Data Reveals Nigeria’s Federal Government Spent $14.37 Billion on International Debt Obligations under Buhari Administration Amid Economic Concerns.

New Report Reveals Federal Government Spent $14.37 Billion on Foreign Debt Obligations Excluding State and Capital Territory. CBN Debt Services in 2022 Increased by 17.17% from 2021.

CBN Reports Record High of $426.18 Million Spent on Debt Services in July 2022, with Decrease to $51.15 Million in August. 2021 sees Highest Debt Service and Payment at $5.77 Billion as Federal Government Borrows N7.3 Trillion to Bridge Budget Deficit.

Federal Government’s Actual Expenditure of N11.69 Trillion Exceeds 2021 Generated Revenues of N4.39 Trillion. Fiscal Deficit Continues for 11 Years, with the 2021 Deficit at 22% Higher than 2020’s N5.98 Trillion. CBN Spends $1.34 Billion on Debt Services and Payments in 2019 and $1.47 Billion in 2018. An average of $444.77 million was Spent Annually on Debt Services and Payments Between 2015 and 2017.

Experts Express Concern over Nigeria’s High 83% Debt Service-to-Revenue Ratio as Debt Profile Continues to Increase. DMO Reports that if Other Sovereign Debts are Included, Debt Stock Could Jump to N77 Trillion. DMO Director-General Emphasizes Need for Urgent Measures to Boost Nation’s Revenue and Improve Public Debt Sustainability.

DMO Director-General Notes that other Countries rely more on taxation as a source of funding for the government, unlike Nigeria. CBN Governor Stated at the last Monetary Policy Meeting (MPC) that the domestic shocks come from the ongoing insecurity that hinders economic agents, the increasing cost of debt and debt servicing, the worsening fiscal balances, the rising expenses as the 2023 general elections are approaching and the ongoing uptrend in inflationary pressure.

The director of the Centre for the Promotion of Private Enterprise (CPPE) states that the ability to service the current debt raises significant sustainability concerns. He notes that the debt service provision in the 2023 budget is a significant N6.3 trillion, which includes N1.2 trillion in interest payments on Ways and Means financing by CBN. The debt service is also 60% of projected revenue and 29% of projected total expenditure. He also points out that the actual revenue historically has been less than budgeted revenue, which implies that the debt service to actual revenue ratio would be much higher by the end of the fiscal year. He states that the high debt service has a high opportunity cost for the economy and citizens as it denies funding for critical social and economic infrastructure projects needed to build a globally competitive economy and improve the welfare of citizens. He also highlights that there is a crowding effect on the private sector in the domestic credit market, the exchange rate risk inherent in the exposure to mounting foreign debt, and the need for a review of Government debt management strategy to reduce the foreign component of the debt stock and exposure to commercial debts.

The Director of CPPE emphasizes the importance of reforms to reduce recurrent expenditure, particularly the cost of governance, and to attract equity domestic and foreign private sector capital for economic and social infrastructure financing. He notes that reducing the burden of debt and the risk of a debt trap also requires appropriate policies to incentivize private investment and that creating an enabling environment for private investment is critical to reducing the burden of public debt. He states that the quality of government spending and the right expenditure priorities are crucial for the attainment of fiscal sustainability by the government and that there is a need to address corruption risks in government projects and general government expenditure. Analysts at Afrinvest in a recent report state that the debt-service-to-revenue ratio, a measure of liquidity, remains disproportionately high at 83% as of Q3:2022 and that based on their estimate, the debt service-to-revenue ratio could reach 91.8% by year-end.

Source: ThisDay Live

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