Nigeria’s foreign debt servicing hits $1.12bn in Q1 2024, signaling growing financial strain

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By Temi Olowu

The Federal Government of Nigeria grappled with a burgeoning burden of foreign debt service payments in the first quarter of 2024, spending approximately $1.12 billion, according to data extracted from the international payment segment of the Central Bank of Nigeria website.

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This figure underscores the mounting pressure of external debt on the nation’s financial health, marking a substantial 39.7 percent increase from the same period in the previous year, when debt servicing amounted to $801.36 million.

A detailed breakdown of the debt service payments illustrates a fluctuating yet consistently high expenditure pattern. In January 2024, the government faced a significant debt servicing obligation of $560.52 million, a staggering fivefold increase from January 2023’s expenditure of $112.35 million.

Although February 2024 saw a relatively moderate outflow at $283.22 million compared to January’s massive obligation, it remained substantial. March 2024 continued this trend with a slightly lower figure of $276.17 million, yet still posing a notable burden on the country’s fiscal position.

Further analysis reveals that Nigeria allocated about 70 percent of its dollar payments to service external debts during the first quarter of 2024. Out of the total outflows of $1.61 billion recorded during this period, a significant portion of $1.12 billion was directed towards servicing external debt.

This represents a substantial increase from the previous year’s first quarter, where external debt servicing accounted for 49 percent of total dollar outflows.

The decline in foreign exchange reserves, which experienced a one-month dip streak, was attributed primarily to debt repayments and other standard financial obligations, according to the Central Bank of Nigeria Governor, Yemi Cardoso. This trend underscores the growing financial strain facing the country.

Expressing deep concern over the escalating debt service costs affecting developing countries worldwide, the World Bank’s Chief Economist and Senior Vice President, Indermit Gill, emphasized the urgent need for coordinated action to avert a potential widespread financial crisis.

Gill warned that the combination of record-level debt and soaring interest rates has placed many developing nations on a precarious economic path, necessitating tough decisions regarding resource allocation.

In 2023, Nigeria incurred a debt service of $3.5 billion for its external loans, marking a 55 percent increase from the previous year’s $2.6 billion. This highlights the persistent upward trajectory of debt service-related payments for the country’s external debts, further underscoring the challenges posed by its growing debt burden.

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