Nigeria Failed To Save $342m From Debt Service Suspension In 2021

The Federal Government of Nigeria failed to save $342.1m from January to December 2021 through the debt service suspension initiative, according to World Bank.

World Bank in a post on its website disclosed the loss in a brief on Debt Service Suspension Initiative.

The World Bank disclosed when different countries, including Nigeria, could have saved if creditors suspended payments on all principal and interests within a period of 12 months.

It gathered that Nigeria, though eligible, opted out of the initiative which could have seen it save 0.1 per cent of its Gross Domestic Product.

Nigeria despite being one of the largest World Bank borrowers are not covered by the Joint Bank-Fund Debt Sustainability Framework for Low-Income Countries.

World Bank in a document published last year April, ‘the Debt Report 2021 Edition II’ provided a justification for countries that were not yet beneficiaries of the DSSI.

It was noted that some countries which were eligible for the DSSI chose not to participate for a number of reasons.

Some of the reasons included conveying wrong signals to bondholders and other private creditors, among others.

The report read, “Some DSSI-eligible countries have thus far elected not to participate. Currently, 27 DSSI-eligible countries, 37 per cent of eligible countries, are not participating in the initiative for a variety of reasons.

“Some fear participation may convey the wrong signal to bondholders and other private creditors while others note the amount of eligible bilateral debt service was negligible, and savings do not justify the administrative expenses incurred by the deferral.

“Because the DSSI only defers payment to a later date, some policymakers worry longer-term debt sustainability may be sacrificed for short-term financial flexibility.”

The World Bank disclosed that Nigeria could have saved about $432.6m from May 2020 to December 2021 through the debt service suspension initiative, The PUNCH had reported.

Nigeria spent N2.49tn on debt servicing payments in the first nine months of 2021, according to the data obtained from the Debt Management Office.

Between January and March 2021, Nigeria spent N612.71bn on domestic debt servicing, while it spent $1bn (N410.83bn) on external debt servicing, giving a total of N1.02tn.

From April to June 2021, the country spent N322.7bn on domestic debt servicing and $299m (N122.83bn) on external debt servicing, showing a total of N445.53bn.

From July to September 2021, Nigeria spent N808.49bn on domestic debt servicing and $520.78m (N213.95bn) on external debt servicing, giving a total of N1.02tn.