Abuja, Nigeria – Nigeria’s debt servicing costs surged to N6.04 trillion in the first half of 2024, reflecting a significant 68.8% increase compared to the N3.58 trillion spent in the same period last year, according to the latest report from the Central Bank of Nigeria (CBN).
This rise in debt obligations now overshadows personnel costs, which stood at N2.32 trillion during the same period, representing a 17.6% increase from N1.97 trillion in the first half of 2023.
The data highlights a growing burden on the Federal Government, with debt servicing consuming about half of total government expenditure, which surged by 29.6% to N12.17 trillion in H1 2024, up from N9.39 trillion in H1 2023. The rapid increase in debt service expenses has been largely attributed to the depreciation of the naira, affecting the cost of repaying foreign debts.
Fiscal Deficit Widens
This growing expenditure has further widened the fiscal deficit, which expanded by 27.9% to N8.44 trillion, compared to N6.6 trillion in H1 2023. Recurrent expenditure, which includes debt servicing and personnel costs, rose sharply by 51.4% to N10.17 trillion in H1 2024 from N6.72 trillion in H1 2023. This spike in recurrent costs has continued to strain the government’s financial position, as recurrent expenditure now accounts for over 270% of retained revenue.
Capital Expenditure Declines
Despite the increase in overall spending, capital expenditure, which is crucial for infrastructure development and long-term economic growth, declined by 25.3% to N1.99 trillion in H1 2024, compared to N2.68 trillion in the same period last year. The reduced capital spending has raised concerns that key projects in critical sectors such as transportation, education, and healthcare could face delays or inadequate funding.
Debt Servicing Now Consumes Over 160% of Retained Revenue
The CBN report also revealed that debt servicing consumed approximately 162% of the Federal Government’s retained revenue in H1 2024, a significant rise from the 128% recorded in H1 2023. Monthly data shows an escalating trend, with debt servicing costs surpassing retained revenue in every month of the first half of 2024. The most significant spike occurred in May, when debt servicing costs surged by 332% year-on-year to N2.26 trillion.
Rising Debt Burden and Calls for Debt Relief
As Nigeria’s debt burden continues to grow, the Federal Government has been left with fewer funds to allocate to critical sectors. In a national broadcast to mark Nigeria’s 64th Independence Anniversary, President Bola Tinubu stated that his administration had reduced the debt service-to-revenue ratio from 97% to 68%. However, CBN data shows that the ratio has risen to 162% in the first half of 2024.
Last year, Tinubu emphasized the unsustainable nature of the country’s debt profile, stating that using 90% of revenue to service debt was a “recipe for destruction.” Analysts at Cowry Research have warned that Nigeria’s debt service costs will likely continue to rise, as financing costs consume a larger portion of government revenues amid a weak naira and high-interest rate environment.
Debt Negotiations and Appeals for Concessions
Given the current trajectory, experts have called on Nigeria to initiate debt negotiations with its creditors. Tilewa Adebajo, Chief Executive Officer of CFG Advisory, noted that the country’s debt servicing now exceeds both recurrent and capital expenditures, putting the country in a precarious position.
Recently, President Tinubu urged world leaders to prioritize debt forgiveness for Nigeria and other developing countries, during the United Nations General Assembly in New York. He reiterated that without such concessions, economic progress in the global South would remain constrained.
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