Nigeria’s debt payment rose to a four-year high of $4.65 billion at the end of 2024, reflecting the federal government’s continued reliance on borrowing.
Data from the Central Bank of Nigeria (CBN) showed that Africa’s most populous nation spent $4.65 billion servicing its debt in 2024, representing a 32.9 percent year-on-year increase compared to $3.5 billion spent in 2023.
The last time the government spent more money in debt servicing within the past five years was in 2020 when repayment stood at $5.8 billion.
The lowest payment within the review period was in 2021 when the government spent $2.1 billion on debt servicing. The debt repayment rose to $2.5 billion in the following year, 2022.
Debt binge
Ayokunle Olubunmi, head of financial institution ratings at Agusto & Co, said the increased repayment in 2024 reflected increased borrowing during the period.
“The increased debt obligations also showed the uptick in the pressures in the foreign exchange (FX) market during the period,” he said.
Tilewa Adebajo, CEO of The CFG Advisory, responded to BusinessDay’s question on the rising debt payment, saying, “More borrowing.”
As of June 30, 2024, Nigeria’s total public debt stood at approximately N134.3 trillion ($91.3 billion), reflecting a 10.35 percent increase from the N121.7 trillion ($91.5 billion) recorded in the first quarter (Q1) of 2024.
According to the National Bureau of Statistics (NBS), Nigeria’s debt comprises external and domestic obligations. Total external debt stood at N56.02 trillion ($42.12 billion) in Q1 of 2024, while total domestic debt was N65.65 trillion (US$49.35 billion).
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Funmi Adebowale, head of research, Parthian Partners, said the surge is largely attributed to escalating debt levels and higher borrowing costs in the international debt markets, driven by global monetary tightening aimed at controlling inflation.
She said lawmakers approved a $2.2 billion foreign borrowing plan late last year to cover a budget shortfall, which included $1.7bn in Eurobonds and $500 million in Sukuk.
Additionally, she noted, the World Bank approved $2.25 billion in financing for Nigeria, aimed at economic stabilisation and enhancing revenue mobilisation.
According to her, another key contributor to the rise in debt service costs was the exchange rate impact. The naira saw some significant depreciation, especially early in 2024, crossing the N1,900/$ mark before rebounding in the second quarter (Q2) due to the CBN’s interest rate hikes and foreign exchange reforms, which helped boost investor confidence and increase foreign exchange inflows.
However, towards the end of the Q2, the naira began weakening again as speculative activities resurfaced, although volatility slowed.
By year-end, the introduction of initiatives like the Electronic Foreign Exchange Matching System (EFEMS) and FX Code helped to stabilise the naira. Overall, the local currency depreciated by 40.90 percent to close the year at N1,535/$ compared to N907.11/$ at the end of 2023.
“The increase in debt service payments presents both opportunities and challenges. While borrowing provides essential resources for development, the rising debt service costs are creating fiscal pressures,” Adebowale said.
“If not effectively managed, this could result in more borrowing, higher inflation, and strained public finances. To ensure long-term economic stability, the government must balance debt management with investments in economic growth, improving revenue generation, and controlling inflation.”
