Nigeria grapples with mounting debt service obligations as data from the Central Bank of Nigeria (CBN) reveals that the country allocated a staggering 70% of its dollar outflows in the first quarter of 2024 to service external debts.
The total outflows during this period amounted to $1.61 billion, with a substantial $1.12 billion utilized for debt servicing. This marks a significant increase from the 49% recorded in Q1 2023, underscoring the escalating burden of external debt on the nation’s financial resources.
A closer look at the monthly breakdown of debt service payments exposes the magnitude of the challenge.
In January 2024, Nigeria commenced the year with a substantial debt servicing obligation of $560.52 million, nearly five times higher than the previous January’s expenditure of $112.35 million.
Although February witnessed a moderation in debt servicing payments, the figure remained substantial at $283.22 million.
March continued the trend with $276.17 million expended on debt servicing, though showing a lesser decrease compared to March 2023’s expenditure of $400.47 billion.
Moreover, the recent decline in Nigeria’s foreign exchange (FX) reserves has further exacerbated concerns. Despite a marginal resurgence of approximately $262 million over 19 days, the FX reserves stood at $32.369 billion as of May 7, 2024, following a one-month dip from $34.45 billion on March 18th.
Central Bank Governor Yemi Cardoso attributed the decreasing reserves primarily to debt repayments and other financial obligations, dispelling notions of efforts to defend the naira.
