Debt servicing has emerged as a significant component of Nigeria’s foreign payment obligations in 2024, accounting for a staggering 63.56% of the total $5.63 billion in foreign payments in nine months.
This is according to an analysis of the latest international payment statistics data of the Central Bank of Nigeria (CBN).
This percentage marks a sharp increase compared to the same period of 2023 when debt servicing constituted 46.71% of $5.48 billion in total foreign payments.
The rise in debt servicing costs reflects the increasing burden of Nigeria’s external debt obligations amid persistent fiscal challenges.
What the data says
The country’s total debt service payments surged by 39.77% from $2.56 billion between January and September 2023 to $3.58 billion in the same period of 2024, highlighting the growing financial strain on public resources.
- Nigeria’s debt servicing in January 2024 stood at $560.52 million, a massive 398.91% increase compared to $112.35 million in January 2023. Debt servicing accounted for 73.97% of total foreign payments of $757.41 million for the month.
- February saw a marginal decline in debt servicing costs, decreasing by 1.84% from $288.54 million in 2023 to $283.22 million in 2024. Total foreign payments for the month fell to $424.96 million, with debt servicing accounting for 66.65%.
- In March, debt servicing dropped significantly by 31.04% year-on-year, from $400.47 million in 2023 to $276.17 million in 2024. However, it remained a notable portion of total foreign payments, representing 65% of the $424.71 million disbursed.
- April’s debt servicing costs jumped by 131.77%, rising to $215.20 million in 2024 from $92.85 million in 2023. During the same period, total foreign payments reached $462.54 million, with debt servicing consuming 46.53% of the total.
- Debt servicing in May reached its highest monthly value in 2024, totalling $854.37 million—a 286.50% increase compared to $221.05 million in May 2023. This substantial expenditure accounted for 68.84% of total foreign payments, which stood at $1.24 billion.
In June, debt servicing costs declined by 6.51% from $54.36 million in 2023 to $50.82 million in 2024. Despite this drop, total foreign payments also fell to $353.61 million, with debt servicing taking up a relatively smaller share of 14.37%.
- Debt servicing in July dropped by 15.46% year-on-year, from $641.70 million in 2023 to $542.50 million in 2024. Total foreign payments stood at $694.45 million, with debt servicing accounting for 78.13%.
- August recorded a 9.68% decline in debt servicing costs, which decreased to $279.95 million in 2024 from $309.96 million in 2023. Debt servicing made up 59.16% of total foreign payments for the month, which amounted to $473.00 million.
In September, debt servicing increased by 17.48%, rising from $439.06 million in 2023 to $515.81 million in 2024. Total foreign payments for the month were $798.26 million, with debt servicing consuming 64.64%.
What you should know
The data reveals a concerning trend: while total foreign payments in 2024 increased modestly by 2.71% compared to 2023, the proportion allocated to debt servicing surged significantly. ,
This indicates a growing reliance on external borrowing and a higher cost of debt repayment, which could crowd out funding for critical developmental projects.
- The spike in May 2024 stands out as a particular concern, as debt servicing consumed nearly 70% of foreign payments, driven by increased repayment obligations for earlier loans. The sharp increases in January and September also reflect heightened fiscal pressure.
- With global interest rates on the rise, the cost of servicing foreign debts may continue to escalate, posing challenges for fiscal management.
- In a recent 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.