Nigeria’s Debt Servicing Surges to N6tn – CBN
Latest data from the Central Bank of Nigeria (CBN) shows that the country’s debt servicing expenses reached N6.04tn in the first half of 2024.
This indicates an increase of 68.8 per cent from the N3.58tn recorded during the same period in 2023.
This implies that the amount spent by the Federal Government in servicing debt during the review period is about three times what it spent on personnel costs.
This rise in debt service obligations, likely driven by naira devaluation for foreign debt repayments, reflects the growing burden on the Federal Government as debt repayment consumes a significant portion of its financial resources.
In contrast, personnel costs totalled N2.32tn in H1 2024, a 17.6 per cent rise from N1.97tn spent in H1 2023.
This expenditure pattern indicates that debt servicing is now almost triple the government’s wage bill, raising concerns about the sustainability of the country’s debt profile and the increasing pressure on public finances.
Despite the rising cost of living in the country, the total amount spent on salaries in the first six months of 2024 only increased marginally.
In H1 2024, about half of the Federal Government’s total expenditures were on debt servicing.
Overall government spending surged to N12.17tn in H1 2024, up from N9.39tn in H1 2023, representing a 29.6 per cent increase.
This jump in total expenditure has further widened the fiscal deficit, which expanded by 27.9 per cent from N6.6tn in H1 2023 to N8.44tn in H1 2024.
This growing deficit highlights the federal government’s struggle to balance its revenue and expenditure, a situation exacerbated by ballooning 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 increase in debt servicing, which now constitutes a large portion of recurrent expenditure, continues to strain the government’s budget.
Recurrent expenditure alone far exceeded total revenue in H1 2024, reaching over 270 per cent of retained revenue, which illustrates the extent of the fiscal pressure the government faces.
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.
This reduction in capital expenditure has sparked concerns that key projects in sectors such as transportation, education, and healthcare could be delayed or underfunded, potentially hampering the country’s development agenda.
The Federal Government’s retained revenue improved in H1 2024, increasing by 33.3 per cent from N2.8tn in H1 2023 to N3.73tn.
However, this revenue growth was overshadowed by the larger rise in total expenditure, particularly debt servicing.
While the increase in revenue is a positive development, it is insufficient to bridge the widening fiscal gap, given the scale of the government’s rising obligations.
Also, the Federal Government spent about 162 per cent of its retained revenue on debt servicing in the first half of 2024.
The percentage recorded in the first six months of 2024 represents a significant increase from the 128 per cent recorded in the corresponding period of 2023, raising concerns about the sustainability of the country’s fiscal framework.
A closer look at the monthly breakdown shows an escalating trend. In January 2024, the Federal Government’s retained revenue was N449.7bn, while debt servicing amounted to N755.9bn, translating to 168% of revenue.
The trend continued across the months, with the most significant spike recorded in May 2024, when debt servicing reached N2.26tn compared to N523.8bn in May 2023. This represents a 332 per cent increase in debt servicing for that month alone.
By June 2024, retained revenue had increased to N731.8bn, while debt servicing stood at N689bn, marking the lowest debt service-to-revenue ratio of 94 per cent for the first half of the year.
In contrast, the situation was somewhat better in June 2023, when debt service accounted for only 68 per cent of revenue.
The surge in debt servicing highlights Nigeria’s growing debt burden. With more than its entire income for the first half of the year spent on debt repayments, the government is left with fewer funds for critical sectors like infrastructure, education, and healthcare.
In his national broadcast to mark Nigeria’s 64th Independence Anniversary, President Bola Tinubu boasted that his administration reduced the debt service ratio from 97 per cent to 68 per cent.
However, the CBN data shows that the ratio has worsened to 162 per cent in the first six months of 2024.
