Nigeria’s total debt service costs climbed to N3.57 trillion in the third quarter of 2024, up by N60 billion or 1.71% from N3.51 trillion in Q2.
This is according to the latest data from the Debt Management Office (DMO).
This increase reflects a combination of higher external debt service obligations and the impact of naira depreciation.
External debt service costs soar
External debt servicing in Q3 amounted to $1.34 billion, translating to N2.14 trillion at the September exchange rate of N1,601.03/$, compared to $1.12 billion (N1.65 trillion) in Q2 at the June rate of N1,470.19/$. This represents a 29.70% rise in naira terms and a 19.44% increase in dollar terms.
The exchange rates used for the external debt were provided by the DMO in its reports.
The rise was primarily driven by higher obligations to multilateral and bilateral creditors, alongside significant interest payments on commercial loans.
- Multilateral debt: Payments totalled $712.66 million in Q3, up 6.04% from $672.01 million in Q2. This segment accounted for 53.26% of total external debt service costs, reflecting increases in principal repayments and interest charges. Payments to the International Monetary Fund (IMF) rose marginally to $406.98 million from $404.24 million in Q2.
- Bilateral debt: Payments surged 325.52% quarter-on-quarter to $186.92 million, driven largely by obligations to China’s Exim Bank, which accounted for $182.04 million in Q3 compared to zero in Q2. Other bilateral creditors, such as the Exim Bank of India and the French Development Agency, recorded modest increases.
- Commercial debt: Total obligations for commercial loans, including Eurobonds, rose 8.48% to $438.68 million in Q3 from $404.46 million in Q2. Eurobond interest payments dominated this category at $427.72 million.
Domestic debt service declines
Domestic debt servicing dropped to N1.43 trillion in Q3 from N1.86 trillion in Q2. Federal Government bonds continued to dominate, accounting for 87.41% of domestic debt service at N1.25 trillion, although this was a decline from N1.68 trillion in Q2.
Interest payments on Nigerian Treasury Bills (NTBs) rose significantly, reaching N168.53 billion in Q3 from N107.48 billion in Q2, marking a 56.8% increase. This suggests an increased reliance on short-term borrowing instruments.
Other components of domestic debt service showed minimal changes:
- FGN Sukuk bonds incurred N8.28 billion in interest payments.
- Federal Government savings bonds accounted for N1.83 billion in interest.
- There were no recorded repayments of principal on promissory notes or other debt instruments in Q3.
What you should know
Economic analysts have repeatedly raised concerns over the rising debt service burden, which continues to consume a significant portion of government revenue.
- With both external and domestic debt service obligations driving substantial fiscal outflows, the need for enhanced revenue generation and prudent fiscal management has become increasingly urgent.
- The sharp rise in bilateral debt service costs, particularly to China’s Exim Bank, and the increased reliance on short-term instruments like NTBs highlight the pressing need for a comprehensive debt strategy to ensure sustainability.
- As Nigeria grapples with rising debt obligations, external payments are becoming more vulnerable to exchange rate fluctuations, further straining government finances.
- The situation highlights the importance of diversifying revenue streams and implementing structural reforms to reduce dependence on borrowing.