Debt Servicing Surged by 55.71% to N1.24tn.

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Nigeria’s debt servicing costs have surged by 55.71% to N1.24tn within a three-month period, as revealed by data from the Debt Management Office. Between January and March 2023, domestic debt servicing amounted to N874.13bn, while external debt servicing reached $801.36m (N368.87bn), resulting in a total of N1.24tn.

The International Monetary Fund (IMF) projects that the Nigerian government will spend 82% of its revenue on interest payments in 2023, with external debt anticipated to rise to $121.6bn. The high levels of debt pose challenges for investment in infrastructure and key sectors of the economy, according to the Director-General of the Debt Management Office.

A report by the Nigerian Economic Summit Group and the Open Society Initiative for West Africa identifies Nigeria and ten other West African countries, including Benin, Burkina Faso, and Ghana, as being in debt distress based on debt sustainability analysis.

The World Bank warns that Nigeria’s current debt levels, although seemingly sustainable, remain vulnerable and costly, with the potential to become unsustainable in the face of macro-fiscal shocks. Dr. Muda Yusuf, the CEO of the Centre for the Promotion of Private Enterprise, highlights the Nigerian economy’s vulnerabilities, including the growing public debt and debt service burden.

Marketnews Thoughts: The significant increase in Nigeria’s debt servicing costs over a short period raises concerns about the country’s ability to manage its debt effectively. The projected allocation of 82% of government revenue to interest payments in 2023 is alarmingly high and leaves limited room for other critical expenditures. The identification of Nigeria and other West African countries as being in debt distress underscores the need for prudent debt management and sustainable economic policies in the region.


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