Debt servicing fell from $540m to $276m, says CBN

IMF returns positive rating of Nigeria’s debts

Figures from the Central Bank of Nigeria (CBN) indicate that the amount Nigeria dedicates to service its debts halved from $540 million in January to $276 million in February this year.

However, the First Deputy Managing Director of the International Monetary Fund (IMF), Gita Gopinath, says Nigeria’s debt has not reached crisis point, as the Fund returned a rather strange positive rating of the country’s mounting debts.

Indeed, the decline in debt servicing occurs with the Federal Government’s ongoing efforts to restructure its debt portfolio, enhance dollar liquidity, and alleviate pressure on the foreign exchange market.

The figures, published on the apex bank’s website, highlight the increasing strain of debt obligations on Nigeria’s external reserves and overall fiscal sustainability.

Conversely, while its debt servicing figure dropped significantly, the country’s Letters of Credit rose, which could be a sign of increased financing of trade transactions.

This came as the CBN has continued to insist that its focus was on stabilising the naira and not artificially backing the national currency with a view to shoring up its value, as lower value continued to affect critical products such as fuel price, electricity tariffs amid low salaries and skyrocketing transportation fares.

Just recently, the Debt Management Office (DMO) said Nigeria now commits N6.04 trillion (more than 69 per cent) of resources to debt restructuring from N3.58 per cent it was in the first hold of 2023.

While the increased level of oil production has been encouraging in the last few weeks, what is realised is far from what is needed to meet loan obligations.

GOPINATH is, however, quick to warn that the IMF’s positive rating of Nigeria’s debt was not an open cheque to the country’s rulers to acquire more debt. IMF believes that at 52.8 per cent of Gross Domestic Product (GDP), Nigeria’s debt was still in its comfort zone.

The World Bank threshold (danger zone) for developing countries’ debt is 55 per cent of GDP, which Nigeria is perilously close to. That is why some experts are worried about the IMF’s view that Nigeria’s debt is still sustainable.

While it is convinced that Nigeria’s debt at 52.8 per cent of GDP is still sustainable, the IMF is however worried about the spending pattern of the Federal Government.

Gopinath warned that though the reform programmes of the Federal Government were successful and made Nigeria attractive again to foreign direct investors, the system has pushed something close to 100 million Nigerians below the poverty line.

Again, the IMF poverty figure in Nigeria is very conservative. Other assessors conclude that 140 million Nigerians are in abject poverty. IMF blames the despicable level of poverty in Nigeria on the absence of a social security system that unemployed people could fall back on.