In a recent update from the Debt Management Office (DMO), Nigeria’s enthusiasm for foreign loans has waned, leading to a reduction in total public debt. As of September’s end, the nation’s overall debt increased marginally to N87.91tn, marking a 0.61% rise from the second quarter.
Notably, there has been a significant drop in external debt, falling from $43.16bn to $41.59bn. This reduction is attributed to the redemption of a $500m Eurobond and the initial payment of $413.859m on a $3.4bn loan secured from the International Monetary Fund during the 2020 COVID-19 pandemic.
Despite concerns surrounding the country’s debt status, the DMO underscores the government’s commitment to meeting its debt obligations. The third quarter of 2023 witnessed the Federal Government allocating $1.39bn to service external debt and N1.79tn for domestic debt servicing.
Patience Oniha, Director-General of the DMO, emphasized the government’s shift towards the domestic market. In 2023, a total of N7.04tn was raised through new domestic borrowing, showcasing a significant increase from the N3.5tn raised in the previous year.
Persisting revenue challenges have prompted the Nigerian government to explore avenues for improvement. A presidential committee on fiscal reforms and taxes has been established. Officials stress that enhancing revenue is crucial to reducing reliance on new borrowings.
Acknowledging that Nigeria’s debt servicing costs were on an alarming trajectory, the World Bank anticipates positive outcomes from recent reforms. The bank believes these changes will bolster revenues, maintaining debt levels below 40% of GDP over the medium term.
Despite ongoing challenges, government officials, including the Minister of Finance and Coordinating Minister for the Economy, Wale Edun, and the Minister of Budget and Economic Planning, Abubakar Bagudu, stress the need to enhance revenue. The target is to elevate the revenue-to-GDP ratio from less than 10% to 18% within the current administration’s term.
In conclusion, Nigeria grapples with balancing its debt situation, focusing on domestic borrowing, and implementing reforms to boost revenue and ensure fiscal sustainability.
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