How Nigeria spent N57.35bn to service foreign debt in 6 months

The Central Bank of Nigeria (CBN) has disclosed that a sum of N57.35 billion ($187.7million) was spent by the federal government on debt services/payments between January and June of 2017.

National Daily gathered that the external debt service consisted of amortization of N20.4 billion, or 31.5 per cent, and interest payments of N44.3 billion, or 68.5 per cent

A breakdown of domestic debt service indicated that amortisation accounted for N25 billion, or 2.5 per cent, while interest payment was 993.1 billion, or 97.5 per cent of the total.

According to findings by National Daily, CBN’s debt services/payment in January stood at N15.2 billion ($50.8 million) but dropped to N6.9billion ($22.6million) in February.

Data from CBN revealed that debt service/payment rose to N14.4 billion ($47.05million) in March and close April at N9.9billion ($32.5million). For May and June, that closed at N10 billion ($33.1 million) and N502million ($1.6 million) respectively.

Data obtained from CBN revealed that debt services/payment in prior six months was around $166 million, while the total debt services/payment according to CBN was at $349.6 million in 2016.

According to CBN, total debt service payments stood at N1, 082.8 billion, or 1.1 per cent of gross domestic product (GDP), made up of N64.7 billion, or $0.3 billion for external, and N1, 018.1 billion for domestic debt.

The CBN continued to issue treasury bills at a double digit yield to support federal government’s financing infrastructures as dwindling global oil price has tumbled the nation’s economy into recession over the past year.

The $1 billion Eurobond issue early in the year was approximately eight times oversubscribed.

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Reacting, Managing director, Highcap Securities Limited, Mr David Adnori said, “The federal government has debt in naira and foreign exchange.

“The government has over borrowed. If you look at debt services obligations, compared to the budget, it is on a high side which makes it dangerous. If anything happens and government unable to service its debt, it will affect the credit worthiness of the country,” he said.

In his comment, the head, Research and Strategy at GTI Securities Limited, Mr Chucks Anyanwu, noted that government’s borrowing has been a mixture of short- term and long-term from international investors.

He expressed that CBN did not break the debt services/payment into different categories.

According to him, the government borrowing depends on utilisations and timely interventions.

In addition, managing director, Enterprise Stockbrokers Plc, Rotimi Fakayejo, said the CBN’s debt service could have been utilised effectively in the real sector of economy, appealing to government to reduce its borrowing and concentrate more on generating initial revenue using the tax.

He stated that the federal government should strengthen its nationwide tax collection policy by linking of Biometric Verification Number of working class citizens to a centralised tax payment.

The federal government in 2017 budget had allocated N1.66 trillion on debt services, 22.3 per cent of the estimated N7.44 trillion.