Nigeria’s total debt service costs continued to climb in the third quarter of 2024, reaching an estimated N3.57 trillion, which marks a 1.71% increase from N3.51 trillion in Q2. This rise is primarily attributed to increased external debt service payments coupled with the depreciation of the naira.
External Debt Service Payments:
External debt service in Q3 2024 amounted to $1.34 billion, or about N2.14 trillion when converted at the exchange rate of N1,601.03/$ as of September. This marks a significant 29.7% increase in naira terms from Q2, where external debt service was $1.12 billion (N1.65 trillion) at the June exchange rate of N1,470.19/$. The increase is driven by the naira’s depreciation and higher obligations to multilateral and bilateral creditors.
The largest portion of external debt service payments went to multilateral debt, totalling $712.66 million, a 6.04% increase from $672.01 million in Q2. This component represented 53.26% of total external debt service. Payments to the International Monetary Fund (IMF) increased slightly to $406.98 million from $404.24 million in the previous quarter.
A sharp rise in bilateral debt payments was observed, with a 325.52% increase to $186.92 million in Q3, up from $43.92 million in Q2. The main driver of this surge was a significant payment to China’s Exim Bank, which rose to $182.04 million, up from zero in the previous quarter.
Commercial debt obligations, including Eurobonds, amounted to $438.68 million, an 8.48% increase from $404.46 million in Q2. Eurobond interest payments dominated this category, accounting for $427.72 million.
Domestic Debt Service Payments:
Domestic debt service in Q3 stood at N1.43 trillion, which is lower than the N1.86 trillion recorded in the previous quarter. Federal Government bond interest payments accounted for the bulk of domestic debt servicing, rising to N1.25 trillion in Q3, though this represented a decrease from N1.68 trillion in Q2.
Bonds continued to dominate domestic debt servicing, accounting for 87.41% of total domestic debt service, down slightly from 90.32% in the previous quarter. Payments on Nigerian Treasury Bills (NTBs) saw a sharp increase, climbing by 56.8% to N168.53 billion in Q3 from N107.48 billion in Q2.
Other domestic debt components, such as payments on Federal Government Sukuk bonds and savings bonds, remained relatively stable. Sukuk bond interest payments were N8.28 billion, while savings bond interest stood at N1.83 billion.
The rising debt service costs have raised concerns among economic analysts, who warn about the sustainability of the current debt burden, especially considering that debt servicing now consumes a significant portion of government revenue. The growing external and domestic debt obligations place immense pressure on Nigeria’s fiscal resources, and experts are calling for better revenue generation strategies and more prudent fiscal management.
In light of this situation, there is a strong emphasis on the need for Nigeria to implement measures that will diversify and boost its revenue base, while also reducing its dependence on debt as a means of financing fiscal deficits.
