The The federal government has proposed to spend N4.5 billion on interest charges on domestic debt by 2023, according to the 2023 draft budget.
This is a 243.51% increase from the proposed allocation of N1.31 billion for domestic debt interest charges in 2016.
During the recent presentation of the Finance Bill 2023 to a joint session of the National Assembly, the President, Major General Muhammadu Buhari (Retired), noted that despite the revenue problems in the country, the country was still meeting its debt service obligation.
“Despite our income problems, we have always met our debt service commitments. Staff salaries and statutory transfers have also been paid on a rolling basis,” Buhari added.
However, speaking at the launch of the World Bank’s Nigeria Development Update titled “The Urgency of Unusual Business”, held recently in Abuja, Finance Minister Zainab Ahmed had admitted that Nigeria was struggling to service its debt.
She said: “We are already struggling to service the debt because even though income is increasing, spending is increasing at a much higher rate, so it is a very difficult situation.”
In a document from Debt Management Office Director General Patience Oniha, recently obtained by our correspondent, the DMO said high debt levels will often result in high debt servicing and affect infrastructure investment.
According to the DG DMO, “high debt levels lead to heavy debt servicing which reduces the resources available to invest in infrastructure and key sectors of the economy”.
Despite this, the government plans to borrow 8.80 billion naira and spend 6.31 billion naira on debt service in 2023.
In its latest Africa’s Pulse report, the World Bank said public debt in Nigeria was of concern due to the rising debt service-to-revenue ratio.
According to the bank, the debt service-to-revenue ratio could stand at 102.3% by the end of 2022.
World Bank Group President David Malpass recently said 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 Nigeria’s debt sustainability, but it will be up to Nigeria itself to interact with the various creditors, which include bondholders, official creditors, who are engaged in Nigeria”.
Earlier, Ahmed revealed that the Nigerian government was in talks with the IMF and World Bank to restructure the country’s debts.
However, the World Bank Group President said Nigeria has yet to apply for the Common Debt Restructuring Framework.
The Director General of the Center for Promoting Private Enterprise, Dr. Muda Yusuf, recently said that the Nigerian economy is characterized by various economic vulnerabilities including rising public debt and debt servicing burden .
Due to the rising cost of servicing debt, he said that “funding for government operations – personnel costs, overheads, capital expenditures and even some of the debt service – will have to come from additional borrowing, which portends serious vulnerabilities for the Nigerian economy.
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