According to the planned budget for 2023, the Federal Government has proposed to spend N4.5 trillion on interest payments on the domestic debt by 2023. In comparison to the N1.31 trillion projected allocation for interest on domestic debt in 2016, this represents a rise of 243.51%.
The President, Major General Muhammadu Buhari (ret. ), emphasized that despite the nation’s financial issues, the nation regularly honored its debt service commitment while presenting the 2023 appropriation bill before a joint session of the National Assembly recently.
“Despite our revenue challenges, we have consistently met our debt service commitments. Staff salaries and statutory transfers have also been paid as and when due,” Buhari added.
However, speaking at the launch of the World Bank’s Nigeria Development Update titled, ‘The urgency for business unusual,’ held recently in Abuja, the Finance Minister, Zainab Ahmed, admitted that Nigeria was struggling to service its debt.
She said, “Already, we are struggling with being able to service debt because even though revenue is increasing, the expenditure has been increasing at a much higher rate, so it is a very difficult situation.”
In a paper from the Debt Management Office’s Director General, Patience Oniha, which our reporter recently acquired, the DMO noted that excessive debt levels would frequently result in expensive debt services and have an impact on investments in infrastructure.
The DMO DG claims that high debt levels result in hefty debt servicing, which lowers the amount of money available for investment in infrastructure and other economic sectors.
However, the government still intends to borrow N8.80 trillion and pay N6.31 trillion in interest in 2023. In its latest Africa’s Pulse report, the World Bank said that public debt in Nigeria was concerning due to the rising debt service-to-revenue ratio.
According to the bank, the debt service to revenue ratio could stand at 102.3 per cent by the end of 2022. The President of the World Bank Group, David Malpass, recently said that the bank would work with the International Monetary Fund to assess Nigeria’s debt sustainability.
He said, “We will work with the IMF on an assessment of the debt sustainability of Nigeria but it will be up to Nigeria itself to interact with the various creditors, which include bondholders, and official creditors, that are engaged in Nigeria.”
Earlier, Ahmed had disclosed that the Nigerian government was in talks with the IMF and the World Bank to restructure the country’s debts.
However, the World Bank Group President said that Nigeria was yet to request the common framework for debt restructuring.
The Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, recently said that the Nigerian economy had been characterised by diverse economic vulnerabilities, which included rising public debt and debt service burden.
As a result of the increasing debt service cost, he said, “Financing of the operations of government – personnel cost, overhead cost, capital expenditure, and even part of the servicing of the debt – will have to come from additional borrowing. These portend severe vulnerabilities for the Nigerian economy.”
