Nigeria’s domestic creditors received N1.33 trillion out of the total debt service payment of N1.87 trillion made in the first six months of this year, data obtained from the Debt Management Office have shown.
Foreign creditors received N536.16 billion in the period under review, according to the data.
The latest figures on domestic and external debt obligations of the federal government showed that Nigeria’s external debt rose by 4.4 percent from $38.39 billion as of December 2021 to $40.06 billion as of June 2022. The domestic debt increased by 8.9 percent from N19.24 trillion as of December 2021 to N20.95 trillion as of June 2022.
Nigeria’s fiscal strains have increased due to huge subsidy payments, especially at a time the country is unable to benefit from the crude oil rally on the international market. This is due partly to crude oil theft and paucity of new investments in Nigeria’s energy sector which impaired its daily crude oil production.
According to Zainab Ahmed, minister of finance, budget and national planning earlier in the year, Nigeria recorded a budget deficit of N3.09 trillion in the first four months of 2022, as the country missed its revenue target.
But due to the resilience of the non-oil sector, the Nigerian economy grew by 3.54 percent in the second quarter of 2022, an improvement over the 3.11 percent real GDP growth rate recorded at the end of the first quarter of this year.
The positive real GDP growth rate was recorded despite the headline and food inflation rates surging to 20.52 percent and 23.12 percent respectively in August, attaining new heights last reached 17 years ago.
“The growth composition analysis showed that the economy’s overall growth footprint was primarily sustained by the growth of 10.8 percent in the non-oil sector – non oil industrial (4.0 percent), services (7.1 percent) and agriculture (2.2 percent) sectors. The growth in these sectors helped to neutralise the adverse impact of continuous negative performance (growth) of the oil sector (-37.8 percent in H1-2022 and it has recession since Q1’2020) to Nigeria’s GDP growth rate,” Nigeria Economic Summit Group (NESG) said in its first-half 2022 assessment of the Nigerian economy.
Domestic debt servicing was paid to creditors that invested in the Nigerian Treasury Bills, Federal Government Bonds, Federal Government Green Bonds, Federal Government Savings Bonds, Promissory Notes (principal), and Federal Government Sukuk.
The bulk of the domestic debt servicing payments were made to creditors that invested in the federal government bonds as those creditors received N892.06 billion in the first half of this year, representing 66.9 percent of the total payments made by the federal government.
Creditors that invested in promissory notes (principal) received N286.67 billion, representing 21.5 percent of the total debt servicing payments during the first half of 2022.
Foreign debt servicing payments were made to multilateral institutions, bilateral institutions, commercial creditors and others.
By receiving N848.33 million, commercial external creditors got 65.7 percent of the total debt servicing payments made to external creditors in the six months ended June 2022. Multilateral creditors received N278.62 million, representing 21.6 percent of the total payments, while bilateral creditors received N165 million, amounting to 12.8 percent of the total debt servicing made by the Nigerian government.
Analysts are of the opinion that debt stock will rise further due to the hawkish stance of the Central Bank of Nigeria that led to hiking the benchmark interest rate to 14 percent in July.
“From the standpoint of fiscal sustainability (solvency and liquidity), Nigeria is gradually approaching a fiscal cliff or trap as the country’s debt service to revenue climbs unchecked (currently at 119 percent of revenue) and debt-to-GDP ratio approaches the 35 percent weak-risk threshold set by the International Monetary Fund (currently at 23.3 percent in Q1-2022),” the NESG said recently.