The administration of President Muhammadu Buhari, the outgoing commander in chief of the armed forces of the Federal Republic of Nigeria, paid a total of $14.28 billion for debt servicing in eight years, beginning from June 2015 to January 2023, the analysis of debt services and payments’ data from the Central Bank of Nigeria (CBN) has shown.
His predecessor, Goodluck Ebele Jonathan, paid a total of $1.50 billion for debt servicing from May 2010 to May 2015 which was when he was in office.
The amount committed to Nigeria’s debt servicing has generated concerns among the nation’s policy makers where 96.3 percent of the country’s revenue was spent on servicing debt in 2022, according to the World Bank.
The surge in Nigeria’s debt services and payments mirrored the country’s external debt position that increased by 168.3 percent from $10.32 billion as of June 2015 to $27.68 billion as of December 2019. It further rose by 50.7 percent to $41.69 billion as of December 2022.
During the first term of President Buhari, the total public debt to GDP ratio increased from 13.0 percent in 2015 to 19 percent in 2019, while the average time to maturity for the total debt increased from 7.17 years to 10.5 years, the Debt Management Office has revealed.
Exactly two weeks from today, President Muhammadu Buhari’s 8-year administration will come to an end as another president will be sworn in. The Nigeran Observer uses a number of socio-economic indicators to assess the outgoing regime, including the total amount paid for debt servicing during his tenure.
Based on the CBN data, the amount paid for debt servicing during the coronavirus pandemic in 2020 was the highest, a development the DMO attributed to increased borrowing due to a sharp decline in federal government’s revenue and expectation of a rising inflation within the domestic economy.
“Significant drop in government’s revenue due to lower oil demand and price shocks related to COVID-19 pandemic, thus constrained government’s funding and presenting additional borrowing requirements to the government” DMO stated, adding that due to COVID-19 pandemic, there was limited access to the concessional funding from the multilateral creditors.
From June 2015 to December of the same year, the outgoing administration paid a total of $176.19 million for debt servicing. Before he handed power over to President Buhari, former president, Goodluck Ebele Jonathan, paid $202.72 million for debt servicing from January 2015 to May 2015.
Payment for debt servicing increased by 98.4 percent in 2016 when $349.61 million was paid, and the amount paid for debt servicing rose further by 27.2 percent to $444.77 million in 2017.
From 2018 to 2022, debt services and payments were on an annual basis in billions of dollars, corresponding to the increasing external debt obligations of Nigeria.
Debt servicing payment skyrocketed by 231 percent from $444.77 million in 2017 to $1.47 billion in 2018. The amount paid, still in billions of dollars, reduced by 8.8 percent to $1.34 billion in 2019.
Nigeria paid $5.77 billion for debt servicing in 2020, the pandemic year, amounting to an increase of 329.5 percent over the previous year’s payment. The unusual payment made in the pandemic year, was the highest amount Nigeria coughed out for debt servicing during the 8-year tenure of President Buhari.
Further, it was $2.12 billion that was paid for debt servicing in 2021, representing a decline of 63.1 percent when compared to the previous year’s payment.
Notwithstanding, debt servicing increased by 17.2 percent to $2.49 billion in 2022, and $112.25 million in January 2023, bringing the total amount of money Nigeria paid out to service debt to $14.28 billion during his eight-year reign, and this is bound to increase by the time the CBN makes available data on debt services and payments from February to May 2023.
Addressing some of the concerns on the rising debt profile, the DMO said in the country’s Debt Management Strategy 2020 to 2023, that the future debt obligations will reflect Nigeria’s revenue profile which can only sustain debts with longer tenors.
“The revised Nigeria’s Debt Management Strategy, 2020-2023, focuses on increased reliance on longer-tenored domestic and external financing with stable short-term instruments in order to moderate refinancing risks. This would help to ensure that the cost profile of Nigeria’s public debt portfolio is maintained at a sustainable level in the medium to long-term, while ensuring that government’s financing needs are met at minimum cost and with a prudent level of risk,” the DMO stated.
