Nigeria’s total debt service payments dropped significantly from $540 million in January 2025 to $276 million in February 2025.
This is according to the Central Bank of Nigeria (CBN)’s latest data on external sector payments.
This decline comes amid ongoing efforts by the federal government to restructure its debt portfolio, improve dollar liquidity, and ease pressure on the foreign exchange market.
The figures, published on the apex bank’s website, highlight the increasing strain of debt obligations on Nigeria’s external reserves and overall fiscal sustainability.
Analysts suggest that recent debt repayment deferrals and negotiations with multilateral lenders may have contributed to the lower outflows for the month.
Surge in Letters of Credit
While debt service payments declined, Letters of Credit (LCs) rose sharply, indicating increased financing of trade transactions.
- The CBN reported that LCs issued in February 2025 totaled $95.6 million, a 48% increase from $64.6 million in January 2025.
- The rise in LCs suggests a recovery in import-related activities, particularly as businesses adjust to the fluctuating naira exchange rate and government policies aimed at stabilizing trade financing.
- Foreign Reserves and Government Measures
- President Bola Tinubu has said in the first 17 months of his administration, Nigeria’s revenue-to-debt service ratio has reduced to 65% from 97%.
The federal government has continued engagements with global lenders and investors to ease Nigeria’s growing debt burden.
The CBN’s monetary policy direction in recent months has focused on stabilizing the naira while balancing external obligations.
More insights
According to the Debt Management Office (DMO), 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.
- Nairametrics reported that 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.
- 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.
- Experts believe that a combination of higher oil revenues, improved tax collection, and strategic debt restructuring could help sustain lower debt service payments in the coming months.
However, concerns remain over the country’s rising total debt stock and the need for stronger fiscal discipline to prevent excessive borrowing.
