Recent data from the Central Bank of Nigeria (CBN) has revealed that Nigeria allocated a staggering 70% of its dollar payments towards servicing external debts during the first quarter of 2024. Out of a total outflow of $1.61 billion recorded in the period, a substantial $1.12 billion was dedicated to servicing external debt obligations. This marks a significant increase from the 49% recorded in the same period in 2023, highlighting the escalating burden of external debt on the nation’s finances.
A closer examination of the monthly breakdown of debt service payments unveils the magnitude of Nigeria’s debt servicing obligations. In January 2024 alone, the country grappled with a substantial debt servicing obligation of $560.52 million, nearly five times higher than the entire debt servicing expenditure recorded in January 2023 ($112.35 million).
Although February 2024 witnessed a moderation in debt servicing payments to $283.22 million, the figures remained substantial. March 2024 continued the trend, albeit with a slight decrease, as the country expended $276.17 million on debt servicing, compared to March 2023’s $400.47 billion.
The rise in debt servicing obligations comes at a time when Nigeria’s foreign exchange (FX) reserves have experienced a one-month dip streak. Governor of the CBN, Yemi Cardoso, attributed the declining reserves primarily to debt repayments and other standard financial obligations, rather than efforts to defend the naira.
The data underscores the pressing need for Nigeria to address its growing debt burden and explore sustainable strategies to manage its external obligations. As debt servicing consumes a larger share of the nation’s dollar payments, it poses significant challenges to fiscal sustainability and economic development. Moving forward, prudent debt management practices and efforts to diversify revenue sources will be crucial in mitigating the adverse effects of Nigeria’s escalating external debt burden.
