FG’s international debt servicing gulps $3.5b in nine months — CBN

According to a report on international payment statistics from the Central Bank of Nigeria (CBN), this figure marks a 39.77% increase from the $2.56 billion spent during the same period in 2023.

The report indicates that May 2024 saw the highest monthly debt servicing payment at $854.37 million, compared to the highest monthly expenditure of $641.70 million in July 2023. The CBN’s data underscores the increasing burden of Nigeria’s debt obligations.

A closer look at the international debt servicing figures reveals a dramatic 398.89% increase in January 2024, with costs rising to $560.52 million from $112.35 million in January 2023. February experienced a slight decrease of 1.84%, with payments falling from $288.54 million in 2023 to $283.22 million in 2024. In March, payments decreased by 31.04%, dropping to $276.17 million from $400.47 million the previous year. April saw a substantial increase of 131.77%, with $215.20 million paid in 2024 compared to $92.85 million in 2023.

May 2024 recorded the highest debt servicing payment of $854.37 million, reflecting a staggering 286.52% rise from $221.05 million in May 2023. Conversely, June experienced a 6.51% decline, with payments of $50.82 million in 2024, down from $54.36 million in 2023. In July 2024, payments fell by 15.48% to $542.50 million from $641.70 million in July 2023. August also saw a decline of 9.69%, with $279.95 million paid compared to $309.96 million in 2023. However, September 2024 witnessed a 17.49% increase, as payments rose to $515.81 million from $439.06 million in the same month last year.

Given the rising exchange rates, these figures raise alarms about the mounting pressure of Nigeria’s foreign debt obligations.

On Monday, reports revealed an increase in the debts of the 36 states across the federation. As of June 30, 2024, the total debt of these states reached N11.47 trillion, despite allocations from the Federal Accounts Allocation Committee (FAAC) and their respective internally generated revenues (IGR). An analysis of public debt reports from the Debt Management Office (DMO) indicated that this represents a 14.57% increase from the N10.01 trillion recorded in December 2023.

External debt for the states and the Federal Capital Territory rose from $4.61 billion to $4.89 billion during the review period. In naira terms, debts surged by 73.46%, increasing from N4.15 trillion to N7.2 trillion, following the naira’s devaluation from N899.39/$1 in December 2023 to N1,470.19/$1 by June 2024. However, domestic debt for the states and the FCT decreased from N5.86 trillion to N4.27 trillion.

Overall, states and the FCT accounted for Nigeria’s public debt of N134.3 trillion in June 2024, a reduction from their 10.29% share in December 2023, despite an increase in nominal debt levels.

Earlier reports highlighted that sub-national governments continued to rely heavily on borrowing to finance their budgets in 2023, with the total debt stock of the 36 states rising by 38.1%, from N7.25 trillion in 2022 to N10.01 trillion.

According to BudgIT’s 2024 State of States report released yesterday, this debt growth was partly driven by a N606.12 billion increase in domestic debt, resulting in an average year-on-year growth rate of 11.4% by December 31, 2023, when total domestic debt stood at N5.86 trillion. The situation was further complicated by a 4.1% increase in foreign debt, which rose from $4.43 billion in 2022 to $4.61 billion in 2023.

The report noted that the liberalization of the exchange rate exacerbated the financial strain on states, significantly increasing their foreign loan repayment obligations in naira terms. Lagos State remained the most indebted in foreign currency, accounting for 26.9% of the total foreign debt, equivalent to $1.24 billion.

The DMO’s report follows BudgIT’s findings that 32 states relied on FAAC for at least 55% of their total revenue in 2023. The 2024 report, released last week, illustrates the over-reliance of state governments on federally distributable revenue, highlighting their vulnerability to shocks from crude oil price fluctuations and other external factors.

The report further revealed that 14 states depended on FAAC receipts for at least 70% of their total revenue. Additionally, transfers from the federation account constituted at least 62% of the recurrent revenue for 34 states, excluding Lagos and Ogun, while 21 states relied on federal transfers for at least 80% of their recurrent revenue.

In the 2023 fiscal year, the combined revenue of all 36 states in Nigeria rose significantly by 31.2%, increasing from N6.6 trillion in 2022 to N8.66 trillion. This growth rate surpassed the previous year’s increase of 28.95%, indicating a notable improvement in fiscal performance. Of the total revenue generated in 2023, Lagos State contributed N1.24 trillion, accounting for 14.32% of the cumulative revenue of the 36 states.

Gross FAAC, which grew by 33.19% from N4.05 trillion in 2022 to N5.4 trillion in 2023, contributed to 65% of the year-on-year growth of the combined revenue of the 36 states.

The report underscores the over-reliance of state governments on federally distributable revenue and highlights their vulnerability to shocks from crude oil prices and other external factors, while also providing a thorough analysis of states’ fiscal sustainability and their balance of internally generated revenue against federal allocations.