Nigeria spent a sum of N1.17 trillion on local and foreign debt service in Q3 2022, which is an increase of 27.9% compared to N912.7 billion during the previous quarter (Q2 2022 ).
This is according to the Nigerian Debt Service Report for the Third Quarter of 2022 published by the Debt Management Office (DMO).
A breakdown of the report showed that N820.59 billion was spent on domestic debt service, while N346.43 billion (or $801.24 million) was incurred on external debt service costs.
Meanwhile, Nigeria’s total debt stock fell to $101.91 billion at the end of September 2022 from $103.31 billion on record as of June 2022.
However, measured in local currency, the total debt stock increased to Naira 44.06 trillion compared to Naira 42.85 trillion in the previous quarter. This is due to the depreciation of the local currency against the US dollar in the official market.
The official exchange rate depreciated from N414.72/$1 registered at the beginning of the review quarter to close the period at N432.37/$1, according to data from the DMO.
Debt stock breakdown: The total balance of external debt stood at 39.660 million dollars (17.15 trillion naira).
- The domestic debt of the federal government stood at $49.85 billion, the equivalent of 21.55 trillion naira.
- The domestic debt of the states also stood at $12.41 billion (N5.36 trillion) as of September 2022.
- The total domestic debt stock was $62.25 billion in the period under review, which is approximately N26.92 trillion in local currency.
More extensive analysis: Domestic debt service in the third quarter of 2022 increased by 23.4% compared to Naira 664.73 billion in the previous quarter and represents the highest value on record. In addition, the cost of servicing the external debt increased by 34% from the $597.95 million registered in the second quarter of 2022.
- A further breakdown showed that a sum of N248.72 billion was spent in July, N152.44 billion in August, while N419.42 billion was spent in September 2022 on domestic debt obligations. In addition, N94.99 billion was incurred in interest payments on Nigerian Treasury bills.
- Additionally, N685.61 billion was spent as interest payments on federal government bonds. Other breakdown includes Naira 8.3bn spent on FGN Sukuk bond rentals, Naira 426.01m interest on FGN Savings Bonds and Naira 6.25bn and Naira 25bn on interest and principal payments respectively on FGN bonds. Treasure.
- This brings the total domestic interest payments to a sum of N795.59 billion and a principal repayment of N25 billion.
Why this issue: Nigeria continues to borrow to finance its budget deficit as the revenue crisis persists. According to Finance Minister Zainab Ahmed, FG’s revenue amounted to N4.233 trillion between January and August 2022, while it spent around N3.52 trillion on debt service during the period.
An aggregate revenue of N4.23 trillion from the federal government means it underperformed by 36.3% compared to the prorated budget of N6.65 trillion for the period. Furthermore, federal retained revenue underperformed by 33.3%, standing at N3.67 trillion in contrast to expected revenue of N5.49 trillion.