Persistent dollar scarcity amid economic uncertainties ahead of the 2023 general elections continues to drag on Nigeria’s foreign reserves.

Nigeria’s foreign reserves declined by $381 million in the last one month, according to the data available on the Central Bank of Nigeria’s (CBN) official website.

On the 6th of July, the reserves stood at $39.336 billion but dropped to $38.954 billion on August 8th, 2022, representing a decline of $381 million.

As a mono-product economy, Nigeria depends on crude oil for over 90% of its foreign revenue. However, poor infrastructure and regional crisis in the oil-rich Niger Delta have plunged the nation’s crude oil production from about 2.1 million barrels per day (mbpd) it averaged a few years back to 1.08 mbpd in July, according to the latest OPEC report released on July.

The drop in crude oil production has impeded the nation’s foreign revenue generation and forced the federal government to increase borrowing in order to plug the revenue deficit.

This, experts blamed for the nation’s rising debt servicing cost. In a recent report by the federal government, Nigeria was estimated to spend N10.43 trillion on debt servicing by 2025.

According to the International Monetary Fund (IMF), in about four years Nigeria will be spending 100% of her revenue on debt servicing.

“The biggest critical aspect for Nigeria is that we have done a macro-fiscal stress test, and what you observe is the interest payments as a share of revenue, and as you see us in terms of the baseline from the federal government of Nigeria, the revenue of almost 100 per cent is projected by 2026 to be taken by debt service,” stated Ari Aisen, a IMF Representative in Nigeria.

While Federal Government has insisted that Nigeria does not have a debt problem but a revenue problem. Patience Oniha, the Director General of the Debt Management Office (DMO), agreed that Nigeria’s rising debt will hinder the country from investing in infrastructure and the real sector of the economy.

The DMO boss said “High debt levels lead to heavy debt service which reduces resources available for investment in infrastructure and key sectors of the economy.”