Nigeria’s debt servicing payments have surged by 69% in the first half of 2024, reaching N6.04 trillion, up from N3.58 trillion recorded in the same period of 2023.
This sharp rise in debt service obligations, likely driven by naira devaluation for foreign debt repayments, reflects the growing burden on the Federal Government as debt repayment consumes a significant portion of its financial resources.
According to data from the latest statistical bulletin of the Central Bank of Nigeria (CBN), debt service in H1 2024 made up 50% of the total expenditure of N12.17 trillion and a staggering 162% of the N3.73 trillion total revenue generated during the period.
What the data says
- In January 2023, the government spent N550.3 billion on debt servicing. By January 2024, this had risen to N755.9 billion, representing a 37% increase. The significant jump highlights the compounding nature of debt obligations as interest payments accumulate over time.
- February 2023 saw a debt servicing expenditure of N518.7 billion, which slightly decreased to N505.9 billion in February 2024, marking a marginal 2.5% reduction. While February’s figures showed a brief reprieve, the overall trend remains concerning.
- March 2023 recorded one of the highest debt servicing costs for that year at N897.9 billion. However, March 2024 saw this figure rise significantly to N1.01 trillion, a 12.2% increase year-on-year. The consistent upward trajectory in debt servicing reflects growing fiscal stress.
- In April 2023, the government spent N847.9 billion on debt servicing, which was reduced to N821 billion in April 2024, representing a 3.2% decline.
- May 2024 marked a dramatic spike in debt servicing, as the government spent N2.26 trillion, a massive increase from N523.8 billion in May 2023. This 332% surge indicates the growing weight of debt repayments, potentially due to large principal repayments or the significant devaluation of the naira in that month.
- Debt servicing costs in June 2023 stood at N241.3 billion, while in June 2024, they rose significantly to N689 billion, reflecting a 186% increase. The sharp rise in June highlights the intensifying financial pressure from Nigeria’s debt load as the government grapples with repayments.
What you should know
The 69% rise in debt servicing between H1 2023 and H1 2024 highlights Nigeria’s growing fiscal vulnerability. With more funds being channeled towards repaying debt, the government has less fiscal space to allocate resources towards infrastructure, social services, and economic development projects. The increasing debt service obligations also signal that Nigeria may be borrowing at high-interest rates, both domestically and internationally, further exacerbating the financial burden.
One of the most concerning aspects of Nigeria’s rising debt burden is that debt servicing made up 50% of the total government expenditure of N12.17 trillion in H1 2024. This means that half of the government’s spending was used to service debt, leaving only half for other critical areas such as infrastructure, education, healthcare, and social services.
Furthermore, debt servicing amounted to 162% of the FGN’s total revenue of N3.73 trillion in the same period. In essence, Nigeria is borrowing to repay its debts, as the government is spending far more on debt servicing than it is generating in revenue. This imbalance highlights the growing strain on Nigeria’s fiscal health and its dependence on borrowing to meet financial obligations.
In an earlier statement, the World Bank expressed deep concern over the escalating debt service costs that are burdening developing countries worldwide. Indermit Gill, the World Bank’s Chief Economist, and Senior Vice President, emphasized the gravity of the situation, highlighting the potential for a widespread financial crisis if immediate and coordinated actions are not taken.
According to Gill, the combination of record-level debt and soaring interest rates has set many developing nations on a precarious path, one that could lead to economic distress and tough decisions regarding the allocation of resources.
