Global ratings agency, Moody’s, has stated that Nigeria’s interest spending on debt might consume up to 36% of the federal government’s revenue in 2024.
The firm stated this in its review of the Nigerian economy, where it maintained the country’s credit outlook as positive, citing the sustenance of reforms instituted in 2023.
Nigeria’s public debt increased by N24.3 trillion to N121.67 trillion at the end of the first quarter of 2024 on the back of depreciation in the naira.
The domestic debt component of the total debt stood at N65.65 trillion while external debt was N56.02 trillion.
In the first quarter of 2024, the federal government reportedly spent around $1.12 billion on foreign debt service. The figure represents around 70% of the total forex outflow in the quarter.
According to the firm, the hawkish monetary policy stance of the CBN has pushed interest rates for local borrowing by the federal government from an average of 12.8% in 2023 to around 19% in the first five months of 2024.
It explained that the interest payment would increase by around 1% of GDP in the year under review.
The report stated, “Tighter monetary conditions are pushing government interest rates for local currency borrowing to higher levels, from an average of 12.8% in 2023 to 19.7% between January and May 2024. As the government is predominantly borrowing in domestic markets, this will have a significant impact on interest spending, which we expect will increase by 1 percentage of GDP in 2024 and consume 36% of government revenue.”
Furthermore, the report noted that implicit fuel subsidy payment due to the devaluation of the naira which increased the cost of fuel imports, would put pressure on the government’s spending. It stated that fuel subsidy payments would remain high in the year but likely to gradually decrease.
The firm also noted that beyond 2024, it is uncertain in its outlook for the country despite an increase in oil production.