President Muhammadu Buhari’s administration has opted to convert loans obtained from the Central Bank of Nigeria (CBN) to bonds as Nigeria’s revenue comes under pressure due to rising debt service fees.
The amount of the central bank loan in the hands of the Federal Government is N20 trillion ($45.4 billion). It would be converted into a 40 years period bond with an interest rate of 9%.
According to Bloomberg on Thursday, this is the first time such a move has been pulled by the Federal Government, as Buhari’s government struggles to grow revenue above debt servicing.
Over N1.87 trillion was spent in the first six months of 2022 to service debt. Next year, Buhari projects that total debt service will gulp N6.30 trillion, surpassing projected revenue of N4.3 trillion.
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This comes as Nigeria’s total domestic loans rose to N26.23 trillion as at June 2022, while external debt stock increased to N16.61 trillion, taking the total public debt to N42.84 trillion.
The N20 trillion CBN loan was not factored into the total debt stock by the Debt Management Office (DMO), indicating that the debt is higher than the level it was reported in June.
DMO Director-General, Patience Oniha, confirmed the loan conversion to publication in a text, “It is a one-time restructuring repayable over 40 years with a moratorium.” she wrote.
Also, the Finance Minister of Nigeria, Zainab Ahmed, had stated on Wednesday that between January to August, N5.33 trillion was borrowed from foreign and local creditors to finance the 2022 budget deficit.
Meanwhile, Nigeria’s total debt stock is projected to climb around 35% of Gross Domestic Product (GDP) after the loan from the central bank is converted, from 23%, Ahmed disclosed.