Nigeria, Africa’s largest economy, spent $1.82 billion on external debt service in 2021, 16.7% more than the $1.56 billion spent a year earlier.
The federal government saw its domestic debt service increase by 11.35% to N2.06 trillion from N1.85 trillion spent the previous year, according to the Debt Management Office (DMO).
The government earned 5.5 trillion naira from January to November in 2021, according to available data.
The federal government had earmarked N3.61 billion for debt service in the 2022 budget, or about 21% of total expenditure and 34% of total revenue.
“The concern is that Nigeria’s rapidly rising stock of external debt does not reflect declining oil revenues and we must be careful not to fall into the debt trap of the 1980s, where a huge part of the revenue went to service the debt,” said Egie Akpata, manager in Lagos. -UCML Capital-based investment ban, said recently.
The International Monetary Fund (IMF) has warned that Nigeria’s rising public debt for a decade could create a squeeze on the economy’s finances and revenues in the medium term.
Ari Aisen, Resident Representative of Nigeria, voiced concerns about the country’s debt servicing on Monday during the presentation of the latest regional economic outlook for sub-Saharan Africa in Abuja.
Also read: IMF: Nigeria to pay N6trn for oil subsidies in 2022
He said many African countries, including Nigeria, would face a critical debt-servicing problem unless immediate steps were taken to dramatically increase revenues.
But Aisen said the IMF fears more than 80% of federal government revenue is going to service the debt, describing it as an “existential problem”.
“It’s a reflection of low incomes,” he said.
The World Bank said in a recent report that Nigeria’s debt remains sustainable, albeit vulnerable and costly, particularly due to large and growing funding from the Central Bank of Nigeria.
“While currently the debt stock of 27% of GDP is considered sustainable, any macro-fiscal shock could push debt to unsustainable levels,” he added.
In February this year, the IMF stressed the urgency of fiscal consolidation to create policy space and reduce debt sustainability risks in Nigeria, calling for significant domestic revenue mobilization.