Nigeria's Foreign Debt Servicing Gulps $1bn in Q1 2024

FG spent $1 billion servicing foreign debt in the first quarter of 2024, according to the CBN.

The Federal Government of Nigeria committed over $1.12 billion to foreign debt servicing in the first quarter of 2024, highlighting the growing burden that external debt is placing on the country's financial resources.

The Central Bank of Nigeria (CBN) website's foreign payment section provides data that shows a consistent increase in debt service payments from January to March. This tendency has been seen in previous years.

Debt servicing increased by 39.7%, from $801.36 million to $1.12 billion, in the first quarter of 2023 compared to the same period in 2024.

Examining the monthly debt service payment split shows a trend of high spending that is both variable and constant.

The federal government was faced with a substantial debt service requirement in January of $560.52 million, which was about five times greater than the total debt service expenditure of $112.35 million in January 2023. The financial strain that foreign debt repayments are placing on the country is further shown by this striking disparity.

Even though there was a little slowdown in debt servicing payments in February, the total amount paid out—$283.22 million—was still significant, even though it was less than in January. Additionally, this amount contrasted favorably with the $288.54 million debt servicing in February 2023.

At $276.17 million, a lower but still significant amount, March's debt servicing expenditures followed the pattern. Nigeria's financial situation was further strained by this noteworthy spending, even if it was a smaller amount than in February and a larger decline than in March 2023 ($400.47 million).

The amount of debt servicing payments was large at $283.22 million in February, although it was less than the substantial outflow in January. This was due to a small decrease in the payments. Additionally, the debt servicing amount of $288.54 million in February 2023 was positively compared to this figure.

According to data from the CBN, Nigeria paid back its external loans with about 70% of its dollar payments between January and March. During this time, a significant $1.12 billion of the $1.61 billion total outflow was used to pay off external debt. Comparing this percentage to the prior year, when it represented 49% of spending in the first quarter of 2023, shows a notable increase.

Notably, there has been a one-month fall in foreign exchange reserves in a row. Rather than attempts to stabilize the naira, CBN Governor Yemi Cardoso ascribed this decrease mostly to debt repayments and standard financial commitments.

The World Bank expressed grave worry over the rising expenses of debt service that developing nations around the world are facing. Indermit Gill, Senior Vice President and Chief Economist, emphasized the seriousness of the issue and warned that if prompt and concerted action is not taken, there may be a widespread financial disaster.

Gill underlined that many developing countries are on a perilous road due to the combination of record-high debt and skyrocketing interest rates, which might result in economic misery and challenging decisions about the distribution of resources.

Nigeria incurred $3.5 billion in debt service for its external loans in 2023, up 55% from the $2.6 billion in debt service-related payments for the nation's external debts in 2022, according to the Debt Management Office, or DMO.