Nigeria’s foreign debt load increased as the naira’s value against the dollar dropped from N196.92 in June 2015 to N414.72 in June 2022. The naira’s value versus the US dollar decreased by 52.52% throughout the course of the seven years under study.
According to a document titled Monthly Average Exchange Rates of the Naira (Naira Per Unit of Foreign Currency) for 2015 that was downloaded from the Central Bank of Nigeria’s website, the interbank foreign exchange market price for one dollar was N196.92.
According to the CBN’s estimate, the value of one dollar was N414.72 as of June 30, 2022. The overall external debt of Nigeria increased from $10.32 billion as of June 30, 2015, to $40.06 billion as of June 30, 20.
According to the Debt Management Office’s external debt stock statistics, this indicated a growth of 288.18% in seven years. According to a breakdown, the federal government has $7.05 billion in external debt in 2015, compared to the states’ $3.27 billion. State external debt reached $4.56 billion by 2022, compared to $35.5 billion for the federal government.
The debts include loans from bilateral lenders including China, France, Japan, Germany, and India as well as loans from multilateral lenders like the World Bank, the African Development Bank, and the International Monetary Fund.
Additionally, they contain obligations derived from commercial sources, such as Eurobonds and Diaspora Bonds.
Nigeria’s external debt would be $40.06 billion if the country’s current currency rate for June 2015 were applied. Nigeria’s external debt in naira terms would have been N7.89tn.
However, with the exchange rate of N414.72 as of June 30 this year, the total external debt in naira terms was N16.61tn, showing a difference of N8.72tn.
By implication, it will cost Nigeria N8.72tn in naira terms if the country decides to pay back the $40.06bn external debt in 2022. If this same debt was incurred in 2015, Nigeria would have spent N8.72tn less, given the then exchange rate of N196.92/$.
Reacting, the Managing Director/Chief Executive Officer of Cowry Asset Management Limited, Mr Johnson Chukwu, said that high external debt would impose a huge debt service on the economy.
He said, “This will impose a huge debt service on the economy, particularly at a period when we have low revenue from oil sales. If the revenue from oil sales does not improve, then the government will be struggling to meet that debt service obligation to foreign lenders.”
However, he noted that Nigeria could service its foreign debt at the current level, but a constant increase in debt without a corresponding increase in foreign currency earnings could put the country in a difficult position.