The federal government’s 64.5 per cent of its total revenue in 2023 servicing debts, analysis of data from the Budget Office has shown.
Actual debt service cost was N7.66 trillion in 2023, a 16.9 per cent rise from the projected N6.56 trillion.
Last year’s figure is higher than the 48.5 per cent of total revenue that debt service gulped in 2022, and lower than the 71.8 per cent of total revenue used to service debt in 2021.
In 2022, actual debt service cost rose marginally to N3.76 trillion from the budget amount of N3.69 trillion.
Actual revenue was N11.88 trillion from projected revenue of N11.05 trillion. In 2022, the federal government received a lower actual revenue of N7.76 trillion from a projected revenue of N9.97 trillion.
PwC Nigeria, in its latest 2024 Nigeria Economic Outlook report projected that debt service could rise from N8.25 trillion in 2024 to N9.3 trillion in 2025 and further to N11.1 trillion in 2026.
The professional services firm stated that Nigeria’s rising debt service cost may affect the country’s debt servicing ability, credit rating outlook, and borrowing cost.
“With a high debt servicing to revenue ratio, the government aims to increase domestic debt in 2024 to meet its deficit funding requirements,” the report said
The report by PwC Nigeria Authors highlighted that Nigeria’s deficit has grown by 370 percent from 2015 to 2023, which has led to a high debt and debt servicing profile.
“Though debt stock to GDP is comparatively low at 37.1 percent, the debt servicing to revenue ratio remains high at 124 percent as of the first half of 2023. In 2024, the government aims to reduce the budget deficit to around 3.9 percent (N9.18 trillion) of GDP, down from 6.1 percent in 2023, through reduced spending,” they said.
A recent report by the United Nations titled ‘A world of debt’ said the growing burden to global prosperity has been translating into a substantial burden for developing countries due to limited access to financing, rising borrowing costs, currency devaluations, and sluggish growth.
“Countries are facing the impossible choice of servicing their debt or serving their people. Today, 3.3 billion people live in countries that spend more on interest payments than on education or health. A world of debt disrupts prosperity for people and the planet,” the report said.