Nigeria’s gross debt interest payments to grow by 92% in 2022-IMF

*Projects heavy interest payments on FG’s debt servicing

International Monetary Fund (IMF) has said the Nigerian government’s gross debt interest payments will grow by 92 per cent in 2022 from 85.5 per cent in 2021.

The international fund, also, said that the federal government will spend 92 kobo of every Naira it earned in 2022 to service its mounting debt profile.

With this revelation, what it means id s that Nigeria will have just 8kobo of every Naira earned for development purposes.

The international fund, in its latest Article IV consultation report, explained that as of the end of September 2021, the Nigerian debt-servicing-to-revenue ratio stood at 76 per cent, implying that 76 kobo out of every N1 earned by the government in 2021 was spent on payment of interest on debts.

According to IMF’s latest statement, it estimates the debt-servicing-to-consolidated revenue (total revenues of the government and its agencies) for 2021 and 2022 at 29 per cent and 32.8per cent respectively.

“The projections were sourced from Nigerian authorities and its staff estimates and projections.

In a table titled, ‘Nigeria Federal Government Operations, 2017–26,’ the IMF said Federal Government’s debt is expected to grow to N70.85 trillion in 2022, N83.17trillion in 2023, N97.80trillion in 2024, N115.38trillion in 2025, and N136.11trillion in 2026.

The IMF expects the country’s revenues and grants in the year to cap at seven per cent of total output. Last year’s rate was estimated at 7.4 per cent, which is much higher than the 6.3 per cent achieved in 2020. It said Nigeria’s economy is recovering from a historic downturn benefitting from government policy support, rising oil prices and international financial assistance.

The IMF said, “Nigeria’s level of public debt increased sharply last year due to the COVID-19 crisis. Public debt had been on an increasing path in the last decade reaching 29 per cent of GDP in 2019 from 9 per cent in 2009, driven by primary deficits as weak non-oil revenue mobilisation failed to compensate for falling oil revenues.“In 2020, the sharp decline in oil revenues increased public debt further to 35 per cent of GDP. The debt-to-GDP ratio is expected to increase in the medium term to 43 per cent of GDP, despite favourable growth-interest rate dynamics. Gross financing needs are expected to increase to 8.9 per cent of GDP in 2021 from 7.3per cent in 2020, and to 11.4per cent in the medium term.”IMF said “despite interest payments accounting for only two per cent of GDP in 2020, interest payments accounted for 89 per cent of the Federal Government’s income, indicating a lack of domestic revenue mobilisation potential. The government’s interest-to-revenue ratio is likely to drop somewhat to roughly 86 per cent in 2021 before rising to 139 per cent by 2026.”

It noted that federal government spending is expected to climb by 69.91 per cent from N17.24 trillion in 2022 to N29.29 trillion in 2026, according to the Washington-based Multilateral Institution.

It also projects government expenditures of N18.57trillion in 2023, N21.51trillion in 2024, N25.24 trillion in 2025, and N29.29 trillion in 2026. Recurrent expenditure will account for most of the government’s spending, rising to N13.59trillion in 2022, N14.69trillion in 2023, N17.47 trillion in 2024, N20.67trillion in 2025, and N24.12trillion in 2026.

While capital expenditure will account for a fraction of the spending, accounting for N3.65trillion in 2022, N3.88trillion in 2023, N4.04trillion in 2024, N4.57trillion in 2025, and N5.18trillion in 2026. Even as spending rises, government revenue is expected to fall short of spending.

Total government revenue is predicted to reach N5.23 trillion in 2022, N6.25 trillion in 2023, N6.87 trillion in 2024, N7.66 trillion in 2025, and N8.57 trillion in 2026, according to the I