Na wa o! The Debt Management Office (DMO) made it known on Thursday that Nigeria expects to spend 35 percent of its federal government revenues servicing debt this year, up from 26 percent last year.
Africa’s biggest economy faces its worst economic crisis in decades after a slump in oil prices hit public finances and the naira currency. Oil formerly made up 70 percent of government income and 90 percent of foreign exchange earnings.
The cost of servicing debt for Africa’s top oil producer has been rising over the past 3 years, with the government looking to borrow as much as $5 billion to finance a record budget deficit of 3 trillion naira.
The DMO said 1.36 trillion naira will go toward servicing federal government debt, out of forecast revenues of 3.86 trillion naira. Nigeria expects to earn 820 billion naira from oil in 2016. Nigeria, also reeling from slowing economic growth, has been shopping for a budget support loan.
The African Development Bank (AFDB) has said the west African nation has asked the bank for a loan of $1 billion to help fund the deficit. Nigeria had also held exploratory talks with the World Bank and looked at options to borrow from the AFDB and China Exim Bank.
Nigeria’s total debt climbed to 12.60 trillion naira ($65.4 billion) as of December 2015, up from 11.2 trillion naira in 2014, with Abuja’s ability to pay bills and fund new projects in doubt as the drop in oil prices drags.
High domestic interest rates and a pegged exchange rate policy could also affect the government’s ability to service debt, analysts say.
In 2015, federal government revenue was projected at 3.60 trillion naira, of which it earmarked 943 billion naira for debt service. Debt service accounted for 19 percent of federal government’s 3.73 trillion naira budget in 2014.
The DMO said in a statement published in newspapers the government spent 1.77 trillion naira in 2015 to service both federal and state debts on combined revenues of 6.32 trillion naira.