Moody’s, a global rating agency, predicts that Nigeria’s interest payments on debt could absorb as much as 36% of the federal government’s revenue in 2024.
In its recent assessment of the Nigerian economy, Moody’s affirmed the country’s credit outlook as positive, attributing this to ongoing reforms initiated in 2023.
As of the first quarter of 2024, Nigeria’s total public debt reached N121.67 trillion, marking a N24.3 trillion increase primarily due to naira depreciation. Domestic debt accounted for N65.65 trillion, with N56.02 trillion attributed to external debt.
During this period, the federal government reportedly allocated approximately $1.12 billion to foreign debt servicing, constituting about 70% of the total forex outflow for the quarter.
Moody’s highlighted the Central Bank of Nigeria’s stringent monetary policy stance, which escalated local borrowing interest rates from an average of 12.8% in 2023 to about 19% between January and May 2024.
The agency projected a 1% rise in interest payments relative to GDP for the year, emphasizing that the government’s substantial reliance on domestic borrowing would significantly elevate interest expenses to 36% of revenue.
Additionally, Moody’s pointed out that the naira devaluation escalated implicit fuel subsidy costs, intensifying fiscal pressures on the government. It anticipated that while fuel subsidy payments would remain elevated throughout the year, they might gradually diminish.
Looking ahead, Moody’s expressed uncertainty about Nigeria’s economic prospects post-2024 despite an uptick in oil production.
