To deal with economic downturn, Nigeria will reschedule debts totaling US$53 billion.
President Muhammadu Buhari stated in a letter to parliament seeking clearance for the transaction that Nigeria will convert a total of N23.7 trillion ($53 billion) in short-term loans owed to its central bank into 40-year debt at 9% interest.
Due to crude theft in its oil-producing region, Africa’s largest economy has battled with minimal revenue. A Senate study concluded in November that oil theft cost it more than $2 billion in the first eight months of this year.
The Nigerian government is spending more on debt repayments than on health and education, according to economists, but President Buhari has claimed that his government was forced to borrow to escape two recessions in the past seven years.
The ruling All Progressives Congress (APC) has a majority in the parliament, which has never turned down any of President Buhari’s requests for approval.
Nigeria’s economy has begun to expand, but it is in fragile shape, and its dominating oil sector is not performing well.
Nigeria’s credit rating was lowered by Fitch in November to “B-” with a stable outlook, in part due to a worsening of its debt servicing.
According to President Buhari, as of December 19, the government owed the central bank N22.7 trillion ($51 billion) in temporary advances, which he described as “short-term or emergency finance to meet delayed government expected cash receipts.”
President Buhari requested permission for a further N1 trillion advance from the central bank in a letter to the legislature dated December 20.
In addition, he asked for an additional N819.5 billion ($2 billion) in 2022 spending, which will be paid for by local borrowing.
Local borrowing caused Nigeria’s overall public debt to increase by 3% to $103.3 billion in the second quarter. According to figures from the finance ministry, the budget deficit to revenue ratio reached 74% this year and may increase to 111% next year.
The amount of interest now being paid on the debt that would be rescheduled was not made public by the government.