Toba Owojaiye ReportingÂ
Nigeria’s increasing debt burden and rising inflation have raised concerns about the country’s fiscal position. In the first three quarters of the 2022 financial year, out of a total revenue of N4.26 trillion available for financing the budget, a staggering N4.23 trillion was allocated to debt financing.
This has resulted in a debt service to revenue ratio of 99.2 percent, significantly surpassing previous estimates. The Federal Government spent N5.24 trillion on servicing its debt obligations to local and foreign creditors.
The debt service costs have put significant strain on the government’s revenue, with over 100 percent of income being used for debt servicing in the first four months of the year. The World Bank has warned that without radical reforms, the proportion of revenue going toward debt service costs will continue to rise in the coming years.
A substantial portion of the debt service costs, approximately 28 percent or N1.2 trillion, went to controversial ways and means facilities granted by the Central Bank of Nigeria (CBN). Domestic debt servicing amounted to N2.15 trillion, while N871 billion was allocated to foreign debt servicing.
Despite the high debt service costs, the government continued to borrow, accumulating N3.41 trillion in fresh debt liabilities. The majority of these loans, 85 percent or N2.9 trillion, were sourced from the local debt market. This trend has raised concerns about the crowding out of private sector investments needed for economic growth and job creation.
Economists have expressed doubts about the accuracy of the inflation figures reported by the National Bureau of Statistics (NBS). Despite the removal of fuel subsidies and significant price increases, inflation stood at 22.79 percent. Some analysts question the integrity of the Consumer Price Index (CPI) data, suggesting that the full impact of subsidy removal and exchange rate unification may not be adequately reflected in the reported figures.
Experts argue that Nigeria needs to focus on production, address insecurity to boost agricultural productivity, and increase oil production to earn more foreign exchange and mitigate inflationary pressures.
In summary, Nigeria’s debt servicing costs have reached alarming levels, straining the country’s revenue and affecting its fiscal position. Rising inflation and questions about the accuracy of inflation figures further exacerbate the economic challenges faced by the nation. Addressing these issues will require comprehensive reforms and a focus on productive sectors to spur economic growth and stability.
