With the Federal Government planning to spend N3.8 trillion out of the N16 trillion 2022 budget on servicing its debt obligations, analysts have expressed worry that the country may soon run out of room to finance its debts.
This is as they called for a review of government spending and a reduction in the countrys borrowing, saying there is a need for the government to look into other sources of funding asides from borrowing.
According to the 2022 Appropriation Bill, the Federal Government is looking at increasing its debt portfolio by N6 trillion next year to finance the 2022 Budget, of which it hopes to spend N3.9 trillion in servicing its outstanding obligations both locally and externally from the N16 trillion budget.
Over the past five years, the country has spent $5.2 billion to service its external debt and N8.6 trillion in servicing its domestic debt. However, analysts say this trend is worrisome. Data shows that while domestic debt servicing amount has been slowly rising, external debt servicing leaped in 2018 as the federal government stepped up its activities in the Eurobond market.
The Debt Management Office (DMO)s latest quarterly data show that the Federal Governments external debt service payments amounted to $299 million in the second quarter of 2021 consisting of $157 million and $142 million, to market and non-market creditors respectively. At the domestic market, it had spent N1.74 trillion to service its obligation between January and September 2021.
According to the head of Financial Institutions Ratings at Agusto&Co, Ayokunle Olubunmi, debt servicing is a burden to Nigeria. Also, an economist and chief executive of the Centre for Promotion of Private Enterprise, Dr. Muda Yusuf, noted that the rising debt profile of the government raises serious sustainability concerns, even though the government tends to argue that the condition was not a debt problem, but a revenue challenge.
In the same vein, while noting that there is a need for more prudence in the spending of the country, former Director-General at the West Africa Institute for Financial and Economic Management, (WAIFEM), and chairman of the Foundation for Economic Research and Training, Prof. Akpan Ekpo, said while the country needs borrowing to finance infrastructure, there is need for more transparency.
