Figures from Debt Management Office, DMO have shown that the cost of servicing the country’s rising internal debt has hit more than N1trillion mark for the first time from 2015
By Shedrack Ifurueze
Debt Management Office, DMO recently said that the federal government had spent over N1.02 trillion to service its domestic debt since the past two years. This comprises of N25 billion spent on the repayment of the principal and N993.13 billion on interest payment within the years under review.
Since the end of December 2015, Nigeria’s total public debt stock was N12.6 trillion, compared to N11.25 trillion in 2014. The difference represents an increase of 12 per cent or N1.37 trillion within the period. External debt accounted for NN2.11 trillion or 16.75 per cent of the total, while domestic debt took the remaining N10.49 trillion or 83.25 per cent. The country’s domestic debt was NN8.54 trillion.
A report on the cost of the domestic debt shows that the organization attributed the increasing cost of debt servicing to an equally increasing domestic debt profile and rising interest rate. In the report, the federal government noted that the debt service as of the end of December 2015 amounted to N1, 018.13 billion compared to N865.81 billion in the corresponding period of 2014, thus representing an increase of N152 32 billion or 17.59 per cent.
The above amount comprised principal repayment of N25 billion and interest payment of N993.13 billion. By instrument type, the federal government bonds debt service payment accounted for 62.41per cent of the total debt service payment, while payments in respect of the Nigerian Treasury Bills and Treasury Bonds were 31.83 and 5.76 per cent, respectively. This trend analysis shows a continued rise in federal government’s domestic debt service payments.
Given the country’s diminishing revenue profile, as a result of dwindling oil and gas revenue, liquidating the debt seems out of the question and refinancing also comes with its own challenge. Meanwhile, DMO stressed that refinancing the 30 per cent component of the domestic debt posed high risk to the economy because of high interest rate.