The value of naira to dollar fell from N196.92 in June 2015 to N414.72 in June 2022, worsening Nigeria’s foreign debt burden.
Within the seven years under review, the naira depreciated by 52.52 per cent against the US dollar.
The Monthly Average Exchange Rates of the Naira (Naira Per Unit of Foreign Currency) for 2015 document obtained from the website of the Central Bank of Nigeria shows that one dollar was N196.92 for Inter-bank Foreign Exchange Market.
The exchange rate for one dollar as of June 30, 2022, was N414.72, according to the figure provided by the CBN.
In the same period, Nigeria’s total external debt rose from $10.32bn as of June 30, 2015, to $40.06bn as of June 30, 2022.
This showed that there was an increase of 288.18 per cent in seven years, according to the external debt stock reports by the Debt Management Office.
A breakdown shows that in 2015, states had $3.27bn external debt while the Federal Government had $7.05bn.
By 2022, states’ external debt had risen to $4.56bn, while Federal Government’s external debt was $35.5bn.
The debts include: loans from multilateral sources such as the World Bank, the African Development bank and the International Monetary Fund, including those from bilateral sources such as China, France, Japan, Germany and India.
They also include debts commercial sources, which include Eurobonds and Diaspora bonds.
If the CBN average exchange rate for June 2015 was used to weigh the country’s current $40.06bn foreign debt, Nigeria’s external debt in naira terms would have been N7.89tn.
However, with the exchange rate of N414.72 as of June 30 this year, the total external debt in naira terms was N16.61tn, showing a difference of N8.72tn.
By implication, it will cost Nigeria extra N8.72tn in naira terms if the country decides to pay back the $40.06bn external debt in 2022. If this same debt was incurred in 2015, Nigeria would have spent N8.72tn less, given the then exchange rate of N196.92/$.
Reacting, the Managing Director/Chief Executive Officer of Cowry Asset Management Limited, Mr Johnson Chukwu, said that high external debt would impose a huge debt service on the economy.
He said, “This will impose a huge debt service on the economy, particularly at a period when we have low revenue from oil sales. If the revenue from oil sales does not improve, then the government will be struggling to meet that debt service obligation to foreign lenders.”
However, he noted that Nigeria could service its foreign debt at the current level, but a constant increase in debt without a corresponding increase in foreign currency earnings could put the country in a difficult position.