Nigeria’s debt servicing costs have skyrocketed to N8.9 trillion in the first nine months of 2024, surpassing the budgeted figure of N6.2 trillion. This dramatic rise is linked to the country’s growing debt profile, which surged from N97.3 trillion at the end of 2023 to N144.7 trillion in 2024. With debt servicing now consuming 58.3% of total government revenue, the country’s fiscal resources are under significant strain.
The increase in debt servicing costs has had a notable impact on Nigeria’s ability to invest in capital expenditure (CAPEX), which is crucial for long-term economic growth. Despite a substantial rise in debt, real GDP growth for 2024 has been limited to just 3.4%. This suggests that the growing debt burden is putting significant pressure on the nation’s economic performance and growth trajectory.
According to a report by Afrinvest, the current debt levels threaten to derail the country’s growth prospects, especially as much of the borrowed funds are not being directed towards capital projects. Analysts warn that Nigeria’s debt servicing commitments may continue to rise unless structural changes are made to the country’s fiscal and revenue generation systems, which have been hindered by challenges such as insecurity, oil theft, and corruption.
The country’s fiscal outlook has been further compounded by a weak revenue generation base. Analysts predict that key revenue sources, including crude oil exports and taxes, will remain under pressure through 2025 due to both external shocks and internal factors like security concerns and administrative inefficiencies. This is expected to further strain public finances and hinder efforts to stabilize the economy.
Source: Punch