Debt servicing costs made by the Nigerian government increased dramatically in the year 2024, rising $3.53 billion in the first nine months of year, a considerable 38% over the same period the previous year. Compared to January 2023, debt servicing expenses increased by 389% to $560.51 million in January 2024. The largest monthly payment for debt payments was $854.36 million in May 2024. In the first half of 2024, payments for debt servicing rose by 69% year-on-year to 6.04 trillion naira. This startling increase has heightened worries about the nation’s mounting debt load and its effects on the stability of the economy.
The $3.53 billion Nigeria spent on External Debt servicing in the first nine months of 2024 is in close proximity to Fitch Ratings’ estimate that government external debt service would reach $4.5 billion for the year. This suggests that actual total expenditures may have reached or even surpassed Fitch’s estimate, highlighting the mounting fiscal pressure on the Nigerian government. The increase in debt servicing costs coincides with a difficult fiscal environment for Africa’s largest economy, which has been struggling with persistent Revenue shortfalls exacerbated by volatile oil prices, which account for a large amount of government revenue.
External debts consume majority of the debt payment.
Rising cost of servicing both domestic and foreign debt has raised concerns over the Sustainability of the nation’s borrowing practices, which emphasizes the burden on public resources. According to statistics made public by the Debt Management Office (DMO), the majority of the payments were used to pay off external debts. This indicates Nigeria’s growing reliance on international loans to fund vital projects and close budget deficits. High interest rates on government Bonds and other securities also contributed to a significant increase in domestic debt payments.
Fitch Ratings projected that government external debt service will increase to US$5 billion in 2025, including a US$3.2 billion in amortizations, including a US$1.1 billion Eurobond repayment scheduled in November 2024. It noted that the government plans to use a mix of syndicated loans, multilateral lending, and potentially commercial borrowing to fulfill its external Finance obligations. On the other hand, the Nigerian government revealed a ₦15.8 trillion debt servicing allocation in the 2025 budget presented to the Joint Session of the National Assembly.
Government acknowledged the weight of the debt burden.
With total Government Spending expected to reach ₦47.90 trillion, the amount allotted for debt servicing is roughly 33% of overall expenditure in the presented 2025 budget, underscoring the gravity of Nigeria’s fiscal challenges. The figure represents a major commitment to managing Nigeria’s mounting debt, which has raised concerns among local and foreign stakeholders. The 2025 budget dubbed as the “Budget of Economic Sustainability,” shows the government’s efforts to balance debt management with development objectives.
This enormous allocation comes on the back of years of borrowing to fund Infrastructure projects, close budget deficits, and handle international economic shocks, which has resulted in an increasing national debt. The government acknowledged the weight of the debt load but defended the borrowing strategy, arguing that it is essential to maintain Economic Growth and finance important projects. It underlined that a sizable amount of the borrowed funds has gone toward building infrastructure, which is expected to spur long-term economic benefits.
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Overall situation leaves the government with limited fiscal capacity to address urgent socioeconomic issues including healthcare, education, and Poverty reduction. In recent years, over 70% of Nigeria’s income has gone toward debt servicing, a trend that many analysts caution is not long-term viable. Policymakers are confronted with tough decisions to balance the need to promote economic growth and fiscal restraint. Calls for better debt management, more income production, and sensible fiscal measures are growing louder, as the nation confronts an uncertain economic future.