3 months debt service gulps $1bn — CBN
By Kayode Tokede
The Central Bank of Nigeria (CBN) has disclosed that the federal government spent $1billion on debt services and payments between January and March 2021.
The CBN in prior period said the government spent $4.68billion on debt services and payments.
According to the apex bank international payments data, $617.5million was spent on debt services and payments in January, while $213.3million and $172.59million was spent by the federal government on debt services and payments between January and March 2021 respectively.
Debt service obligations in the reporting period, amounted to N797.41 billion, compared with N416.43 billion and N752.37 billion in 2020 Q2 and 2019 Q3, respectively.
Analysts have expressed that the global outlook remained uncertain due to rising global debt levels, lockdown measures, and sluggish global trade, stressing that the roll-out of the COVID-19 vaccines and continued implementation of monetary, fiscal, and structural policies tends to strengthen global growth prospect.
The government is meant to pay back loans borrowed from Exim Bank of China, International Monetary Fund (IMF), among others.
The CBN in its economy report for January said, “Debt service obligations in the reporting period, amounted to N797.41 billion, compared with N416.43 billion and N752.37 billion in 2020Q2 and 2019Q3, respectively.
“The increase was due largely to the maturity of FGN bonds, Eurobonds, and loans from Exim Bank of China. The depreciation of the naira exchange rate also contributed to the rising debt service payments during the review period.”
A member of the Monetary Policy Committee (MPC) of the CBN, Robert Asogwa, with the African Development Bank, in his personal statement said a broader concern however, is the high level of public debt which was also a key issue raised in the January 2021 MPC meeting with debt service burdens now at or above the levels during the last global financial crisis.
The apex bank had disclosed that the federal government spent a total of $9.76billion on debt services between 2015 and 2020.
The breakdown by CBN revealed that $1.3billion was spent on debt services in 2019, as against $5.77billion spent in 2020.
The CBN website revealed that $1.47billion was spent on debt service in 2018 as against $444.77million in 2017. In addition, $349.6million and $378.91million on spent on debt service between 2016 and 2015 respectively.
Data accessed from the apex bank official website revealed that debt service in the country continued to soar amid federal government borrowing to support budget.
The breakdown of the data revealed that government spent $199.76 million, highest amount on debt service in 2019, while in 2020, $4.43billion was highlight amount spent on debt service in 2020.
Our correspondent can report that between 2015 and 2020, debt service according to CBN has increased by 1,422 per cent or $5.39billion.
Analysts have continued to stress that while the country’s debt to Gross Domestic Product (GDP) ratio is sustainable for now, the cost of servicing the debt eats deep into the country’s already depleting revenue.
Critics of the government have complained about the government’s penchant for debts, believing that it could put the future of younger Nigerians in jeopardy.
The Deputy Governor, Financial System Stability, CBN, Mrs. Aisha Ahmad, had started that, “Low oil prices, muted fiscal revenues and significant debt service obligations have dramatically restricted the already fragile fiscal space.
“Further fiscal adjustments will be required to curtail rising public debt and budget deficit, in addition to prioritization of government spending to support the Economic Sustainability Plan (ESP).”
AfDB had said debt servicing gulps more than 50 per cent of Nigeria’s revenue.
The bank, which said this in its West Africa Economic Outlook last year, said the servicing of the country’s external debt gulped about 50 per cent of the country’s revenue.
According to AfDB, the average revenue spent by West African countries on external debt servicing is 17 per cent. This is high and even higher in Nigeria which spends about 50 per cent revenue on external debt servicing. It added that with the increasing domestic debt burden, the percentage of revenues spent on debt servicing in Nigeria was even higher.
The bank said that even though the country’s debt burden had increased by as much as 128 per cent in the last eight years, Nigeria’s debt to Gross Domestic Product remained low.
The low debt-to-GDP ratio notwithstanding, it added, the problem with the nation’s increasing debt burden was the high proportion of revenue spent on debt servicing.
