Nigeria to spend 78% of borrowing to fund debt service in 2021
By Samuel Bankole
Nigeria has proposed to spend about N3.34 trillion to service its debt in the course of the 2021 fiscal year, the federal government stated in its budget for next year.
The government plans to spend N2.18 trillion to service its domestic debt while it will spend N940.89 billion on its external debt, the details of the 2021 budget revealed.
The government is also setting aside the sum of N220 billion as a sinking fund to retire maturing loans and obligations in the course of the year.
The amount set aside by the government to finance its outstanding debt service represents 25.53 percent of the N13.08 trillion budgeted for the 2021 fiscal year.
The government plans to borrow N4.28 trillion from both domestic and foreign debt markets to fund the 2021 budget deficits.
Analysis of the amount the government intends to borrow from both domestic and external sources showed that 78.03 percent of the borrowing will be utilised to fund debt service in the course of the year.
Monetarists at their last Monetary Policy Committee (MPC) meeting in September had warned the government against incessant borrowing because of the implications to growth.
“The Committee also noted the rising public debt profile and urged the fiscal authority to strengthen its debt management strategy, explore other sources of revenue, as well as enhance efficiency in public expenditure'” the Central Bank of Nigeria (CBN) governor, Godwin Emefiele said at the end of MPC meeting last month.
Nigeria’s total debt at the end of the second quarter of 2020 stood at N31.01 trillion, buoyed by the $3.36 Billion Budget Support Loan from the International Monetary Fund (IMF) in May.
It also means that Nigeria debt services budget represent about 10.77 percent of the total outstanding debt at of June 2020.