The Nigerian government spent NOK 490.9 billion repaying Treasury bills maturing in the first nine months of 2024, BusinessDay found.
The government paid more than double the N234.7 billion it paid in interest on treasury bills in 2024 than the N234.7 billion it paid in the same period last year, according to data from the Central Bank of Nigeria (CBN) Primary Market Report.
Treasury bills are short-term debt instruments issued by the federal government through the CBN to provide short-term funding to the government.
The increase in interest rates on Treasury bills is a result of the CBN Monetary Policy Committee, headed by Supreme Bank Governor Emi Cardoso, raising interest rates by 850 basis points this year.
Nigeria’s benchmark interest rate has been raised to 27.25% from 18.75% at the beginning of the year to combat rising inflation.
The Federal Government paid 5.2 trillion naira (interest and capital) in repayment of Treasury Bills this year, up from 3.8 trillion naira in the same period last year.
Related article: Stock market registers first gain this week ahead of Treasury bill auction
One-year Treasury bills reached a record high of 28.36% in July, but began to decline to 23.36% in September.
In the previous auction, the stop interest rate for one-year Treasury bills was 20%, an increase of more than 1% from 18.5% at the previous auction, but the interest rate for 91-day and 182-day Treasury bills was 0.3. % rose. 0.5% each.
Analysts point out that rising interest rates are contributing to an increase in government debt burden.
As the Nigerian government continues to struggle with “scarce” resources, experts have expressed concern over the growing public debt portfolio, which stands at over N120 trillion as of March 2024, and the amount needed to service these debts. He says it will consume most of the population. Scarce government resources.
According to the Debt Management Bureau, the total debt of the federal and state governments has increased to over N121 trillion as of March 2024. This represents an increase of 24 trillion naira, or 19.8 percent, within three months compared to the debt position of 97 trillion naira as of December 2023. .
Total debt was $42 billion ($56 trillion) in external debt and $65 trillion ($49 billion) in domestic debt.
Related article: CBN plans to issue 2.20 trillion naira treasury bills in the fourth quarter for liquidity management
In a recent statement, the World Bank expressed deep concern about the increasing debt servicing costs burdening developing countries around the world.
Indermit Gill, Chief Economist and Senior Vice President of the World Bank, underlined the seriousness of the situation and stressed the possibility of a widespread financial crisis unless immediate and concerted action is taken.
He said the combination of record levels of debt and soaring interest rates could put many developing countries on a precarious path, leading to economic hardship and difficult decisions about resource allocation. .
According to data from the latest quarterly statistical bulletin of the Central Bank of Nigeria (CBN), debt service payments to Africa’s most populous country’s revenue account for 74.3 percent of Nigeria’s total retained earnings of N1.76 trillion (N1.31 trillion). Nigeria). First quarter of 2024.
Chief Economist at Cardinal Stone Research, Olaolu Boboi, said the increase in interest on these government bills could be negative for the government’s fiscal position and could create future uncertainty for the country. .
“Nigeria’s debt servicing over the past five years has hovered close to 100%, which shows how precarious the situation is,” Boboi said.
He said excessive government borrowing could squeeze the private sector out of the bond market.
