The Federal Government spent $1.36 billion to service debts owed to 12 international and multilateral creditors in the first half of 2024.
This amount reflects a significant 216.07 per cent increase compared to the $431.23 million spent during the same period in 2023, as reported by the Debt Management Office.
Findings show that the increase in debt servicing costs was largely driven by a sharp rise in interest rates, which significantly impacted borrowing expenses for the government. This surge in rates led to the higher payments made in the first half of 2024.
The sharp rise in debt service payments by the federal and state governments highlights the growing pressure on Nigeria’s fiscal balance, exacerbated by ongoing economic challenges.
The multilateral creditors involved in these payments include institutions such as the African Development Bank, European Development Bank, International Fund for Agricultural Development, African Development Fund, International Development Association, Africa Growing Together Fund, Islamic Development Bank, International Monetary Fund, and the International Bank for Reconstruction and Development.
The bilateral firms include the Japan International Cooperation Agency, Kreditantstalt fur Weideraufbua, and the Agency Francaise Development.
Recall that the DMO’s 2024 half-year public debt report reveals that Nigeria’s domestic and foreign public debt rose to N71.2tn and $42.9bn, respectively.
Domestic and foreign debt levels have seen a significant rise since December 2023, with domestic debt increasing by 20.4 per cent to N71.2 trillion under President Tinubu’s administration, up from N54.1 trillion in June 2023. Foreign debt rose by 1.1 per cent to $42.4 billion.
To combat inflation and stabilize the economy, the Central Bank of Nigeria has implemented an aggressive monetary policy, raising the monetary policy rate to 27.25 per cent.
The CBN’s aggressive interest rate hikes have inadvertently raised the country’s debt servicing costs, as higher borrowing costs impact both the government and the private sector.
This has sparked concerns among Nigerians about the role of the World Bank and other international creditors in the country’s rising debt-to-GDP ratio.
Many question the logic behind their continued approval of large loans, given the lack of significant progress or tangible results.
However, a further breakdown of the debt servicing report showed that the International Monetary Fund got the highest debt repayment of $813.58m, 102.52 per cent more than the $401.73m paid in the twelve months of 2023.
The government made the largest payment of $327.98 million to the International Development Association, up from $257.33 million in the same period of 2023.
Payments to other institutions included $113.91 million to the African Development Bank, $2.67 million to the European Development Fund, $5.91 million to the International Fund for Agricultural Development (IFAD), $18.15 million to the African Development Fund (ADF), $1.01 million to the Africa Growing Together Fund, $11.96 million to the Islamic Solidarity Fund, and $11.02 million to the International Development Corporation.
Bilateral creditors, such as JIC, received $336,463, KFV got $24.07 million, and AFD received $32.39 million.
The data highlights growing concerns over Nigeria’s foreign debt obligations, as rising global interest rates and exchange rate fluctuations continue to increase borrowing costs.
