Nigeria’s debt service report for Q3 2022 released by the Debt Management Office (DMO) revealed that the country spent N1.17 trillion on local and foreign debt servicing in the period under review. This figure represents a 27.9 percent increase from the N912.7 billion recorded in the second quarter of the year.
Driving the news
A further breakdown released by the DMO shows that the federal government spent N820.59 billion servicing domestic debts while simultaneously incurring N346.43 billion on foreign debt service costs. This brings Nigeria’s total debt stock to $101.91 billion (as of September 2022) from $103.31 billion in June.
- Due to the depreciation of the Naira against the US dollar at the official exchange channel, total debt stock rose to N44.06 trillion compared to N42.85 trillion.
Why it matters
Nigeria is in a revenue crisis that forces the country to borrow to fund its budget deficit. According to the Minister of Finance, Zainab Ahmed, the federal government’s revenue between January and August 2022 was N4.233 trillion while spending about N3.52 trillion on debt service during the period under review. Meanwhile, the country’s budget for the same period was N6.65 trillion. This shows Nigeria would keep borrowing to fund its budget and service debts.
State of play
A country can experience sharp rises in debt due to tax cuts, increased stimulus programs, a rise in government spending, decreased tax revenue, etc. In a country like Nigeria, one of the major reasons the debt stock continues to rise is a lack of revenue sources. Others include mismanagement of public funds, corruption and lack of capital fundings due to insecurity.
According to the World Bank’s Lead Economist for Nigeria, Alex Sienaert, the country’s debt servicing would cost 123.4 percent of FG’s revenue in 2023.