Nigeria’s debt stock to hit N70trn by end of 2023 –Analysts

By Chinwendu Obienyi

Financial analysts have raised concerns over Nigeria’s debt burden, saying, it  is likely to hit the N68.8 trillion mark by end of 2023.

This is coming after the National Assembly (NASS) last month approved former President Muhammadu Buhari’s request to securitise Federal Government’s N22.7 trillion Ways & Means liabilities from the CBN.

With the securitisation of the liability, the CBN officially becomes a constitutionally recognised long-term creditor to the government. According to analysts at Afrinvest, by the same token, the liability (N22.7 trillion) has been formally added to existing debt stock expected to reach N68.8 trillion by the end of the year.

This move, Afrinvest said, became pertinent following the inability of the administration to offset what should have been a stop-gap funding from the CBN.

Noteworthy, 96.2 per cent (or N21.8 trillion) of the gross Ways & Means liability was obtained within the eight years of the outgoing administration (2015 – 2022) – a gross violation of the allowable 5.0 per cent of previous year’s revenue limit imposed by section 38 of CBN’s Act 2007, which has now been reviewed upward to 15.0 per cent two days before President Buhari left the office.

“Hence, should FG’s projected revenue underperform going forward (as the trend has been historically), recourse to Ways & Means support would remain an option in the short to medium term”, they said.

Also speaking, KPMG, in its macroeconomic report, said the securitisation of the CBN ways and means, as approved by the Senate, provides for the issuing of debt instruments with a 3-year moratorium on the principal, a 40-year term, and an annual interest rate of 9 percent per annum.

“The immediate impact of this is that Nigeria’s debt which hit N46.3 trillion by the end of 2022 will immediately rise to about N70 trillion. This represents 35 percent of the 2022 nominal GDP which is close to the government’s own self-imposed target of 40 percent.

However, with the N8.8 trillion expected new borrowings from both domestic and external means in the 2023 States and Federal budgets, the total debt stock will likely stand at about N77.8 trillion by the end of 2023”, the report said.

The firm also said that Nigeria must devise means to significantly raise revenue to avoid sliding into critical debt servicing challenges.

It added that the Government should also focus on sustainable debt management and giving investments that produce long-term economic returns top priority.