As the Federal Government accumulated debts, notably during the previous administration, the nation’s debt servicing increased by 22.3 percent to $1.8 billion in the first seven months of this year, 2023, according to the Central Bank of Nigeria’s (CBN) latest foreign payments data.
According to the report, this represents 22.3 per cent leap from $1.48 billion reported in seven months of 2022. A breakdown shows that the $112.3 million spent in January 2023 was 146.17 percent greater than the $45.64 million spent in December 2022, while the $288.54 million spent in February was 156.8 percent higher. The federal government spent $400.47 million in March, but only $92.85 million in April.
However, the CBN disclosed that $221.05million was spent on debt services in May and it dropped to $54.36million in June. For July, the figure increased to $641.7million, the highest so far in 2023.
With about $400.47million debt services in March, the government has spent a sum of $801.36 million on debt services in the first quarter of 2023 (Q1), a growth of four per cent from $770.52 million in Q1 2022 and this occurred as the Federal Government strugged to boost its revenue base .
In 2022, the country spent a total of $2.4billion to service its external debts, which was a slight increase from the $2.11billion spent in 2021. Under former President Muhammadu Buhari, the apex bank data showed that $15.1billion was spent on debt services between May 2015 and April 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.
However, members of the Monetary Policy Committee (MPC) of the CBN at the first meeting in 2023 also expressed concerns over increasing debt service amid rising inflation rate and weakening of local currency.
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, states that the country is at the risk of sliding into critical debt servicing problems unless urgent actions are taken to significantly raise revenue.
On the recent senate approval of the securitisation of N22.7 trillion Ways and Means advances provided to the government by the CBN, KPMG said Nigeria’s debt, which hit N46.3 trillion by the end of 2022, will immediately rise to about N70 trillion.
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.
“With FGN revenue to GDP ratio of 4.49 per cent as of December 2022, Nigeria’s debt service to revenue ratio may surpass 100 per cent in 2023, which will limit the fiscal space and the government’s ability to pay for its operations and functions, unless urgent measures are taken to build revenue,” KPMG said.