The International Monetary Fund (IMF) has warned that Nigeria is at risk of high debt-servicing costs, Investors King report.
The Federal Government’s revenue projection for 2023 shows that 82% of its revenue will be used to pay interest on its debt, an improvement from 96.3% in 2022 and 86.1% and 87.8% in 2020 and 2021 respectively.
The IMF has advised Nigeria to take decisive fiscal and monetary actions to achieve macroeconomic stability and implement structural reforms to enhance growth.
Nigeria’s external debt, including the private sector, is projected to rise to $121.6 billion, with external reserves reaching $37.5 billion. The IMF has also noted that the country missed the opportunity to benefit from higher global oil prices. The Federal Government’s retained revenue from January to November 2022 was N6.5tn, of which N5.24tn was used for debt servicing.
The IMF’s Resident Representative for Nigeria, Ari Aisen, has stated that by 2026, debt servicing could consume 100% of the government’s revenue. He added that interest payments on debts may exhaust the country’s entire earnings within the next four years, unless action is taken to mobilize more revenue.
The World Bank has predicted that interest payments on the Federal Government’s borrowing from the Central Bank of Nigeria will cost 62% of revenue by 2027.
The high cost of debt servicing is affecting investment in infrastructure, according to the Director General of the Debt Management Office (DMO), Patience Oniha. The Federal Government plans to cut its debt-to-revenue ratio to 60% in 2023, according to the Minister of Finance, Budget and National Planning, Zainab Ahmed.
The government is in the process of converting its Ways and Means loans into a 40-year bond to reduce its debt servicing cost. As of the third quarter of 2022, the country’s public debt has reached N44.06tn, according to DMO.
