What's next for Nigeria's looming debt crisis?

Jul 29, 2022|Gbemisola Alonge

The Nigerian government is officially spending more than it earns on servicing its debt (domestic and local). Between January and April 2022, Nigeria made a total budget revenue of ₦1.4 trillion but paid ₦1.9 trillion in debt servicing; that's 120% of the revenue going to paying back loan interest. With the government not earning enough to pay back interest on its debt, it is difficult for the country to spend on more critical development areas like healthcare and education.

Key takeaways:

The Nigerian government is officially spending more than it earns on servicing its debt (domestic and local). Between January and April 2022, Nigeria made a total revenue of ₦1.4 trillion but paid ₦1.9 trillion in debt servicing.
In (an inevitable) future where the government’s debt situation worsens, and it becomes unable to fund its debt services, it could seek a debt restructuring, which will look different for different creditors.
The implication of a debt restructuring for Nigeria is broken into two options: either face the brunt of implementing policies that will be painful in the short-term and beneficial in the long-term or restructure market-led debt restructuring—which comes with its own impact of being shut out of the market.

That means the average Nigerian is not expecting ASUU’s five-month strike to end this year because the government has no money to pay lecturers to return to class.

The country has been on this trajectory since 2020 when the debt servicing ratio (the proportion of government’s revenue spent on debt) hit 98%. However, noticing the trend in the graph above,