Nigeria has spent a staggering $2.78 billion on servicing its foreign debt in the first seven months of 2024, according to the Central Bank of Nigeria (CBN).
This significant expenditure represents 64% of the total $4.36 billion in official dollar payments made by the CBN on behalf of the Nigerian government from January to July 2024.
The increase in debt servicing costs marks a sharp rise from the same period in 2023, when 46% of total international payments were allocated to debt service.
The 39.13% increase in 2024 highlights the growing burden of Nigeria’s foreign debt obligations, which have outpaced the overall rise in international payments.
Several factors may have contributed to this surge in debt servicing, including an increase in Nigeria’s total debt stock, higher interest rates on existing debt, or changes in payment schedules that necessitated more immediate debt repayments.
A closer look at the monthly breakdown reveals the fluctuating yet significant impact of debt servicing on Nigeria’s international payments:
January 2024: Nigeria’s external debt servicing payments soared to $560.52 million, a 399% increase from the $112.35 million recorded in January 2023. Debt servicing accounted for a substantial 74% of the total international payments of $757.41 million for the month.
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February 2024: Debt servicing costs amounted to $283.22 million, representing 67% of the $424.96 million in total international payments for the month. This marked a marginal decrease of 2% from the $288.54 million paid in February 2023.
March 2024: Debt servicing further decreased to $276.17 million, down by 31% from $400.47 million in March 2023. Despite the decrease, it still represented 65% of the total international payments of $424.71 million.
April 2024: Debt servicing payments dropped to $215.20 million, constituting 47% of the $462.54 million in total international payments. Although the percentage was lower, the amount represented a significant 132% increase from the $92.85 million paid in April 2023.
May 2024: The most notable spike occurred in May, with debt servicing soaring to $854.37 million—a 287% increase from the $221.05 million paid in May 2023. This amount was the highest monthly expenditure of the year, accounting for 69% of the $1.24 billion in total international payments.
June 2024: Debt servicing costs slightly declined to $50.82 million, 6% lower than the $54.36 million recorded in June 2023. This represented only 14% of the $353.61 million in total international payments, offering a temporary respite in Nigeria’s debt obligations.
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July 2024: The relief was short-lived, as debt servicing rose again to $542.50 million, representing 78% of the $694.45 million in total international payments for the month. However, this was a 15% decrease from the $641.70 million paid in July 2023.
Over the seven-month period, Nigeria’s total debt servicing costs in 2024 reached $2.78 billion, reflecting a 19% increase from the $1.81 billion spent during the same period in 2023. This escalating burden underscores the growing challenge Nigeria faces in managing its external debt amid rising global financial pressures.
Indermit Gill, the World Bank’s Chief Economist and Senior Vice President, warned of the potential for a widespread financial crisis if immediate and coordinated actions are not taken.
Gill emphasized that the combination of record-level debt and soaring interest rates could push many developing nations, including Nigeria, toward economic distress, forcing difficult decisions about resource allocation.