By Dipo Olowookere
Data by the Debt Management Office (DMO) has revealed that the sum of N3.73 trillion has been used by Federal Government to service domestic debts since 2015.
In 2015, a total of N1.02 trillion was spent on domestic debt servicing, while in 2016, N1.23 trillion was used to service the local debts and N1.48 trillion was spent by government on debt servicing.
According to the data obtained by Business Post, in 2017, Federal Government spent N180.6 billion to service local debts in January and N187 billion was used for the same purpose in March.
In May 2017, it used N73.1 billion for debt servicing and N217.3 billion for same purpose in July.
In September, N171.4 billion was used to service local debts, N92.7 billion used in November and N52.2 billion in December.
A recent statement released by the DMO disclosed that the total debt profile of Nigeria as at December 31, 2017 was N21.73 trillion.
The composition of the debt stock showed that external debt was 26.64 percent of the portfolio, up from 20.04 percent in 2016, while domestic debt was 73.36 percent, down from 79.96 percent a year earlier.
Further analysis showed that the domestic debt for the Federal Government was N12.59 trillion, while that of the states and the Federal Capital Territory was N3.35 trillion.
The external debt of the Federal Government, states and the FCT was N5.79 trillion, putting the total public debt as of December 31, 2017 at N21.73 trillion.
The debt office noted that the total public debt as of December 31, 2017 represented 18.2 percent of Nigeria’s GDP for the year, showing that Nigeria’s debt had continued to be sustainable and was well within the threshold of 56 percent for countries in her peer group.
Federal Government has been spending considerable resources in recent times on the servicing of domestic debts, thereby raising questions of the sustainability of the country’s debt burden.
However, the Federal Government has insisted that the nation’s debt burden is sustainable since it is less than 20 percent of the country’s Gross Domestic Product although lesser revenues have made the payment of interest burdensome.
This has motivated the government to move towards foreign borrowing since such loans attract less interest payment.
Among the various instruments Federal Government used to borrow from the domestic debt market, the highest interest was paid on the FGN Bonds.
In 2017, for instance, Federal Government paid N982.66 billion on the FGN Bonds and a total of N445.13 billion was paid on Nigerian Treasury Bills; N22.99 billion on Treasury Bonds; while N25 billion of the principal was repaid.
In addition, an interest of N442 billion was paid on Savings Bonds.
According to the DMO, restructuring of the country’s debt mix has led to an increase in foreign debts in order to minimise the high interest rate on local debts.
“The key benefits of the restructuring of the portfolio are the reduction of the government’s debt service costs, lowering of interest rates in the domestic market and improved availability of credit facilities to the private sector.
“We repaid N198 billion Nigerian Treasury Bills in December 2017 with the proceeds of Eurobond issuances, and we have continued further implementation of the strategy in 2018, with the issuance of the S2.5 billion Eurobonds in February 2018, the proceeds of which are being used to repay maturing domestic debts, starting with N130 billion NTBs repaid on March 1, 2018,” the debt office said.
According to the DMO, the borrowings are for financing capital expenditure and stimulating the economy. The funds injected through the borrowings strongly supported the implementation of the Federal Government’s budget, which helped the country to exit recession in 2017.
Additional information from Economic Confidential
