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Nigeria’s debt service surged by 69% in the first half of 2024, reaching N6.04 trillion from N3.58 trillion in the same period in 2023.
This sharp increase in debt service obligations is likely caused by the devaluation of the naira for external debt service, increasing the burden on the federal government as debt service consumes a significant portion of its financial resources. It reflects that.
According to data from the latest statistical bulletin of the Central Bank of Nigeria (CBN), debt servicing in the first half of 2024 will be 50% of the total expenditure of N12.17 trillion and a staggering 162% of the total revenue of N3.73 trillion generated. accounted for a large number. During the period.
What the data says: In January 2023, the government spent NOK 550.3 billion on debt servicing. By January 2024, this increased to N755.9 billion, an increase of 37%. This large increase highlights the compounding nature of debt obligations, where interest payments accumulate over time. Debt servicing expenditure in February 2023 was N518.7 billion and in February 2024 it was N505.9 billion, a slight decrease of 2.5%. Although February’s numbers showed a temporary reprieve, the overall trend remains concerning. March 2023 recorded one of the highest debt servicing costs of the year at NOK 897.9 billion. However, in March 2024, this figure increased significantly to NEB 1.1 trillion, an increase of 12.2% year-on-year. The consistent upward trend in debt servicing reflects increasing fiscal stress. In April 2023, the government spent NOK 847.9 billion on debt servicing, which was reduced to NOK 821 billion in April 2024, a decrease of 3.2%. In May 2024, debt repayments spiked dramatically. The amount of debt service disbursed by the government was N2.26 trillion, a significant increase from N523.8 billion in May 2023. This 332% jump may be due to large principal repayments and a significant devaluation of the naira, indicating an increased weight on debt servicing. Debt servicing costs in June 2023 were N241.3 billion, which increased significantly by 186% to N689 billion in June 2024. The sharp rise in June highlights the intensifying fiscal pressure from Nigeria’s debt burden as the government grapples with repayments.
The 69% increase in debt service payments from H1 2023 to H1 2024 highlights Nigeria’s growing financial vulnerability. As more money is directed toward debt servicing, governments have less fiscal space to allocate resources to infrastructure, social services, and economic development projects. Rising debt service obligations suggest that Nigeria may be borrowing at high interest rates both domestically and internationally, further exacerbating the fiscal burden.
One of the most worrying aspects of Nigeria’s growing debt burden is that debt servicing accounted for 50% of the total government expenditure of N12.17 trillion in the first half of 2024. This means that half of government spending goes to debt servicing, and only half remains. Also in other important areas such as infrastructure, education, health and social services.
Moreover, debt service amounted to 162% of FGN’s total revenue of N3.73 trillion for the same period. Since the government spends far more on debt servicing than it receives, Nigeria is essentially borrowing money to pay off debt. This imbalance highlights the growing strain on Nigeria’s fiscal health and reliance on borrowing to meet financial obligations.
In an earlier statement, the World Bank expressed deep concern about the rising debt servicing costs burdening developing countries around the world. Indermit Gill, Chief Economist and Senior Vice President of the World Bank, underlined the seriousness of the situation and stressed the possibility of a widespread financial crisis unless immediate and concerted action is taken.
Gill said the combination of record levels of debt and soaring interest rates has put many developing countries on a precarious path that can lead to economic hardship and difficult decisions about resource allocation. .
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