Nigeria’s debt servicing expenses surged to N6.04 trillion in the first half of 2024, a 68.8% increase from N3.58 trillion in the same period of 2023, according to the Central Bank of Nigeria.
This spending is approximately three times the N2.32 trillion allocated for personnel costs, which rose by 17.6% from N1.97 trillion the previous year.
The significant increase in debt service obligations is largely attributed to the devaluation of the naira affecting foreign debt repayments, highlighting the mounting financial strain on the Federal Government as a substantial portion of its resources is directed toward debt repayment.
In contrast, personnel costs in Nigeria reached N2.32 trillion in the first half of 2024, marking a 17.6% increase from N1.97 trillion in the same period of 2023.
This expenditure pattern reveals that debt servicing now approaches triple the government’s wage bill, raising serious concerns about the sustainability of Nigeria’s debt profile and increasing pressure on public finances.
Despite the rising cost of living, the total spent on salaries in the first half of 2024 saw only a marginal increase, highlighting the challenge of balancing fiscal responsibilities while addressing citizens’ economic needs.
Findings showed that in H1 2024, about half of the Federal Government’s total expenditures were on debt servicing.
Overall government spending in Nigeria soared to N12.17 trillion in the first half of 2024, a 29.6% increase from N9.39 trillion in the same period in 2023.
This surge in total expenditure has contributed to a widening fiscal deficit, which expanded by 27.9% from N6.6 trillion in H1 2023 to N8.44 trillion in H1 2024.
This growing deficit underscores the federal government’s difficulty in balancing revenue and expenditure, a challenge further intensified by escalating debt obligations.
The persistent growth in the fiscal deficit suggests that Nigeria’s current fiscal trajectory may be unsustainable, particularly given its increasing reliance on debt financing to cover revenue shortfalls.
Recurrent expenditure, which encompasses operational costs such as debt servicing and personnel payments, surged by 51.4 per cent, from N6.72tn in H1 2023 to N10.17tn in H1 2024.
The rise in debt servicing, now a significant portion of recurrent expenditure, is heavily straining the government’s budget.
In H1 2024, recurrent expenditure alone surpassed total revenue, reaching over 270% of retained revenue.
This stark disparity illustrates the intense fiscal pressure the government is under, highlighting the urgent need for reforms to address the imbalance between revenue generation and expenditure management.
Despite the rise in overall spending, capital expenditure, which is crucial for infrastructure development and long-term economic growth, declined by 25.3 per cent from N2.68tn in H1 2023 to N1.99tn in H1 2024.
The decreased capital spending reflects the government’s constrained financial capacity, as more resources are directed towards servicing debt and recurrent costs.
The reduction in capital expenditure has raised concerns that essential projects in transportation, education, and healthcare may face delays or insufficient funding, jeopardizing the country’s development agenda.
However, the Federal Government’s retained revenue showed some improvement in H1 2024, rising by 33.3% from N2.8 trillion in H1 2023 to N3.73 trillion.
