Nigeria spent more servicing accrued loan interest than principal in last quarter 2020

Nigeria’s debt profile increased by 2.15% in the fourth quarter (Q4) of 2020 to close at ₦32.92 trillion. The fourth quarter saw external debt increased by 4.26%, while domestic debt increased by 0.87%. Total external debt at the end of Q4 was ₦12.71 trillion, and domestic debt closed at ₦20.21 trillion.

In the fourth quarter, Nigeria paid $289.45 to service external debts and $326.99 billion to repay domestic debt. Most of the monies paid out to debt servicing went to the payment of accrued interest on the loans, as principal repayment was less than 31%.

Data available from the Debt Management Office (DMO) showed Nigeria incurred more debt in the second quarter (Q2) of 2020. However, the total public debt of the country fell gradually from Q2 through Q4. Total debt increased by 4.47% in the first quarter (Q1) of 2020 to ₦28.628 trillion. In Q2, it increased by 8.31% to ₦31.01 trillion. In Q3 and Q4, it increased by 3.92% and 2.15%, respectively.

Data gleaned from the Nigerian Bureau of Statistics (NBS) revealed that in Q4, Nigeria incurred ₦692.75 billion as debt. Of this amount, external debt made up 75%, amounting to ₦519.27 billion. Total domestic debt in Q4 was ₦173.48 billion, making 25% of the amount borrowed in 2020.

By the end of 2020, the Federal Government (FG) incurred a total of $33.35 million. The sources of borrowing show that multilateral loans account for 53.78% of the total sum. The amount owed as multilateral debt closed at $17.93 million. Commercial debts at year-end were $11.17 million, and the country ended 2020 owing bilateral debt of $4.06 million.

The state governments and the FCT accumulated a total of $4.77 billion in debt at the end of 2020. Amongst the states, Lagos state owed the most debt by year-end. The foreign debt for Lagos state accumulated to $14.06 billion, which is 29.46 as of December 2020. Kaduna state was behind Lagos in second place, accounting for 11.89% of the debts.

Top 10 States by External Debt in 2020

The Federal Government mainly used bonds to acquire loans in 2020. By the end of the year, FG Bonds debt accumulated made up 73.83% of the total domestic debts owed. Treasury bills were the second most used instruments by the FG. A total of ₦2.72 trillion remains outstanding treasury bills debt by December 2020. Other instruments include promissory notes, sukuk, treasury bonds, green bonds, and savings bonds. Total domestic debt by the FG closed at ₦16.024 trillion.

FG Domestic Debt for 2020 (Jan-Dec) 

Data review showed that Lagos state is the most indebted state in the country by year-end 2020. The state also ranked top in domestic debt as well as in foreign debts. The state’s domestic debt made up 12.15% of the total domestic debt of states and FCT. Rivers state followed, though half of Lagos state with 6.38%. Delta and Akwa Ibom states were 3rd and 4th, accounting for 5.94% and 5.51%. Kaduna state, which was second in foreign debts, is 25th, making 1.64% of the total. In all, state domestic debt was ₦4.185 trillion.

In the fourth quarter of 2020, Nigeria paid $289.45 million to service its external debts. Of this amount, only 30.64% was used to pay for the capital borrowed, while interest on foreign loans serviced accounted for 69.34%. In Q4, $289.45 was used to service external debts.

Most of this money went to commercial debts owed. Fifty-four percent of the $289.45 went to commercial loans, while multilateral loan was serviced by 43% of the figure.

Domestic debts serviced showed that 92.9% went to the payment of accumulated interests while 7.1% was spent to service the principal. The states spent a total of ₦351.99 billion servicing domestic debts. Government bonds took 68.03% of the amount, and 18.51% went to NTBs. Others are Sukuk rentals, treasury bonds, green bonds, and savings bonds.

Domestic Debt Serviced in Q4 2020

Nigeria was able to pay off some of its debts by the end of 2020. However, its debt profile increased by the end of the year. This could be attributed to the increasing interest rates on the loans.