Cowry Research said there is no immediate relief for Nigeria’s debt levels and debt service costs, even as financing costs are expected to continue to consume a larger portion of the federal government’s revenues.
According to its analysis, this is because the local currency remains weak against the dollar with the tight interest rate reflecting the monetary tightening.
The analysts noted that approximately N3 trillion will be raised from subsequent FGN Bond issuances. It is also part of an effort to meet its funding target of N6.06 trillion in domestic borrowing and N1.77 trillion in foreign borrowings, as outlined in the N28.77 trillion 2024 budget.
The Debt Management Office (DMO) published a report detailing Nigeria’s escalating public debt levels within the first three months of 2024 last week.
The report indicated that the total debt had surged to N121.67 trillion from N97.34 trillion in the fourth quarter of 2023, reflecting an increase of N24.33 trillion.
This substantial rise is attributed to the depreciation of the Naira and an aggressive borrowing spree by both federal and state governments.
This data underscores the fact that within the last 12 months, Nigeria has secured $4.95 billion in loans from the World Bank, despite growing concerns about the increasing costs associated with servicing its external debt. The government anticipates additional loan approvals worth $4.4 billion from the international lender and the African Development Bank (AfDB) over the next year.
The World Bank has approved funding for six projects in Nigeria, including $750 million for power sector financing, $500 million for women’s empowerment, $700 million for girl child education, $750 million for renewable energy solutions, $750 million for resource mobilisation reforms, and $1.5 billion for economic stabilisation reforms. These projects have significantly contributed to the country’s increasing debt levels.
On the domestic front, the Federal Government’s domestic debt service costs amounted to N989 billion during the review period, largely driven by the escalating debt stock, which reached N61.6 trillion.
A key factor behind the increase in the federal government’s debt burden is the securitisation of the N22.7 trillion in ways and means advances provided by the central bank, alongside the N7.3 trillion approved by lawmakers during the fourth quarter of 2023.
Data from the DMO shows that interest payments on federal bonds rose to N797 billion, accounting for more than 80 per cent of the total domestic debt service cost. Payments on Nigerian Treasury Bills (NTBs), the second most significant debt service component, increased to N97 billion during the first quarter of 2024.
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