How Nigeria Serviced World Bank, IMF, Other Debts with $13.1bn in 11 years

.Spent $1.3bn in first 3 months of 2021  . $5.77bn paid in 2020 is highest

Kayode Tokede 

As the federal government continue its borrowing spree and debt servicing constituting a major threat to Nigeria’s economy, it has emerged that the Central Bank of Nigeria (CBN) spent $13.1billion in 11 years to settle Nigeria’s foreign debt obligations.

The international payment data released by the CBN showed that from 2011 to 2021, the amount paid to the World Bank, International Monetary Fund (IMF), Exim Bank of China, among others for debt service and payments have continued to increase.

The debt repayments, it was learnt, were made on behalf of the federal government alone excluding 36 states and the Federal Capital Territory (FCT).

THISDAY gathered that between 2011 and 2017, the CBN spent an average of $328 million on debt services and payment reaching $1.4 billion mark in 2018.

In 2019, the CBN withdraw $1.34 billion for debt servicing and payment, the international payment data revealed. 

Further analysis of the data revealed that in 2021, debt services and payment dropped by 63 per cent to $2.13 billion from $5.77 billion reported in 2020.

The reported $5.77 billion is the highest debt services and payments recorded by the CBN, while a total of $242.8 million was the lowest in 2013.

The CBN international payment data showed that in the first three months of 2021, $1.3 billion was spent to service debts. The amount dropped to $298.9 in the next three months ending June 2021.

From July to October, CBN further disclosed that a total of $606 million was spent on service debts.

A month-on-month breakdown showed that the CBN in January spent $617.5 million to service debts; it dropped by 65.45 per cent to $213.3 million in February; and dropped to $172.5 million in March.

In April, the CBN disclosed that  $82.3 million was spent on debt service; it moved to $167.5 million in May, the second-highest amount spent on debt service by the apex bank in one month.

In June, the amount dropped to $49.4 million; in July, it rose to $120.8 million. For August and September and October the figures reported by the CBN were $230.6 million, $169.2 million, and $85.2 million respectively.

However, between November and December of 2021, the CBN revealed that $148.57 and $69.83million was spent in debt services and payment respectively. 

The apex bank in its economic report for the month of October 2021, maintained that debt service obligations amounted to N1,022.99 billion, compared with N440.63 billion in the second quarter of 2021. 

“The increase was due largely to the rise in the payment of FGN Bonds and principal repayment of promissory note,” the CBN explained. 

The apex bank noted that the depreciation of the naira exchange rate also contributed to the rising debt service payments.

 Nigeria’s debt profile continued to snowball and its attendant cost is worrisome as members of the CBN’s Monetary Policy Committee (MPC) noted the rising burden of debt services.

Meanwhile, analysts have continued to express that the global outlook remained uncertain due to rising global debt levels, lockdown measures, and sluggish global trade, stressing that the roll-out of the COVID-19 vaccines and continued implementation of monetary, fiscal, and structural policies tends to strengthen global growth prospect.

Also, the Monetary Policy Committee members of the CBN continued to express concerns over increasing debt and its vulnerability to the nation’s economic growth.

At the last meeting, the members cautioned on the rising government debt profile and the concentration of the funding sources and its implications for fiscal sustainability and macroeconomic stability, including its impact on financial system performance and growth.

The MPC, thus, urged the government on the need to harness other sources of revenue to reduce its dependence on oil as a single revenue source.

In addition, he reiterated the need for government to seek alternative, more viable, and efficient infrastructure financing sources, in order to ease its expenditure burden rather than borrowing.

A member Robert Asogwa of African Development Bank (AfDB),  in his personal statement stated that: “There are however three worrisome indicators at the time of this MPC meeting including, the inflationary rise in December 2021, the surge in M3 and the persistent debt buildup which are key issues of policy concern.”

He added that: “Nigeria is however not alone in the debt dilemma as the global debt levels soared above 400 percent of global GDP early in 2021, but later declined to about 350 percent of global GDP by the third quarter of 2021. 

“The main challenge is the lack of debt wisdom in Nigeria and with the debt service expenditure estimated at about 35.6 percent of the projected revenue in 2022, the road to long term recovery now seems more uncertain than previously anticipated.”

Another member of the MPC, Mike I. Obadan, a Professor of Economics, University of Benin, said: “Fiscal performance is worrisome in the area of revenue generation and the attendant narrow fiscal space and public debt accumulation. Besides these are other issues which shape the direction of monetary policy.”

The AfDB had said debt servicing gulps more than 50 per cent of Nigeria’s revenue.

The AfDB in its recent West Africa Economic Outlook, said the servicing of the country’s external debt gulped about 50 per cent of the country’s revenue.

According to AfDB, the average revenue spent by West African countries on external debt servicing is 17 per cent. This is high and even higher in Nigeria, which spends about 50 per cent revenue on external debt servicing. It added that with the increasing domestic debt burden, the percentage of revenues spent on debt servicing in Nigeria was even higher.

The bank said that even though the country’s debt burden had increased by as much as 128 per cent in the last eight years, Nigeria’s debt to Gross Domestic Product remained low.

The low debt-to-GDP ratio notwithstanding, it added, the problem with the nation’s increasing debt burden was the high proportion of revenue spent on debt servicing.

Moreover, the economic report for October 2021 explained further that: “Borrowing in the review period was anchored on the 2021 budget and the 2020 – 2023 Medium Term Debt Strategy framework. The debt profile of the FGN rose by 7.9 per cent to N33,805.84 billion at end-September 2021, relative to end-June 2021; driven by new borrowings for infrastructural development, COVID-19 mitigation, and fast-tracking of the economy.

“Domestic debt accounted for 53.9 per cent of FGN total debt, while external debt obligations constituted 46.1 per cent. This compares with the domestic-external debt target of 70:30 in the 2020-2023 mediumterm debt strategy of the FGN. While the external portion of debt stock grew by 13.6 per cent, domestic debt outstanding rose by 3.4 per cent, compared to end-June 2021.

“FGN bond issues remained dominant in the domestic debt portfolio, accounting for 73.8 per cent of the total domestic debt, followed by Treasury Bills (19.2 per cent); Promissory Notes (4.4 per cent); FGN Sukuk (2.0 per cent); and others (0.6 per cent). The distribution was in tandem with the FGN’s objective to issue more long-term than short-term domestic debt instruments (75:25). In the composition of the external debt, Multilateral, Commercial and Bilateral loans accounted for 48.2 per cent, 40.2 per cent and 11.6 per cent of the total external debt stock, respectively.”