Nigeria has spent about 277.64% more servicing its external debt in the third quarter of 2023, according to the latest data from the Debt Management Office (DMO).
A quarterly analysis of the data shows that external debt servicing was $368.26 million (N283.17 billion) in Q2 2023.
However, in Q3 2023, it rose to $1.39 billion (N1.07 trillion), showing an increase of 277.64% in three months.
The exchange rate of the DMO (N768.93/$) was used in calculating the naira value for the external debt servicing cost.
Top Three External Debt Service Expenditure Items in Q3 2023
- Eurobonds: $943,661,250.03
- World Bank’s International Development Association (IDA): $212,038,953.70
- China (Exim Bank of China): $137,191,263.89
The DMO in a statement on Wednesday said that external debt decreased due to the redemption of a $500 million Eurobond and payment of $413.859 million as the first principal repayment of the $3.4 billion loan obtained from the International Monetary Fund (IMF) in 2020 during Covid-19.
However, it appears that there is no record of the debt service to the IMF in the external debt servicing report of Q3 2023.
Total Debt Servicing
Nairametrics further observed a significant increase of 237.06% in the total public debt servicing (which includes both external and domestic debt servicing) in Q3 2023.
About N2.86 trillion was spent on debt servicing in Q3 2023, which is higher than the N849.05 billion spent in Q2 of the same year.
It was also observed that Nigeria’s debt servicing bill was N5.20 trillion between January and September 2023.
This nine-month total bill includes N3.23 trillion in domestic debt servicing and $2.56 billion (N1.97 trillion) in external debt servicing.
Also, domestic debt servicing rose by 216.76% based on a quarterly analysis from N565.88 billion in Q2 2023 to N1.79 trillion in the next quarter.
More Insight
The DMO noted that Nigeria’s total public debt increased marginally from N87.38 trillion at the end of Q2 2023 to N87.91 trillion as of September 30, 2023. This represents a marginal rise of 0.61% in three months.
The DMO also stated that the domestic debt stock of the country increased by N1.80 trillion to N50.196 trillion as external debt stock declined by $1.57 billion in the third quarter of 2023 from $43.16 billion to $41.59 billion as of September 30, 2023.
There have been concerns over the country’s rising debt costs amid rising debt over the years.
In its 2022 Debt Sustainability Analysis Report, the DMO warned the projected government’s debt service-to-revenue ratio of 73.5 per cent for 2023 was high and a threat to debt sustainability.
It noted that the government’s current revenue profile could not support higher levels of borrowing.
The International Monetary Fund recently said the Federal Government projected to spend 82 per cent of its revenue on interest payments in 2023.
The World Bank also projected that debt servicing would gulp 123.4 per cent of the Federal Government’s revenue in 2023.
President Bola Tinubu recently said the country could not continue to service its debt with 90 per cent of its revenue.
He noted that the country was headed for destruction if that continued.
- In its statement on Wednesday, the DMO, affirmed the country’s commitment to honouring its debt obligations, noting that “The servicing of these debts, in addition to other debts, are clear demonstrations of the FGN’s commitment to honouring its debt obligations.”
In a recent statement by the World Bank, it stressed the impact of high debt service costs on developing countries, with its Chief Economist and Senior Vice President, Indermit Gill, saying:
- “Record debt levels and high-interest rates have set many countries on a path to crisis. Every quarter that interest rates stay high results in more developing countries becoming distressed and facing the difficult choice of servicing their public debts or investing in public health, education, and infrastructure.
- “The situation warrants quick and coordinated action by debtor governments, private and official creditors, and multilateral financial institutions more transparency, better debt sustainability tools, and swifter restructuring arrangements. The alternative is another lost decade.’’
