The Central Bank of Nigeria (CBN) says it spent $3.5 billion to service the federal government’s foreign debt obligations in 2023, a 40.59 per cent Year-on-Year (YoY) increase from $ 2.49 billion in 2022.
Debt servicing has continued to constitute a major threat to Nigeria’s economy and the international payment data released by the CBN showed that from 2011 to 2021, the amount paid to the World Bank, International Monetary Fund (IMF), Exim Bank of China, among others for debt service and payments have continued to mount amid weakening of the naira against the dollar.
InsideBusiness Online gathered that the debt repayment was made only on behalf of the federal government and did not include state governments’ debt services in the period under review.
The breakdown of debt service showed that the average minimum and maximum amount paid on debt services stood at $ 54.36 million and $ 641.7 million between June and July 2023, respectively.
The CBN data revealed that between 2011 and 2017, the apex bank was withdrawing an average of $328 million on debt services and payments and it reached the $ 1.4 billion mark in 2018.
In 2019, the CBN withdrew $1.34 billion as debt service and payment, the international payment data disclosed.
The data by the apex bank revealed that in 2021, debt services and payments dropped by 63 per cent to $ 2.13 billion from $ 5.77 billion reported in 2020. The reported $ 5.77 billion is the highest debt services and payments recorded by the CBN, while a total of $ 242.8 million was the lowest in 2013.
Analysis of international payment data showed that in the first three months of 2021, $1.3 billion was spent on service debts. The amount dropped to $298.9 million in the next three months ending June 2021.
From July to October, CBN further disclosed that a total of $606 million was spent on service debts.
A month-on-month breakdown showed that the CBN in January spent $617.5 million to service debts; it dropped by 65.45 per cent to $213.3 million in February; and dropped to $172.5 million in March.
In April, the CBN disclosed that $82.3 million was spent on debt service; it moved to $167.5 million in May, the second-highest amount spent on debt service by the apex bank in one month.
In June, the amount dropped to $49.4 million; in July, it rose to $120.8 million. For August September and October, the figures reported by the CBN were $230.6 million, $169.2 million, and $85.2 million respectively.
However, between November and December of 2021, the CBN revealed that $148.57 and $ 69.83 million were spent on debt services and payments respectively.
The apex bank in its economic report for October 2021, maintained that debt service obligations amounted to N1,022.99 billion, compared with N440.63 billion in the second quarter of 2021.
“The increase was due largely to the rise in the payment of FGN Bonds and principal repayment of promissory notes,” the CBN explained.
The apex bank noted that the depreciation of the naira exchange rate also contributed to the rising debt service payments.
Nigeria’s debt profile continued to snowball and its attendant cost is worrisome as members of the CBN’s Monetary Policy Committee (MPC) noted the rising burden of debt services.
Meanwhile, analysts have continued to express that the global outlook remained uncertain due to rising global debt levels, lockdown measures, and sluggish global trade, stressing that the roll-out of the COVID-19 vaccines and continued implementation of monetary, fiscal, and structural policies tend to strengthen global growth prospect.
In 2022, Nigeria spent a total of $ 2.4 billion to service its external debt, which was a slight increase from the $ 2.11 billion spent in 2021.
Under former President Muhammad Buhari, the apex bank data revealed that $ 15.1 billion was spent on debt services between May 2015 and April 2023.
Under President Bola Tinubu’s regime in 2023, Nigeria’s debt service stood at $2.38 billion between June and December 2023.
The International Monetary Fund (IMF) recently said the federal government projected to spend 82 per cent of its revenue on interest payments in 2023.
KPMG had also raised alarm that Nigeria’s debt service to revenue ratio may exceed 100 per cent in 2023. The professional services firm in its macroeconomic snapshot Nigeria’s risk of sliding into critical debt servicing problems unless urgent actions were explored to significantly raise revenue.
The firm said with the N8.8 trillion expected new borrowings from both domestic and external means in the 2023 states and federal budgets, the total debt stock will likely stand at about N77.8 trillion by the end of 2023.
In 2022, Nigeria’s debt service-to-revenue ratio was 80.6 per cent — a figure far above the World Bank’s suggested 22.5 per cent for low-income countries like Nigeria.
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