Nigeria paid N7.8 trillion towards debt service in 2023—a 121% increase over N3.52 trillion in debt service from the year before.
This is based on an examination of information made available by the Debt Management Office (DMO).
According to the data breakdown, the cost of servicing domestic debt was N5.23 trillion, up 104% from N2.56 trillion in the prior year, while the cost of servicing external debt increased 167% to N2.57 trillion from N962.5 billion in 2022.
The devaluation of the local currency, which increased the cost of servicing foreign debt commitments as the CBN struggled with an FX liquidity crisis and exchange rate volatility, contributed to the notable increase in Nigeria’s debt payment costs.
The foreign debt cost was converted from dollars to naira using the DMO’s available prevailing exchange rate for the quarters.
It is noteworthy that the review year’s debt servicing costs exceeded the N6.56 trillion budgeted for the year.
The federal government has budgeted N6.56 trillion for debt servicing, which is made up of N1.81 trillion for external debt, N247.7 billion for the sinking fund, N1.2 trillion for interest on the Ways & Means debt to the CBN, and N3.29 trillion for domestic debt, according to the budget document obtained from the Budget Office.
Nigeria is still struggling to balance growing fiscal expenditures with declining revenue, with debt service eating up a sizable portion of the national budget. Data from the Budget Office shows that between January and September 2023, debt servicing made up 45.6% of all expenses.
Additionally, debt service consumed roughly 80.9% of the federal government’s total revenue during the nine months, in comparison to revenue earned during the same period. Notably, as of September 2023, retained revenue was N7.51 trillion, while debt service was N5.79 trillion.
President Bola Tinubu approved the N28.7 trillion budget for 2024, with a predicted revenue of N18.32 trillion. This means that the Nigerian government will be borrowing more money in 2024, resulting in a budget deficit of over N10 trillion.
In January 2024, the Debt Management Office raised over N2 trillion through bond auctions, while the CBN, acting on behalf of the federal government, has already raised around N2.05 trillion through Treasury Bill auctions.
In the meantime, the federal government and the World Bank are presently negotiating to finalise the acquisition of approximately $1 billion in loans to address the difficulties faced by internally displaced persons (IDPs) and their host communities, as well as to support rural access and agricultural marketing in the nation.
Similarly, it has been reported that the federal government has engaged investment firms, such as Citigroup, JPMorgan Chase & CO, and Goldman Sachs Group, to provide advice on a Eurobond offering that is scheduled for later this year. By the end of the year, Nigeria’s debt profile would have increased dramatically, which would raise the country’s debt service costs—even though the size of the Eurobond offer is still uncertain.
Despite this, the federal government’s proposed debt payment expense for the fiscal year 2024 is N8.25 trillion, or 28.7% of the entire proposed budget.
The DMO also declared that the country’s overall debt stock will expand by 110% in just one year, from N46.25 trillion at the end of 2022 to N97.34 trillion on December 31, 2023. This represents a startling increase of N51.1 trillion.
The combined domestic debt of the 36 states, including the Federal Capital Territory, and the federal government was N59.12 trillion, or N53.26 trillion.
However, as of the end of December 2023, the federal government owed N34.07 trillion in external debt, and the states owed an additional N4.15 trillion, making the total amount owed to foreign creditors N38.22 trillion.
