Debt service costs have consumed approximately 74% of the federal government’s retained revenue in the first quarter of 2024, according to the latest quarterly statistical bulletin from the Central Bank of Nigeria (CBN). The federal government’s retained revenue for the period was ₦1.76 trillion, while debt servicing expenditures amounted to ₦1.31 trillion.
Despite this significant burden, debt servicing accounted for only 29% of the government’s total expenditures. Revenue increased by 33.8% compared to the same period in 2023, though overall expenditures decreased by 12.9% to ₦4.59 trillion from ₦5.28 trillion.
The fiscal deficit also saw a reduction of 29%, falling from ₦3.96 trillion in Q1 2023 to ₦2.83 trillion this year. Debt servicing costs decreased by 33.5% from ₦1.97 trillion in Q1 2023. Nevertheless, the high debt service-to-revenue ratio highlights persistent challenges in managing the nation’s debt sustainably.
Spending Priorities:
In Q1 2024, debt service costs exceeded both personnel costs and capital expenditures. Personnel expenses were ₦1.15 trillion, up 17.1% from the previous year, while capital expenditure dropped by 35.9% to ₦1.15 trillion from ₦1.8 trillion. The reduction in capital spending raises concerns about potential cuts in infrastructure and development investments.
Global and Local Context:
Nigeria’s debt servicing burden continues to rise, with ₦7.8 trillion spent on debt in 2023, a 121% increase from the previous year. In the first quarter of 2024, the country spent approximately $1.12 billion on foreign debt service, a 39.7% increase from $801.36 million in Q1 2023. The World Bank has expressed alarm over the rising debt service costs, warning of potential financial instability if immediate reforms are not made.
The Debt Management Office (DMO) of Nigeria reported a sharp increase in total public debt to ₦121.67 trillion (about $91.46 billion) as of March 31, 2024, up from ₦97.34 trillion (approximately $108.23 billion) at the end of 2023. This represents a 24.99% increase in debt within a three-month period, largely driven by naira devaluation, despite a $16.77 billion reduction in dollar terms.
Credit: Nairametrics (Text Excluding Headline)
