FG’s interest spending on debt to gulp 36% of revenue in 2024 – Moody’s rating agency

9ja debt servicing

Keeps Nigeria’s rating unchanged

Global ratings agency, Moody’s has stated that Nigeria’s interest spending on debt might consume up to 36% of the federal government’s revenue in 2024.  

9ja debt servicing2

The firm stated this in its review of the Nigerian economy, where it maintained the country’s credit outlook as ‘positive’, citing the sustenance of reforms instituted in 2023. 

According to the firm, the hawkish monetary policy stance of the Centeal Bank of Nigeria (CBN) has pushed interest rates for local borrowing by the Federal Government from an average of 12.8% in 2023 to around 19% in the first five months of 2024.  

​The Ratings agency explained that the interest payment would increase by around 1% of GDP in the year under review.  

The report stated, “Tighter monetary conditions are pushing government interest rates for local currency borrowing to higher levels, from an average of 12.8% in 2023 to 19.7% between January and May 2024. As the government is predominantly borrowing in domestic markets, this will have a significant impact on interest spending, which we expect will increase by 1 percentage of GDP in 2024 and consume 36% of government revenue”.

​Furthermore, the report noted that implicit fuel subsidy payment due to the devaluation of the naira which increased the cost of fuel import would put pressure on the government’s spending. It stated that fuel subsidy payments would remain high in the year but likely to gradually decrease.  

The firm also noted that beyond 2024, it is uncertain in its outlook for the country despite an increase in oil production.  

​Director-General of the Debt Management Office (DMO) had earlier stated that the federal government has raised N4 trillion out of the N6 trillion domestic borrowing target in the 2024 budget. The DMO has seen an increased appetite for its offers following the increase in MPR by the CBN. 

​Recsll that in January, the Federal Government raised approximately N418.19 billion from the domestic bonds market through the DMO In February, and secured an additional N1.49 trillion from two FGN Bond offerings.

​Nigeria’s public debt increased by N24.3 trillion to N121.67 trillion at the end of the first quarter of 2024, on the back of depreciation in the naira.

The domestic debt component of the total debt stood at N65.65 trillion, while external debt was N56.02 trillion.

In the first quarter of 2024, the Federal Government reportedly spent around $1.12 billion (about N1.667 trillion) on foreign debt service. The figure represents around 70% of the total forex outflow in the quarter. 

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