Nigeria’s Foreign Debt Service Expenditure Surges
Nigeria’s Federal Government reported a sharp rise in foreign debt servicing costs, spending $3.5 billion in the first nine months of 2024. Data from the Central Bank of Nigeria (CBN) shows this amount marks a 39.77% increase. The government spent $2.56 billion on foreign debt during the same period in 2023. The rise in debt service costs highlights the country’s ongoing economic strain amid currency devaluation and fiscal challenges.
Highest Monthly Debt Payments in May 2024
The highest monthly foreign debt payment in 2024 occurred in May, with Nigeria spending $854.37 million, a steep rise compared to May 2023’s $221.05 million. This difference underscores the financial strain on Nigeria’s economy, exacerbated by the weakening naira and higher global interest rates. The CBN report highlights these payments as a growing concern for Nigeria’s fiscal stability.
Month-by-Month Debt Servicing Trends
Debt servicing costs varied monthly in 2024, with January showing a 398.89% increase to $560.52 million from $112.35 million in 2023. April experienced a notable 131.77% rise, indicating increasing fiscal pressure. In contrast, costs slightly declined in June and July compared to the previous year. The variations reflect Nigeria’s struggle to manage debt payments amidst volatile economic conditions.
Economists Warn of Debt Trap
Economic experts warn that Nigeria’s escalating debt service obligations could create severe economic challenges. Dr Muda Yusuf, CEO of the Centre for the Promotion of Public Enterprises, expressed concern about the risk of a “debt trap” if the government fails to reduce foreign debt exposure. According to Yusuf, the country’s reliance on foreign loans continues to inflate debt costs due to exchange rate pressures.
Fitch Projects Rising Debt Costs
Credit rating agency Fitch projects that Nigeria’s foreign debt servicing will climb to $5.2 billion in 2025. This projection comes despite the government’s stated focus on domestic borrowing. With an expected Eurobond repayment of $1.1 billion in November, Nigeria faces substantial debt obligations that could further strain its economy.
Government Urged to Rethink Debt Strategy
Economists urge the government to limit foreign borrowing, given that much of Nigeria’s external reserves are in foreign exchange swaps. The Small and Medium Enterprises Development Agency warns that unchecked debt growth may harm Nigeria’s economic stability. Financial analysts echo this concern, advising a more cautious debt management approach. They stress that stabilising debt is essential to maintaining Nigeria’s economic resilience.
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