In the first nine months of 2024, the Nigerian government spent $3.58 billion on servicing its foreign debt, marking a 39.77% increase from the $2.56 billion spent in the same period last year. According to data from the Central Bank of Nigeria (CBN), the surge in debt servicing underscores the mounting fiscal pressure as Nigeria grapples with economic challenges, a devalued naira, and rising global interest rates.
The highest monthly debt servicing payment in 2024 was recorded in May, reaching $854.37 million. This represents a sharp rise compared to May 2023, when Nigeria spent $221.05 million—an increase of 286.52%. Month-on-month fluctuations highlighted the rising cost of debt obligations, with January 2024 showing a dramatic 398.89% increase in payments to $560.52 million, compared to $112.35 million in January 2023. While February saw a slight decrease of 1.84%, March recorded a 31.04% drop, reflecting the inconsistent debt servicing costs throughout the year.
However, several months did show a decline in debt payments. For instance, June saw a reduction of 6.51%, dropping from $54.36 million in 2023 to $50.82 million in 2024. August also saw a decrease of 9.69%, with payments of $279.95 million in 2024 compared to $309.96 million last year. Yet, these temporary declines are overshadowed by the overall upward trend in foreign debt obligations.
The ongoing rise in debt servicing is attributed to the nation’s devalued currency and increased global borrowing costs. According to global credit ratings agency Fitch, Nigeria’s external debt servicing is expected to climb further, potentially reaching $5.2 billion in 2025. The agency anticipates that debt payments next year will include $2.9 billion in principal repayments and a $1.1 billion Eurobond due in November 2025.
Fitch’s projections underscore Nigeria’s growing reliance on foreign financing, despite recent shifts toward domestic borrowing. The agency noted that Nigeria’s external reserves are partly constituted by foreign exchange swaps, which could add to the complexity of future obligations.
Economists and agencies, such as the Small and Medium Enterprises Development Agency, are raising concerns about the country’s rising debt burden. Dr. Muda Yusuf, CEO of the Centre for the Promotion of Public Enterprises, cautioned that Nigeria risks falling into a “debt trap” if the public debt burden continues to grow at this rate. He emphasized the need for Nigeria to manage its debt exposure carefully, especially given the impact of exchange rate fluctuations.
“We need to be very conscious of and watch the rate of growth of our public debt. Because it could create macroeconomic challenges, especially if the burden of debt service continues to grow,” Yusuf warned.
As Nigeria faces the potential for greater debt obligations next year
