The cost of servicing Nigeria’s foreign debt has surged by 107.7% to reach N3.8 trillion, significantly exceeding the projections outlined in the 2024 budget between January and August.
This is contained in the 2025-2027 Medium Term Expenditure Framework and Fiscal Strategy (MTEF & FSP) published by the Budget Office and obtained by Nairametrics.
The 2024 budget initially projected foreign debt servicing costs at N1.83 trillion, but actual spending surged to N3.8 trillion within the same period, resulting in an increase of N1.97 trillion, according to the report.
- In contrast, domestic debt servicing only slightly exceeded expectations, surpassing projections by 2%. The budget allocated N3.53 trillion for domestic debt servicing, while actual spending amounted to N3.6 trillion, reflecting a modest difference of N71 billion.
- Additionally, the total amount budgeted for debt servicing during the period—including domestic debt, foreign debt, sinking funds, and interest on FGN bonds for securitized ways and means—was N7.41 trillion.
- However, the government has paid N5.51 trillion so far, representing 34.4% of the total budgeted amount. This shows the mounting pressure on public finances as debt servicing continues to consume a significant portion of government expenditure.
Non-Oil Revenue
According to the report, the Federal Government of Nigeria (FGN) achieved N12.74 trillion in retained revenue by August 2024, representing 73.8% of its targeted N17.25 trillion for the year. The report shows that the deviation was largely due to the delayed implementation of the anticipated windfall tax, which has yet to materialize.
- The report highlights a strong performance in non-oil revenues, which totaled N3.81 trillion, achieving an impressive 160.1% of the target.
- This growth significantly cushioned the shortfall in oil revenues, which contributed only N4.09 billion, reflecting a 75% performance against the budget projection.
- Furthermore, Corporate Income Tax (CIT) and Value Added Tax (VAT) collections performed exceptionally well. According to the report, CIT generated N1.71 trillion, surpassing its target by 74.5%, while VAT contributed N530.41 billion, exceeding expectations by 55.1%.
- The report also shows that Customs revenues reached N969.89 billion, achieving 95% of the target, driven by increased trade activity and improved efficiency in collection systems. Other revenue streams contributed N4.83 trillion, with independent revenue accounting for N2.3 trillion, further supporting the government’s finances.
Despite these gains, the report emphasizes that oil revenues underperformed due to persistent challenges in the sector, including price volatility and production constraints.
Oil Revenue
According to the report, Nigeria’s gross oil and gas revenue for 2024 was projected at N20 trillion, but as of August, only N9.83 trillion was realized from the prorated sum of N13.33 trillion. This represents a performance rate of 72.1%, falling significantly short of expectations.
- The report shows that after deductions, including the statutory 13% derivation for oil-producing states, net oil and gas revenue inflows to the Federation Account amounted to N8.5 trillion, which is N2.86 trillion or 25.3% below target.
- This shortfall indicates the challenges facing the oil sector, including fluctuating global oil prices and production constraints.
- In contrast, the report highlights that non-oil revenue outperformed expectations, exceeding the prorated target by N3.53 trillion, representing a 49.3% increase.
What you should know
- The rise in Nigeria’s foreign debt servicing costs highlights growing fiscal challenges with potentially significant consequences for the economy.
- This year, Nigeria’s public debt has grown due to various factors, including the depreciation of the naira and increased domestic borrowing, often at higher interest rates.
- As earlier reported by Nairametrics, the country’s debt-to-GDP ratio exceeded 50% for the first time by the end of March 2024, following the release of revised GDP figures.
- The depreciation of the naira has substantially increased the cost of servicing external debts, which are paid in foreign currencies, further straining public finances.
