Nigeria’s external debt serving has hit a new height in half-year 2019 as the latest figure obtained from the Central Bank of Nigeria (CBN) shows that international payment in the form of debt servicing between January and June 2019 was estimated at N263.7 billion or $859 million.
According to the CBN data, Nigeria’s debt service rose by 100% when compared with the amount paid in half-year 2018. Basically, in half-year 2018, international payment made in the form of debt servicing was estimated at N131.3 billion or $427.6 million, while it rose to N263.7 billion or $859 million in half-year 2019.
External debt servicing: While Nigeria paid the sum of N610.2 billion to service domestic debt in the first quarter of 2019, servicing external debt gulped N109.6 billion. Meanwhile, external debt service is signalling a big rise.
- A look into the data reveals that within the first 6-months of 2019, Nigeria paid an average of $101 million or N31.04 billion external debt service on a monthly basis.
- The highest external debt servicing during the period under review was recorded in February, with N193.4 billion, while the least was paid in June (N18.15 billion).
- External debts service in 2017 was N142 billion, while by half-year 2019, external debt service already doubled.
- An earlier report published by Nairametrics revealed that Nigeria spent a total of N7.04 trillion to service both domestic and external debts under President Muhammadu Buhari’s administration alone.
Further details: From the foregoing, Nigeria’s external debt servicing which stood at N451.8 billion in full-year 2018 means in just half-year 2019, external debt servicing already covers 64% of the corresponding year.
- Specifically, loans or debt granted to countries come with terms or conditions which may include cash to cover repayment of interest and principal on a debt for a particular period.
- Currently, Nigeria’s debt category is largely dominated by 41% of multilateral and bilateral sources from the World Bank, Bank of China, the African Development Bank and so on.
- It means on a monthly basis, Nigeria meets financial obligation by paying billions as a form of interest of the debts.
Upshots: The rising cost of debt servicing has become worrisome as there are growing concerns that Nigeria’s total debt service may hit N1 trillion by the end of 2019.
- While the Accountant General of the Federation, Ahmed Idris recently disclosed that Nigeria’s debt servicing currently being paid will not cause any problem to the economy, the debt service obligation may put Nigeria’s fiscal responsibility to a strain.
- In the meantime, the recent warning signal raised over Nigeria’s ever-escalating debt servicing by the President of the African Development Bank, Dr Akinwumi Adesina, should be food for thought for Nigeria’s policymakers.