Nigeria’s debt servicing up 55.7% in Q1’23

Data from the Debt Management Office shows Nigeria’s debt servicing cost increased by 55.7 per cent to hit 1.2 trillion naira in the first quarter of this year, while total debt stock rose to 49.9 trillion naira. Femi Oladehin, Partner at Argentil Capital Partners joins CNBC Africa to unpack the numbers.

Mon, 26 Jun 2023 13:29:26 GMT

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AI Generated Summary

The surge in debt servicing costs by 55.7% to 1.2 trillion naira in Q1’23 poses significant challenges for the new administration, highlighting the pressing need for prudent financial management and revenue enhancement strategies.
The focus on debt to revenue ratio rather than debt to GDP ratio is emphasized as a more accurate measure of Nigeria's debt servicing capacity, underscoring the importance of boosting revenue generation to sustainably manage the country's debt burden.
The interview also discussed the impact of currency devaluation on foreign debt levels and highlighted the volatility in the currency market, signaling ongoing challenges and uncertainties in Nigeria's economic landscape.

Data released by the Debt Management Office has revealed that Nigeria's debt servicing costs surged by 55.7% to reach 1.2 trillion naira in the first quarter of 2023, while the total debt stock climbed to 49.9 trillion naira. Femi Oladehin, Partner at Argentil Capital Partners, shed light on the implications of these figures in an interview with CNBC Africa. Oladehin pointed out the challenges facing the new government due to the significant debt burden and emphasized the need for a cautious approach towards future borrowings. He highlighted the importance of increasing revenue to improve the country's debt servicing capacity. Oladehin also expressed concerns about the foreign debt and the impact of currency devaluation on debt levels. He predicted that by June, the debt numbers could rise to around 80 trillion naira, posing a significant challenge for the government. The interview touched on the administration's efforts to boost revenue generation and explore alternative sources of income to mitigate the debt crisis. Oladehin stressed the necessity of tough decisions to navigate the economic challenges ahead. The discussion also questioned the traditional focus on debt to GDP ratio as a measure of economic stability, suggesting a shift towards debt to revenue ratio for a more accurate assessment of debt servicing capacity. Additionally, the interview addressed the volatility in the currency market, with Oladehin acknowledging the limited supply in the forex market and anticipating continued fluctuations in the exchange rate. Overall, the interview underscored the complexity of Nigeria's debt situation and the formidable task facing the new administration in managing the country's financial obligations amidst economic uncertainties.