Nigeria's debt servicing costs have escalated by 69% in the first half of 2024, totaling N6.04 trillion, compared to N3.58 trillion during the same timeframe in 2023.

This significant increase in debt obligations, likely influenced by the devaluation of the naira affecting foreign debt repayments, underscores the mounting pressure on the Federal Government, as debt servicing now accounts for a substantial share of its financial resources.

Data from the latest statistical bulletin released by the Central Bank of Nigeria (CBN) indicates that in the first half of 2024, debt servicing constituted 50% of the total expenditure of N12.17 trillion and an alarming 162% of the N3.73 trillion total revenue generated in that period.

In January 2023, the government allocated N550.3 billion for debt servicing. By January 2024, this amount had increased to N755.9 billion, reflecting a 37% rise. This notable increase emphasizes the cumulative nature of debt obligations as interest payments accrue over time. 

In February 2023, debt servicing expenditures were N518.7 billion, which saw a slight decrease to N505.9 billion in February 2024, representing a minor 2.5% reduction. Although February's figures provided a brief respite, the overall trend remains alarming.

March 2023 experienced one of the highest debt servicing costs of that year at N897.9 billion. In contrast, March 2024 witnessed a significant rise to N1.01 trillion, marking a 12.2% year-on-year increase. This persistent upward trend in debt servicing costs indicates increasing fiscal strain.

In April 2023, the government spent N847.9 billion on debt servicing, which decreased to N821 billion in April 2024, reflecting a 3.2% decline.

May 2024 saw a dramatic increase in debt servicing, with the government expending N2.26 trillion, a substantial rise from N523.8 billion in May 2023. This 332% surge highlights the escalating burden of debt repayments, potentially driven by large principal repayments or the significant devaluation of the naira during that month.

In June 2023, debt servicing costs were recorded at N241.3 billion, but by June 2024, this figure surged to N689 billion, marking a staggering 186% increase. This significant escalation underscores the mounting financial strain resulting from Nigeria's debt obligations as the government struggles with repayment challenges.

The 69% increase in debt servicing between the first halves of 2023 and 2024 illustrates Nigeria's increasing fiscal vulnerability. As more resources are directed towards debt repayment, the government finds itself with diminished capacity to invest in infrastructure, social services, and economic development initiatives. The rising debt service commitments also suggest that Nigeria may be incurring loans at elevated interest rates, both domestically and internationally, which further compounds the financial strain.

A particularly alarming aspect of Nigeria's escalating debt situation is that debt servicing accounted for 50% of the total government expenditure of N12.17 trillion in the first half of 2024. This indicates that half of the government's budget was allocated to servicing debt, leaving only the remaining half for essential sectors such as infrastructure, education, healthcare, and social services.

Moreover, debt servicing represented 162% of the Federal Government of Nigeria's total revenue of N3.73 trillion during the same period. Essentially, Nigeria is borrowing to meet its debt obligations, as the expenditure on debt servicing far exceeds the revenue generated. This disparity highlights the increasing pressure on Nigeria's fiscal stability and its reliance on borrowing to fulfill financial commitments.

In a previous statement, the World Bank voiced significant concern regarding the rising debt service costs impacting developing nations globally. Indermit Gill, the World Bank’s Chief Economist and Senior Vice President, stressed the seriousness of the situation, warning of the potential for a widespread financial crisis if prompt and coordinated measures are not implemented.

The integration of high levels of debt at the record level and rising interest rates, as noted by Gill, has placed numerous developing countries in a vulnerable situation, potentially resulting in economic challenges and difficult choices concerning resource distribution.