

Also, the AfDB’s Board of Directors announced on Tuesday the approval of a $210m loan for Nigeria’s Special Agro-Industrial Processing Zones, which it said would boost the agricultural sector.