Nigeria’s debt servicing payments have surged by 69% in the first half of 2024, reaching N6.04 trillion, up from N3.58 trillion recorded in the same period of 2023.
This sharp rise in debt service obligations, likely driven by naira devaluation for foreign debt repayments, reflects the growing burden on the Federal Government as debt repayment consumes a significant portion of its financial resources.
According to data from the latest statistical bulletin of the Central Bank of Nigeria (CBN), debt service in H1 2024 made up 50% of the total expenditure of N12.17 trillion and a staggering 162% of the N3.73 trillion total revenue generated during the period.
The 69% rise in debt servicing between H1 2023 and H1 2024 highlights Nigeria’s growing fiscal vulnerability. With more funds being channeled towards repaying debt, the government has less fiscal space to allocate resources towards infrastructure, social services, and economic development projects. The increasing debt service obligations also signal that Nigeria may be borrowing at high-interest rates, both domestically and internationally, further exacerbating the financial burden.
One of the most concerning aspects of Nigeria’s rising debt burden is that debt servicing made up 50% of the total government expenditure of N12.17 trillion in H1 2024. This means that half of the government’s spending was used to service debt, leaving only half for other critical areas such as infrastructure, education, healthcare, and social services.
Furthermore, debt servicing amounted to 162% of the FGN’s total revenue of N3.73 trillion in the same period. In essence, Nigeria is borrowing to repay its debts, as the government is spending far more on debt servicing than it is generating in revenue. This imbalance highlights the growing strain on Nigeria’s fiscal health and its dependence on borrowing to meet financial obligations.
In an earlier statement, the World Bank expressed deep concern over the escalating debt service costs that are burdening developing countries worldwide. Indermit Gill, the World Bank’s Chief Economist, and Senior Vice President, emphasized the gravity of the situation, highlighting the potential for a widespread financial crisis if immediate and coordinated actions are not taken.
According to Gill, the combination of record-level debt and soaring interest rates has set many developing nations on a precarious path, one that could lead to economic distress and tough decisions regarding the allocation of resources.