Nigeria, Africa’s biggest economy, spent $1.82 billion on external debt servicing in 2021, 16.7 percent higher than the $1.56 billion spent a year earlier.
The federal government saw its domestic debt service rise by 11.35 percent to N2.06 trillion from the N1.85 trillion it spent the previous year, according to Debt Management Office (DMO)
The government earned N5.5 trillion from January to November in 2021, available data show.
The federal government had planned N3.61tn for debt service in the 2022 budget, about 21 percent of total expenditure, and 34 percent of total revenues.
“The worry is that Nigeria’s rapidly growing foreign debt stock does not reflect shrinking oil revenues and we need to be careful not to fall into the 1980s debt trap where a huge chunk of revenues went to debt service,” Egie Akpata, a director at Lagos-based investment ban UCML Capital, said recently.
The International Monetary Fund (IMF) has warned that Nigeria’s decade-long rise in public debt could create both financial and revenue squeeze for the economy in the medium term.
Ari Aisen, resident representative for Nigeria, raised concerns on Monday about the country’s debt service while presenting the latest Sub-Saharan Africa Regional Economic Outlook in Abuja.
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He said many African countries, including Nigeria, would face a critical problem with debt servicing unless actions were immediately taken to significantly raise revenue.
But Aisen said the IMF was concerned that over 80 per cent of federal government revenue was going into debt servicing, describing it as an “existential problem.”
“It is a reflection of low revenue,” he said.
The World Bank said in a recent report that Nigeria’s debt remained sustainable, albeit vulnerable and costly, especially due to large and growing financing from the Central Bank of Nigeria.
“While currently the debt stock of 27 percent of GDP is considered sustainable, any macro-fiscal shock can push debt to unsustainable levels,” it added.
In February this year, the IMF highlighted the urgency of fiscal consolidation to create policy space and reduce debt sustainability risks in Nigeria, calling for significant domestic revenue mobilisation.
