World Bank warns that Nigeria's debt servicing will amount to as much as 123% of government revenue

WORLD Bank officials have projected that Nigeria's debt servicing will gulp as much as 123.4% of the federal government’s revenue in 2023 in what is looking like a scary and unsustainable economic outlook.

Like most African nations, Nigeria is still reeling from the economic effects of the coronavirus pandemic, as the global shutdown led to a collapse in the export of primary commodities. Most African countries are highly dependent on the export of primary products and with global commerce on hold, their economies face long-term damage, leaving them in need of significant help from the rest of the world to get over the impact of the pandemic.

Over the last three years, Nigeria has had to borrow significantly to fund her annual budget and the World Bank has now warned that this is putting the economy at risk. Alex Sienaert, the new World Bank lead economist for Nigeria, recently published a document titled Nigeria Public Finance Review: Fiscal Adjustment for Better and Sustainable Development Results. in which he warned that debt servicing would gulp 100.2% of federal government revenue by the end of 2022.

This represents a decline from the earlier projection in its October Africa’s Pulse report, which is a biannual analysis of the near-term macroeconomic outlook for the region, published during the World Bank/IMF Spring and Annual Meetings in April and October. In the Africa’s Pulse report, the World Bank had said that Nigeria’s debt service to revenue ratio could stand at 102.3% by the end of 2022.

It had described the public debt in Nigeria as concerning due to the rising debt service-to-revenue ratio. However, the situation would be dire in 2023 as debt surviving would exceed 118% of revenue reported in the first four months of 2022.

Mr Sienaert said: “Borrowing more is not the solution as debt costs are rising rapidly, squeezing non-interest spending. Debt servicing has surged over the past decade and is expected to continue increasing over the medium-term, crowding out productive spending.”

Nigeria’s public debt rose to N44.06trn in the third quarter of 2022, with the country struggling with a repayment burden. According to the Debt Management Office, the total public debt stock rose from N42.84tn recorded in the second quarter to N44.06tn in the third quarter of 2022.