The FG spent $3.58 bn in the first nine months of 2024 to service its foreign debt, a 39.77% increase compared to the $2.56 bn spent in 2023.
This is according to data from the Central Bank of Nigeria on international payment statistics.
The significant rise in external debt service payments shows the mounting pressure on Nigeria’s fiscal balance amid ongoing economic challenges.
Data from CBN’s international payment statistics reveal that the highest monthly debt servicing payment in 2024 occurred in May, amounting to $854.37 million.
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In comparison, the highest monthly expenditure in 2023 was $641.70 million, recorded in July. The sharp contrast in May’s figures between the two years ($854.37 million in 2024 versus $221.05 million in 2023) highlights the rising cost of debt obligations as Nigeria battles massive devaluation of the naira.
The CBN showed significant month-on-month changes in debt servicing costs, with some months recording sharp increases compared to the previous year. A breakdown of the data revealed varied trends across the nine months.
In January 2024, debt servicing costs surged by 398.89 percent, rising to $560.52 million from $112.35 million in January 2023. February, however, saw a slight decline of 1.84 percent, with payments reducing from $288.54 million in 2023 to $283.22 million in 2024.
March recorded a 31.04 percent drop in payments, falling to $276.17 million from $400.47 million in the same period last year. April saw a significant rise of 131.77 percent, with $215.20 million paid in 2024 compared to $92.85 million in 2023.
The highest debt servicing payment occurred in May 2024, when $854.37 million was spent, reflecting a 286.52 percent increase compared to $221.05 million in May 2023. June, on the other hand, saw a 6.51 percent decline, with $50.82 million paid in 2024, down from $54.36 million in 2023.
July 2024 recorded a 15.48 percent reduction, with payments dropping to $542.50 million from $641.70 million in July 2023. In August, there was another decline of 9.69 percent, as $279.95m was paid compared to $309.96m in 2023. However, September 2024 saw a 17.49 percent increase, with payments rising to $515.81 million from $439.06 million in the same month last year.
The data raises concerns about the growing pressure of Nigeria’s foreign debt obligations, with rising global interest rates and exchange rate fluctuations contributing to higher costs.
The global credit ratings agency Fitch recently projected Nigeria’s external debt servicing will rise to $5.2bn next year.
This is despite the current administration’s insistence on focusing more on domestic borrowings from the capital market.
It is also estimated that approximately 30 percent of Nigeria’s external reserves are constituted by foreign exchange bank swaps.
Regarding external debt, the agency said external financing obligations through a combination of multilateral lending, syndicated loans, and potentially commercial borrowing will raise the servicing from $4.8bn in 2024 to $5.2bn in 2025.
The anticipated servicing includes $2.9 billion of amortisations, including a $1.1 billion Eurobond repayment due in November.
The Small and Medium Enterprises Development Agency and economists have stated that the rise in Nigeria’s public debt might create macroeconomic challenges, especially if the debt service burden continues to grow.
The Chief Executive Officer of the Centre for the Promotion of Public Enterprises, Dr. Muda Yusuf, explained that the situation could lead to a vicious circle, warning that “we don’t end up in a debt trap.”
He said, “I think there is a need for us to be very conscious of and watch the rate of growth of our public debt. Because it could create macro-economic challenges, especially if the burden of debt service continues to grow.”
He maintained that there is a need for the government to reduce the exposure to foreign debts because the number has grown so due to the exchange rate.
