The depreciation of Nigeria’s Naira has increased the nation’s external debt service in January by about N34.3 billion.
According to the monthly economic report for January released by the CBN on Friday, Nigeria paid $620 million for external debt service in January.
However, in November Last year, Ripples Nigeria revealed that Nigeria was actually expected to pay $529,920,000 for January matured loan.
Using figures published in August by the World Bank Debtor Reporting System, Ripples metrics revealed that a total of $2.15 billion of matured loan is expected to be paid in 2021 to 10 levels of creditors’ type classified under multilateral, bilateral and bonds agreements.
However, CBN data shows Nigeria paid $90 million more which amounts to N34.3 billion as inter bank exchange rate moved from N361 to N381.
CBN in its economic report noted clearly that depreciation of naira to the dollar contributed to the rising debt service payments.
“A continued strengthening of the dollar vis-à-vis the naira would also raise debt service burdens, thereby reducing resources for growth,” the apex bank noted.
Statistics from CBN showed, that as at the time Ripples Nigeria obtained Nigeria’s debt obligation for 2021 from World Bank reporting system, Nigeria’s Naira at Inter-bank Foreign Exchange Market (IFEM), exchanged at a monthly average of N316 to a dollar.
The exchange rate however increased to 381 in August the same rate quoted by CBN in its January 2021 economic report.
In February, Dr Paul Alaje, Senior Economist with SPM Professionals raised concern on Nigeria’s dollar debts at a virtual Annual Forum of Finance Correspondents Association of Nigeria (FICAN).
In his words, “devaluation of Nigeria currency happened last year from ₦306 official figure to ₦379, now, when you study debt management publication carefully, you will see that because of devaluation, Nigeria has added ₦1 trillion to debt for borrowing nothing “
“Looking at the foreign component of Nigeria’s debt and the conversion to Naira, Nigeria devalued and borrowed in dollars that its self will make our debt profile to increase,” he said.
He added that Nigeria will still service this debt at the same dollar rate it borrowed the money because the rate of servicing has not reduced.
Similarly, a recent Bloomberg report revealed that banks are projecting a boost in profits due to a weaker naira in 2021.
According to the report, FCMB Group Plc foreign currency earnings rose more than two-fold to N10 billion ($24.5 million) from N3.5 billion and expect to grow further in 2021 as Investors expect the naira to trade at 425.69 naira per dollar in three months and 440.50 naira per dollar in six months.
While this looks unlikely, the pressure from IMF and World Bank might see the projected exchange rate take effect.
A Goldman Sachs reports that CBN might consider devaluing the currency again in the short term to meet the conditions for international financing.
However, Nigeria government has continued to defend that the country’s debt level is sustainable and will continue to look into debt market this year.
Last month, Ripples Nigeria exclusively reported that the CBN spent $5.76 billion servicing external debt in 2020.
According to RipplesMetrics report the payment represented a 329.5 percent rise compared to $1.34 billion cumulative total debt service payment recorded in 2019.
In 2018, debt service was $1.47 billion while in 2017, $444.7 million was spent to service external debts.
For 2016 debt servicing by CBN stood at $349.6 million and while in 2015 when the present administration came into power, $379.9 million was spent.
This showed as at December 2020, debt servicing by CBN has increased by 1422.2 percent in the last five years.
Join the conversation
INVESTIGATION….N.3bn down the drain: Why water projects for Enugu communities don’t work
In this concluding part, ARINZE CHIJIOKE talks about some of the projects that are serving the people and how various WASH programmes have failed to tackle...
INVESTIGATION…PARKVIEW ESTATE: Exclusive images of how billionaire property developer incurred Lagos govt‘s anger
Many have seen the demolished building, but not many know the circumstances that led to the teardown of the about...
INVESTIGATION… N.3bn down the drain, as Enugu communities suffer from dry taps
In November 2020, three organizations and the Enugu State government celebrated the completion of N300 million worth of projects that were expected...
INVESTIGATION… How herdsmen crisis compounds woes of already deprived Ogun communities
Earlier in January, the Nigerian media space was awash with reports of violence between herders and farmers across the country....
Investigation… Inside Enugu markets where traders are choked by multiple taxes
In recent times, the world economy has developed tremendously and this is partly linked with activities of petty traders who...
Juve keep Euro hopes alive after ending Inter’s 20-game unbeaten run
Juventus ensured they remain in the race for a spot in Europe next season after they won a dramatic Serie...
BREAKING… Ndidi, Iheanacho win historic FA Cup with Leicester City
Super Eagles duo of Wilfred Ndidi and Kelechi Iheanacho have helped Leicester City to beat Chelsea in the final of...
Aribo, Balogun’s Rangers complete Scottish PL season unbeaten
Super Eagles duo of Joe Aribo and Leon Balogun have helped their club, Rangers to go unbeaten throughout the Scottish...
Champions Man City fight back to beat Newcastle in seven-goal thriller
Newly-crowned champions of the English Premier League, Manchester City came from behind to beat Newcastle United 4-3 in a thrilling...
Nwankwo returns as Rohr names 31-man provisional squad for Cameroon friendly
Simy Nwankwo was handed an invitation to the Super Eagles squad for the first since 2018, as manager Gernot Rohr...
Latest Tech News
TechNigeria: A weekly digest of what went down in Nigeria’s tech space
Today, let’s do a quick one on: • Afrinurse launch • Cyber crime via messaging apps • CDcare launch •...
Nigeria’s CDcare launches zero-interest, pay-later platform. 2 other things and a trivia
This line-up of stories will help you discover the latest happenings around the tech world, today. 1. Nigeria’s CDcare launches...
Nigeria’s ClassNG launches as open marketplace for education. 2 other things and a trivia
This line-up of stories will help you discover the latest happenings around the tech world, today. 1. Nigeria’s ClassesNG launches...
Healthtech startup launches engagement app for African nurses. 2 other things and a trivia
This line-up of stories will help you discover the latest happenings around the tech world, today. 1. Healthtech startup launches...
GirlCode partners Amazon to upskill unemployed women. 2 other things and a trivia
This line-up of stories will help you discover the latest happenings around the tech world, today. 1. GirlCode partners Amazon...
SpaceX to launch lunar mission funded with crypto. 2 other things and a trivia
This line-up of stories will help you discover the latest happenings around the tech world, today. 1. SpaceX to launch...