Economy: Experts express worry over growing debt servicing

Cross section of experts have expressed concern on the huge cost of debt servicing the country is bearing, eve n as the federal government’s savings bond’s June allocation is yet to be affected.

The concern, Daily Times gathered was bore out of the rising payments for debts servicing compared to previous years.

An investment analysts company recently in a report noted that domestic debt servicing payments soared from N354bn in 2010 to N1.23trn last year.

According to the report, focus on the domestic payments because they comprise more than 90 per cent of the total burden, and because the FGN’s external debt obligations are mostly concessional and far less costly than its naira borrowing.

There is a point at which this domestic debt service burden becomes unsustainable, and we are not a million miles away from it”.

Total debt service in the 2016 budget represented a projected 35.4% of total FGN revenue. The ratio was so dire, of course, because the record of revenue collection has been poor.

In practice, collection was even poorer than forecast and the actual ratio was above 60%.
The report further poited that the cost of issuing NTBs has soared, to the benefit of the commercial banks (the main buyers). Since August 2016, the yields on the 364-day paper at auction have settled above 22% (and more than doubled over 12 months.

While yesterday we commented upon the still exemplary ratio for domestic debt stock/GDP, today we note the alarming rise in domestic debt service.