The burden of Nigeria’s foreign debt servicing remains a major concern. Recent data from The Central Bank of Nigeria (CBN) show that $5.47 billion was spent between January 2024 and February 2025 to settle External Debt obligations. The rising expenditure continues to pressure foreign exchange reserves and overall fiscal stability. Over the 14 months under review, the amount spent on debt servicing varied significantly. The highest recorded payment was in May 2024, when Nigeria paid $854.37 million, while June 2024 saw the lowest monthly expenditure at just $50.82 million.
Furthermore, the increase in some months and sharp declines in others indicate that the country struggles to balance its financial obligations against available reserves. In July 2024, the external Loan service payments surged to $542.50 million, a sharp rebound from the previous month’s low. This was followed by a decline to $279.95 million in August 2024 before rising again to $515.81 million in September 2024. With back and front, by December 2024, payments rose to $328.91 million, reflecting the continued Volatility in servicing obligations.
Rising total debt service and the implications for fiscal stability.
Meanwhile, its impact is not limited to foreign loans alone, as the total loan service cost, including domestic obligations, saw a notable rise in the third quarter of 2024. The total expenditure for the period stood at ₦3.57 trillion, marking a quarter-on-quarter increase from ₦3.51 trillion in the previous quarter. However, Naira depreciation and high external loan repayments can also influence the increase. External loan repayments in Q3 2024 amounted to $1.34 billion, translating to ₦2.14 trillion when converted using the September exchange rate of ₦1,601.03 per dollar.
In comparison, Q2 2024 had an external loan service cost of $1.12 billion, valued at ₦1.65 trillion at the prevailing exchange rate of ₦1,470.19 per dollar. Multilateral debt obligations formed the largest component of external debt servicing, with payments reaching $712.66 million in Q3 2024. This marked a 6.04 percent increase from the previous quarter, reflecting both rising principal repayments and interest charges. Payments to institutions such as the International Monetary Fund (IMF) remained a significant portion of these commitments.
Bilateral loan repayment sees substantial growth.
Payments to bilateral creditors, including China’s Exim Bank, jumped from $43.92 million in Q2 to $186.92 million in Q3. The increase was primarily attributed to renewed obligations to the Chinese lender, which had recorded no payments in the previous quarter. Commercial loans, including Eurobonds and other syndicated loans, accounted for a significant share of Nigeria’s external debt servicing costs. In Q3 2024, commercial totaled $438.68 million, marking an 8.48 percent increase from the previous quarter. Of this amount, Eurobond interest payments alone made up $427.72 million, maintaining their dominance in Nigeria’s foreign debt obligations.
As Nigeria struggles with its growing loan burden, a considerable portion of national Revenue is allocated to servicing these obligations. The approved 2025 Appropriation Bill of ₦54.99 trillion set aside about ₦14.32 trillion for loan repayment. To address the issue, the current administration, under President Bola Ahmed Tinubu, has tried to reduce the debt service-to-revenue ratio. Government figures suggest that the ratio has decreased from 97 percent to 68 percent. However, the overall loan burden remains substantial, and new borrowing plans could worsen the situation.
Related Article: FG in talks for $580m loan from World Bank
Despite growing concerns, the government has continued to seek additional loans from foreign creditors, including the World Bank. Recently, the World Bank announced plans to extend $2.2 billion in credit to Nigeria for various projects across the country. The new loans include allocations for community development programs, internally displaced persons, healthcare initiatives, and Digital Infrastructure improvements. These projects are expected to enhance economic resilience, but accumulating more loans may further complicate the financial future.