Nigeria’s Debt Servicing Hits Four-Year High Amid Rising Borrowing and Currency Depreciation

Nigeria’s debt repayment reached a four-year high of $4.65 billion in 2024, marking a 32.9% increase from the previous year. This surge in debt servicing reflects the federal government’s increasing reliance on borrowing to cover its financial obligations. The last time debt repayment exceeded this amount was in 2020, when it reached $5.8 billion, while 2021 saw the lowest expenditure at $2.1 billion.

Experts attribute the heightened debt payments to both an increase in borrowing and the pressures from the foreign exchange (FX) market. As of mid-2024, Nigeria’s public debt had grown to N134.3 trillion ($91.3 billion), a 10.35% increase from earlier in the year. This debt is split between external obligations (N56.02 trillion) and domestic debt (N65.65 trillion), putting added pressure on the nation’s fiscal situation.

The rise in debt servicing is linked to Nigeria’s increased borrowing in both domestic and international markets, including a $2.2 billion foreign borrowing plan approved by lawmakers. The World Bank also granted Nigeria $2.25 billion for economic stabilization, further contributing to the nation’s rising debt levels. Experts highlight that the growing debt obligations are partly due to global monetary tightening, which has led to higher borrowing costs for the country.

Currency depreciation has also played a significant role, with the naira weakening by 40.90% in 2024, exacerbating debt repayment costs. Despite efforts to stabilize the currency through measures like the Electronic Foreign Exchange Matching System (EFEMS), the naira continued to face volatility. Experts warn that if debt management is not carefully handled, the government may face more borrowing, higher inflation, and further strain on public finances, making it crucial to balance debt servicing with long-term economic growth strategies.

source: vanguard