The federal government spent a total of 1.03 trillion naira on debt service in the first quarter of this year, compared to 779.73 billion naira in the corresponding period of 2020, the Central Bank of Nigeria said. (CBN).
Apex bank revealed this in its April 2021 economic report released this weekend.
He attributed the increase in government debt service obligations during the period to interest payments on additional FGN bonds, promissory notes and the repayment of the $ 500 million Eurobonds, arrived due in January 2021. The CBN declared: “Public borrowing has remained anchored on the federal government’s medium-term debt strategy.
The outstanding debt of the FGN reached 28,984.30 billion naira at the end of March 2021, an increase of 2.5% and 15.8% compared to the end of December 2020 and the corresponding period in 2020.
“Development has been propelled by fiscal policy aimed at supporting economic recovery, reducing the infrastructure deficit and funding COVID-19 mitigation programs.
Domestic debt represented 57.0 percent of the FGN’s total debt, while external debt obligations represented 43.0 percent. This compares to a 70:30 mix for the domestic-external debt target in the FGN’s 2020-2023 Medium-Term Debt Strategy.
“After the FGN fully reimbursed the euro-bond of $ 500 million on January 28, 2021, the outstanding external debt fell by 1.8% compared to the end of December 2020.
In comparison, the stock of domestic debt increased by 3.6%. FGN bond issues continued to dominate the composition of domestic debt, accounting for 75.5 percent of total domestic debt, followed by treasury bills (15.8 percent); promissory notes (5.7 percent); FGN Sukuk (2.2%); and others 3 (0.9 percent).
The distribution goes hand in hand with the FGN’s goal of holding more long-term than short-term domestic debt instruments (75:25). “Debt service obligations in the first quarter of 2021 were 1,032.29 billion naira, compared to 779.73 billion naira and 461.98 billion naira in the first and fourth quarters of 2020, respectively. .
The significant increase is due, in large part, to interest payments on additional FGN bonds, promissory notes and the repayment of the $ 500 million Eurobonds, which matured in January 2021. ”
The CBN’s economic report for April follows an announcement by the Debt Management Office (DMO) that Nigeria’s total public debt, including state and federal government bonds, increased by 7.75% , compared to 32.916 billion naira on December 31. 2020, to 35,465 billion naira as of June 30, 2021.
The report also follows President Muhammadu Buhari’s letter to the National Assembly, requesting approval from the legislature for $ 4.054 billion, € 710 million and $ 125 million in new borrowing. In addition, the DMO announced last Thursday that the federal government plans to issue a new Eurobond to raise $ 6.2 billion (around 2.6 trillion naira) to finance the 2021 budget.
In a statement, the DMO said that through the Eurobond issuance, Nigeria is expected to raise up to $ 3 billion (1,200 billion naira) but not more than $ 6.2 billion.
President Buhari’s Economic Advisory Council (EAC) chairman Dr Doyin Salami was recently reported by a national daily as warning that Nigeria’s current stock of public debt is unsustainable despite the comfortable 35% ratio of the country’s debt to gross domestic product (GDP). ) report.
Salami also reportedly lamented that with a debt service-to-revenue ratio of 97.7% (January to May 2021), the country’s public debt profile was unsustainable.
According to the respected economist, the country’s outstanding debt is expected to reach around 54 trillion naira when the Ways and Means liabilities as well as the Asset Management Corporation of Nigeria (AMCON) and the projected budget deficit for 2021 are taken. in consideration.
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