The first quarter of 2024 saw the Federal Government spend over $1.12 billion on foreign debt service payments, underscoring the mounting strain that foreign debt is placing on the country’s budget.
The Central Bank of Nigeria’s website’s foreign payment section provided the data that showed a consistent growth in debt service payments throughout the previous few years as well as between January and March. Debt servicing reached $801.36 million in Q1 2023, but by Q1 2024, it had risen to $1.12 billion, a 39.7% increase.
A monthly analysis of the debt service payments shows a trend of excessive spending that is both erratic and constant.
The government had a $560.52 million debt servicing commitment at the beginning of 2024. This amount alone more than five times the total debt servicing cost for January 2023 ($111.235m), demonstrating the increasing strain that foreign debt repayments are placing on the country’s budget.
The $283.22 million debt servicing payments in February 2024 showed some moderation but remained high. It is less than the enormous withdrawal in January and the $288.54 million debt serviced in February 2023.
The trend was maintained in March 2024, albeit at a reduced amount, with Nigeria spending $276.17 million on debt service. Even though this was less than the $400.47 billion spent in March 2023 and less than the $2 billion spent in February, it was still a significant expense that further strained the nation’s finances.
It was also noted that, between January and March 2024, Nigeria paid back almost seventy percent of its dollar payments to settle its external debt.
The Central Bank of Nigeria has reported a significant increase in external debt servicing, with $1.12bn out of $1.61bn in total outflows made during Q1 2023.
This represents a significant portion of the nation’s financial resources and a significant increase from the previous year’s 49%.
The decreasing foreign exchange reserves are primarily due to debt repayments and other financial obligations, rather than efforts to defend the naira.
The World Bank has expressed concern over the escalating debt service costs burdening developing countries worldwide, with Chief Economist and Senior Vice President Indermit Gill highlighting the potential for a widespread financial crisis if immediate and coordinated actions are not taken.
Nigeria’s debt service for external loans increased by 55% from $2.6bn in 2022, indicating a precarious path for many developing nations.