Nigeria’s expenditure on servicing its debt slowed down significantly in the second quarter of 2023, totalling N849.58 billion. This represents a substantial decrease of 43.04% when compared to the N1.49 trillion spent on debt servicing in the first quarter of 2023.
Data obtained from the Debt Management Office (DMO) reveals that from January to March 2023, Nigeria allocated N874.13 billion to servicing domestic debt and $801.36 million (equivalent to N617.35 billion) to external debt servicing, amounting to a total of N1.24 trillion.
However, between April and June 2023, Nigeria spent N565.88 billion on domestic debt servicing and $368.26 million (equivalent to N283.7 billion) on external debt servicing, again totaling N1.24 trillion. The exchange rate used for external debt servicing was $1 to N770.38.
Over the span of six months, the country spent a total of N2.34 trillion on servicing its debt.
Despite the reduction in debt servicing costs, Nigeria’s total public debt reached N87.38 trillion by the end of June 2023, marking a substantial increase of 75.29% or N37.53 trillion when compared to the N49.85 trillion recorded at the end of March 2023.
The DMO, in an official statement, clarified that this debt figure includes the N22.71 trillion classified as Ways and Means Advances, which the Central Bank of Nigeria extended to the Federal Government. The statement also noted that the debt stock comprises new borrowings by both the Federal Government and sub-national entities from local and external sources.
The data indicates a significant surge in both domestic and external debt within just three months. Domestic debt increased by 79.18%, rising from N30.21 trillion, while external debt surged by 69.28%, growing from N19.64 trillion in the first quarter of 2023.
The DMO had previously cautioned that the Federal Government’s projected revenue of N10 trillion for 2023 could not support further borrowing. It highlighted that the projected government debt service-to-revenue ratio of 73.5% for 2023 was alarmingly high and posed a threat to debt sustainability. The DMO expressed concerns that the current revenue profile of the government was inadequate to support increased borrowing.
Both the International Monetary Fund (IMF) and the World Bank had also raised concerns about Nigeria’s debt burden. The IMF warned that the Federal Government was projected to allocate 82% of its revenue to interest payments in 2023, while the World Bank projected that debt servicing would consume 123.4% of the Federal Government’s revenue in the same year.
President Bola Tinubu recently underscored the urgency of addressing this issue, emphasizing that the country could not continue servicing its debt with 90% of its revenue and warning of dire consequences if this pattern persisted.