External Debt Servicing Reaches $2.78 Billion in 2024, CBN Reports

Nigeria has witnessed a sharp rise in its external debt servicing costs, which surged to $2.78 billion in the first seven months of 2024. This marks a substantial 53.63% increase compared to the $1.81 billion recorded in the same period in 2023. The information was disclosed in the Central Bank of Nigeria’s (CBN) Weekly International Payments report, highlighting the growing financial strain on the country’s resources.

The report reveals that the highest monthly payment during this period occurred in May, with $854.36 million disbursed for external debt servicing. This was followed by $560.51 million in January and $542 million in July. In contrast, the lowest payment was recorded in June, amounting to just $50.82 million.

This year’s debt servicing costs reflect a significant rise from the previous year, where the highest monthly payment was $641.69 million in July 2023. The overall increase in debt servicing is attributed to a combination of factors, including new borrowing, the depreciation of the naira, and rising interest rates on existing loans.

According to the Debt Management Office (DMO), Nigeria’s total public debt stood at N121.67 trillion ($91.46 billion) as of the end of the first quarter of 2024, a marked increase from N97.34 trillion ($108.23 billion) at the close of 2023. This surge in debt is largely driven by new domestic and external borrowings, as well as the impact of the naira’s devaluation.

Financial analysts have warned that the continued increase in debt servicing costs could strain Nigeria’s economy, limiting the government’s ability to fund crucial capital projects. They caution that without a shift towards borrowing for productive investments rather than consumption, Nigeria risks falling deeper into a debt trap.

As the government grapples with these challenges, experts are urging a more strategic approach to borrowing, emphasizing the need for loans that support long-term economic growth rather than short-term financial relief. With projections indicating that Nigeria’s external debt servicing could reach $4.8 billion in 2024, the government faces increasing pressure to manage its debt obligations more effectively.