"Nigeria\u2019s foreign debt service costs surge by 96% to $2.19 billion in May"

" Nigeria\u2019s foreign debt service costs surge by 96% to $2.19 billion in May \r\n\r\n Nigeria has seen a significant surge in its foreign debt servicing costs, with\u00a0 an\u00a0 increase of 96% year-on-year, according to the latest data released by the Central Bank of Nigeria (CBN). \u00a0 \r\n\r\n By the end of May 2024, the country\u2019s debt services and payments had reached $2.19 billion, a sharp rise from $1.12 billion recorded in the same period in 2023. \u00a0 \r\n\r\n The cumulative\u00a0 foreign\u00a0 debt servicing costs for the first five months of 2024 amounted to $2.19 billion, nearly doubling \u00a0the\u00a0 amount\u00a0 spent in the same period in 2023. \r\n\r\n It is also about 84% of the total external debt servicing costs recorded in 2022, which was $2.6 billion. \u00a0 \r\n\r\n \u00a0 \r\n\r\n Breakdown of\u00a0 Foreign\u00a0 Debt Service Payments \u00a0 \r\n\r\n <img class=\"alignnone wp-image-491056 size-full\" src=\"https:\/\/nairametrics.com\/wp-content\/uploads\/2024\/06\/image-30.png\" sizes=\"(max-width: 624px) 100vw, 624px\" srcset=\"https:\/\/nairametrics.com\/wp-content\/uploads\/2024\/06\/image-30.png 624w, https:\/\/nairametrics.com\/wp-content\/uploads\/2024\/06\/image-30-300x179.png 300w\" alt=\"\" width=\"624\" height=\"373\" data-pin-no-hover=\"true\" \/> \r\n \r\n \t In January 2024, Nigeria\u2019s debt servicing costs amounted to $560.52 million, a n \u00a0increase of 399% compared to $112.35 million in January 2023. This significant jump underscores the growing burden of external debt on the country\u2019s finances. \u00a0 \r\n \r\n \r\n \t February 2024 saw a slight decrease in debt servicing costs, totalling $283.22 million. This is a 1.8% decline from $288.54 million in February 2023. Despite the minor decrease, the overall trend indicates a steep rise in debt costs. \u00a0 \r\n \r\n \r\n \t In March 2024, debt payments were recorded at $276.17 million, a 31% decrease from $400.47 million in March 2023. This reduction suggests a temporary reprieve in the upward trend of debt servicing costs. \u00a0 \r\n \r\n \r\n \t However,\u00a0 April 2024 witnessed a substantial increase in debt servicing payments, which rose to $215.20 million from $92.85 million in April 2023. This marks a 132% increase year-on-year, reflecting the escalating debt obligations of the country. \u00a0 \r\n \r\n \r\n \t The month of May 2024 saw a\u00a0 further \u00a0spike in debt servicing costs, reaching $854.37 million compared to $221.05 million in May 2023. This represents a significant 286% increase, highlighting the growing fiscal pressure on Nigeria\u2019s economy. \u00a0 \r\n \r\n \u00a0 \r\n\r\n Debt service gulps\u00a0 66 % of official dollar outflow \u00a0 \r\n\r\n Nairametrics further observed that Nigeria spent about\u00a0 66 % of its dollar payments to service external debts between January and\u00a0 May \u00a02024. \u00a0 \r\n\r\n According to data from the CBN, out of the $ 3.31 \u00a0billion in total outflows made during this period,\u00a0 about \u00a0of $ 2 .1 9 \u00a0billion was directed towards servicing external debt. \u00a0 \r\n\r\n This figure represents a hefty slice of the nation\u2019s financial resources and indicates a significant increase from the previous year when it was 4 4 % in\u00a0 the same period . \u00a0 \r\n\r\n More Insights\u00a0 \r\n\r\n The soaring costs of servicing foreign debt have significant implications for Nigeria\u2019s economy. The increased debt burden could potentially divert resources away from critical sectors such as healthcare, education, and infrastructure, exacerbating socio-economic challenges. \u00a0 \r\n\r\n T he World Bank \u00a0recently \u202f expressed deep concern over the escalating debt service costs that are burdening developing countries worldwide . Indermit Gill, the World Bank\u2019s Chief Economist, and Senior Vice President, emphasized the gravity of the situation, highlighting the potential for a widespread financial crisis if immediate and coordinated actions are not taken. \u00a0 \r\n\r\n According to Gill, the combination of record-level debt and soaring interest rates has set many developing nations on a precarious path, one that could lead to economic distress and tough decisions regarding the allocation of resources. \u00a0 \r\n\r\n Fitch Ratings recently noted that\u00a0 pressure on interest-to-revenue ratios remains high at 38% , driven by higher interest rates and structurally low revenue-to-GDP ratios. \u00a0 \r\n\r\n The rating agency also projected a decline in Nigeria\u2019s debt costs, although they are expected to remain significantly high. \u00a0 \r\n\r\n The Nigerian government needs to adopt more stringent fiscal measures and explore debt restructuring options to mitigate the impact of rising debt servicing costs. \r\n\r\n Enhanced revenue generation strategies and prudent economic management will be crucial in addressing the growing debt burden. "

"Nigeria\u2019s foreign debt service costs surge by 96% to $2.19 billion in May"

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