Nigeria’s expenditure on foreign debt servicing soared to approximately $1.12 billion in the first quarter of 2024, according to recent data released by the Central Bank of Nigeria (CBN). This significant increase underscores the mounting financial pressure stemming from the nation’s obligations to external creditors.
The latest figures reveal a concerning trend of rising debt servicing expenses over recent years. Comparing statistics, debt servicing in the first quarter of 2023 stood at $801.36 million, marking a notable surge of 39.7% to reach $1.12 billion in the same period of 2024.
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Monthly breakdowns of debt service payments depict fluctuating yet consistently high spending patterns. Notably, Nigeria faced a substantial debt servicing obligation of $560.52 million in January 2024, nearly five times higher than the corresponding figure of $112.35 million in January 2023. Although there was a slight moderation in payments to $283.22 million in February 2024 and a further decrease to $276.17 million in March 2024, these amounts remained burdensome on the nation’s fiscal position.
Analysis by Nairametrics indicates that between January and March 2024, approximately 70% of Nigeria’s dollar outflows were allocated to servicing external debts. Out of the total outflows of $1.61 billion recorded during this period, a substantial portion amounting to $1.12 billion was directed towards debt servicing. This represents a significant increase from the 49% recorded in the first quarter of 2023.
Concerns have been raised regarding Nigeria’s escalating debt service costs, with the World Bank expressing apprehension about the situation. Indermit Gill, the World Bank’s Chief Economist and Senior Vice President, emphasized the potential for a widespread financial crisis if immediate and coordinated actions are not taken. Record-level debt combined with soaring interest rates poses a significant risk to developing nations, potentially leading to economic distress and challenging decisions regarding resource allocation.
In 2023, Nigeria incurred a total debt service of $3.5 billion for its external loans, representing a 55% increase from the $2.6 billion recorded in 2022. This underscores the growing financial burden associated with servicing the country’s external debts.
The escalation in foreign debt servicing costs underscores the urgency for strategic fiscal management and prudent debt repayment strategies to mitigate the impact on Nigeria’s economic stability and growth prospects.
Credit: Nairametrics (Text Excluding Headline)
