Although Africa’s biggest economy’s total outstanding domestic debt currently stands at N12.4 billion, down from N12.59 billion in 2017 on the Nigerian government’s preference for foreign borrowing, the cost of servicing the debt grew by 23.65 per cent to N1.8 billion, compared to N1.46 billion at the end of 2017.
“The increase in the cost of debt servicing in 2018 was attributable to the coupon payments of new instruments such as FGN Sukuk, Green bonds and FGN Savings,” the country’s central bank said Wednesday, in its 2018 Annual Activity Report.
Nigeria’s rising debt profile worries the World Bank Group and the International Monetary Fund (IMF) who last month warned the federal government over its excessive borrowing.
It will be recalled that the World Bank’s Vice President for Africa, Hafez Ghanem, told the Nigerian government to decrease borrowing and instead focus on tapping from private investments which is seen yielding multiplier effects on many sectors of the economy.
In November last year, the IMF raised the alarm that Nigeria is servicing its debt with more than 50 percent of its oil-based revenue, the major contributor the economy.
Nigeria’s inability to meet its 2.3 million oil production target meant to substantially fund N8.92 trillion budget for 2019 continues to cause worry in the country.
Already, analysts are worried that Nigeria’s debt service to revenue ratio of 31 per cent and debt service to capital expenditure ratio of 75 per cent of the 2019 Appropriation Bill passed by the National Assembly on April 20, was too high and could hamper the country’s ability to deliver infrastructure investments.
With the failure to meet its 2.3 million production target, analysts are further concerned that Nigeria may be in trouble in the coming months.
On the other hand, the Nigerian central bank is saying that decline in the country’s debt profile iss a good thing.
The bank, in its 2018 a new report released by the Financial Markets Department shows that the 2018 debt stock declined by N146.35 million or 1.16 per cent when compared to N12.59 billion in 2017.
Nigeria’s preference for foreign borrowing makes it easier to finance its fiscal deficit at attractive rates, according to its debt agency, Debt Management Office.