The federal government has spent $1.36 billion to service outstanding debts owed to 12 international and multilateral creditors in the first six months of 2024.
This is according to an analysis of data from the public debt reports released by the Debt Management Office.
The figure for payments made between January to June 2024 represents a 216.07 per cent increase from $431.23m recorded in the corresponding period of 2023.
It was, however, observed that the increase was driven primarily by a sharp rise in interest rates, which significantly impacted borrowing costs, leading to higher expenses for the government, reports The PUNCH.
The significant rise in the debt service payments owed by the federal and state governments shows the mounting pressure on Nigeria’s fiscal balance amid ongoing economic challenges.
The multi-lateral firms include the Africa Development Bank, European Development Bank, International Fund for Agriculture Development, African Development Fund, International Development Association, Africa Growing Together Fund, Islamic Development Fund, International Monetary Fund, and the International Bank for Reconstruction and Development.
The bilateral firms include the Japan International Cooperation Agency, Kreditantstalt fur Weideraufbua, and the Agency Francaise Development.
Recall that the DMO’s 2024 half-year public debt report reveals that Nigeria’s domestic and foreign public debt rose to N71.2tn and $42.9bn, respectively.
This is a notable increase from December 2023, where domestic debt stood at N59.1tn and foreign debt at $42.4bn, reflecting rises of 20.4 per cent and 1.1 per cent, respectively.
Domestic debt, in particular, has spiked under Tinubu’s administration, climbing from N54.1tn in June 2023 to the current N71.2tn.
The Central Bank of Nigeria has continued to implement an aggressive monetary policy rate hike to 27.25 per cent as part of its broader efforts to control inflation, aiming to reduce the rising cost of living and stabilize the economy.
However, this strategy has led to unintended consequences, significantly increasing the country’s debt servicing costs, as higher interest rates have made borrowing more expensive for both the government and private sector.
Nigerians have raised serious concerns about the role of the World Bank and other international creditors in the country’s rapidly growing debt-to-GDP ratio, questioning the rationale behind their continued approval of large loans despite the lack of significant progress or tangible results.
However, a further breakdown of the debt servicing report showed that the International Monetary Fund got the highest debt repayment of $813.58m, 102.52 per cent more than the $401.73m paid in the twelve months of 2023.
This is followed by the International Development Association with a payment of $327.98m. The association got a payment of $257.33m in the corresponding period of 2023.
The government paid ADB $113.91m, EDF ($2.67m), IFAD ($5.91m), ADF ($18.15m), AGTF($1.01m), ISF ($11.96m), IDC($11.02m).
Bilateral firms, including JIC, got $336,463, KFV ($24.07), and AFD ($32.39m).
The data raises concerns about the growing pressure of Nigeria’s foreign debt obligations, with rising global interest rates and exchange rate fluctuations contributing to higher costs.
The global credit ratings agency, Fitch, recently projected Nigeria’s external debt servicing will rise to $5.2bn next year.
This is despite the current administration’s insistence on focusing more on domestic borrowings from the capital market.
At the General Debate of the ongoing 79th Session of the United Nations General Assembly at the UN headquarters in New York, United States, held in September, President Bola Tinubu called on world leaders to prioritise debt forgiveness for Nigeria and other developing countries from creditors and multilateral financial institutions.
The president, represented by Vice President Kashim Shettima, said countries of the global South would not make meaningful economic progress without special concessions and a review of their current debt burden.
He further drew the UN’s attention to the global debt burden undermining the ability of countries and governments to meet the needs of their citizens, trade barriers and protectionist policies destroying the hopes for nations, and the uncontrollable competition discouraging motivation and hampering global investments.
Meanwhile, the government’s Promissory Notes debt surged to N1.65 tn as of June 2024, marking a 6.5 per cent increase from March 2024.
Promissory Notes, a debt instrument that includes a written commitment by the issuer (in this case, the government) to repay a specific amount, have become a primary mechanism for the federal government to meet obligations it cannot fund immediately with revenue or cash.
This form of domestic debt has seen a staggering 114 per cent rise since Tinubu took office.
This sharp rise highlights the government’s growing reliance on promissory notes for financial commitments, majorly owed to government contractors, suppliers, and oil marketers.
