Nigeria’s debt servicing expenses rose dramatically to N6.04 trillion in the first half of 2024, a staggering 68.8% increase from N3.58 trillion during the same period in 2023, according to the Central Bank of Nigeria’s latest data. This surge in debt service obligations has eclipsed personnel costs, which increased only modestly to N2.32 trillion, highlighting a troubling trend where debt repayment consumes about three times the amount allocated for government salaries. The burden of this debt is intensified by the devaluation of the naira, which dramatically impacts the costs of foreign debt repayments. The ramifications of skyrocketing debt servicing costs have raised eyebrows over the sustainability of Nigeria’s financial health and the increasing strain on public finances.
Overall government expenditure surged by 29.6%, hitting N12.17 trillion in the first half of 2024, up from N9.39 trillion in the corresponding period of the previous year. This escalation of spending has driven the fiscal deficit to new heights, swelling by 27.9% from N6.6 trillion in H1 2023 to N8.44 trillion in H1 2024. The increasing fiscal deficit illuminates the federal government’s ongoing struggle to align revenue with rising expenditures, particularly as it leans more heavily on debt financing to cover budgetary shortfalls. Rising debt obligations further complicate the situation, underpinning concerns that Nigeria’s fiscal situation is becoming ever more precarious, potentially placing it on an unsustainable fiscal path.
The recurrent expenditure, which accounts for operational costs like salaries and debt servicing, ballooned by 51.4% from N6.72 trillion in H1 2023 to N10.17 trillion in H1 2024. This significant leap in debt servicing, constituting an outsized share of recurrent expenditures, has placed extreme pressure on the government’s budget. Sobering statistics reveal that recurrent expenditures alone surpassed total revenue for the first half of 2024, reaching over 270% of retained income. As the federal government allocates more resources toward fulfilling debt obligations and covering operational costs, concerns mount that vital capital expenditures, which are integral to infrastructure and economic growth, have declined markedly, falling by 25.3%.
While the Federal Government’s retained revenue saw a welcome improvement of 33.3%, increasing from N2.8 trillion in H1 2023 to N3.73 trillion, it was overshadowed by the ballooning expenditure, especially in the area of debt servicing. Alarmingly, the government spent approximately 162% of its retained revenues on debt finance in the first half of 2024—a dramatic rise from the 128% recorded in the previous year. A monthly review reveals a concerning trajectory; for example, by January 2024, debt servicing already equated to 168% of retained revenue, potentially signaling severe fiscal distress. With Nigeria spending more than its entire revenue on debt repayments during the first half of the year, investing in critical sectors like education, healthcare, and infrastructure becomes increasingly untenable.
President Bola Tinubu’s insistence during the nation’s 64th Independence Anniversary that the administration reduced the debt service ratio from 97% to 68% stands in stark contrast to data indicating a ratio of 162% in early 2024. Such a disparity calls into question the reliability of official assertions about fiscal management, especially as President Tinubu previously cautioned against allowing the country to be ensnared by debt servicing at levels that devour the majority of government revenues. Meanwhile, the Debt Management Office’s Q1 2024 report has documented Nigeria’s domestic and external debt reaching N121.67 trillion or approximately $91.46 billion, further underscoring the steepening debt crisis.
Amidst this financial turmoil, analysts anticipate that Nigeria’s debt servicing costs will continue to require an increasingly larger share of government revenues, attributed to a weak local currency and a constrictive interest rate environment. Efforts to mitigate these debt servitude challenges include projected domestic bond issues aimed at raising nearly N3 trillion, as highlighted in the government’s N28.77 trillion budget. In commentary surrounding these developments, industry leaders emphasize the need for the Nigerian government to open lines of dialogue with creditors, as the present reality sees debt servicing overshadow both recurrent and capital expenditures. This growing imbalance necessitates urgent action within national and global financial structures, a sentiment echoed by the President during various international platforms, where he has called for targeted debt forgiveness initiatives for Nigeria and similar struggling economies.
