The cost of servicing Nigeria’s debt increased by 14.68 percent to N3.36 trillion in 2022, according to data released by the Debt Management Office (DMO).
The DMO stated in its debt report for the last quarter that the country spent N2.93 trillion in 2021 on payments for servicing both domestic and foreign debt.
The DMO had previously said that as of December 2022, the total stock of debt in Nigeria was N46.25 trillion.
At the current exchange rate of $/N460, a study of DMO revealed that the nation spent $2.4 billion, or N1.07 trillion, to service its external debt last year.
In 2022, N2.56 trillion was spent on repaying domestic debt, with April seeing the highest costs of N529.88 billion.
Debt servicing has increased under the presidency of Muhammadu Buhari since 2015 when he assumed power in Africa’s biggest economy.
The total amount spent in 2016 to pay off the nation’s internal debts was N1.23 trillion. In 2017, N1.48 trillion was spent servicing domestic debt.
The cost of servicing the nation’s domestic debt increased to N1.8 trillion in 2018, but it decreased to N1.69 trillion in 2019.
Debt servicing increased to N1.85 trillion in 2020. Domestic debt service reached N2.05 trillion by 2021.
On the other side, servicing foreign debt consumed $353.09 million in 2016. It increased to $464.05 million in 2017 and to $1.47 billion in 2018.
The nation spent $1.33 billion in 2019 on servicing its foreign debt. External debt service cost $1.56 billion in 2020. It increased to N2.93tn by 2021.
Using the annual exchange rate set by the CBN, the amount spent on servicing the external debt was determined. For instance, the average exchange rate between the naira and the dollar in 2016 and 2017 was N197 and N305, respectively. In 2018 it was N305, and in 2019 it was N360. In 2020 and 2021, it closed at N380 and N420, respectively.
Reacting, The Lagos Chamber of Commerce and Industry expressed concern over the nation’s debt load, particularly in light of the slow rate of income growth, the extensive amount of deteriorating infrastructure, and the unsupportable weight of oil subsidy overhang.
The chamber stated in a statement on Thursday that the almost 90% ratio of debt payments to government revenue was still concerning and unsustainable.
According to the report, capital and interest payments on borrowed money exposed the nation’s fiscal weaknesses, and the government urgently needed to put more emphasis on plans for increasing revenues while plugging leaks.
In order to minimize its debt obligations and strengthen its financial position, the chamber further encouraged the government to shift its attention to equity financing, divestiture, or shedding of its equity stakes in state-owned firms, real estate, and infrastructure.
The International Monetary Fund (IMF) has cautioned that if the government does not take the necessary steps to increase revenue production, debt servicing might consume 100 percent of the Federal Government’s revenue by 2026.