FG spends 74% of revenue on debt servicing in Q1, 2024
In the first quarter of 2024, Nigeria faced a substantial financial challenge as debt servicing consumed a staggering 74 percent of the federal government’s retained revenue, amounting to N1.31 trillion out of N1.76 trillion.
This revelation comes from the Central Bank of Nigeria’s (CBN) latest quarterly statistical bulletin, highlighting the country’s ongoing struggle with managing its debt despite efforts to reduce fiscal deficits and overall expenditures.
The significant allocation to debt servicing underscores the prioritisation of debt obligations over critical areas such as personnel costs and capital expenditures. In Q1 2024, despite a 33.8 percent increase in retained revenue compared to the same period last year, overall government expenditures decreased by 12.9 percent, amounting to N4.59 trillion.
The fiscal deficit also decreased by 29 percent, totaling N2.83 trillion, reflecting some improvement in financial management. However, the persistently high debt service to revenue ratio remains a pressing concern for economic stability and growth.
During the period, Nigeria spent more on servicing its debts than on personnel costs or capital investments. Personnel expenditures increased by 17.1 percent, reaching N1.15 trillion, while capital expenditures saw a sharp decline of 35.9 percent, amounting to N1.15 trillion. This reduction in capital spending raises concerns about the potential impact on infrastructure development and long-term economic growth.
In 2023, Nigeria’s debt servicing costs amounted to N7.8 trillion, marking a 121 percent increase from N3.52 trillion in 2022. Moreover, in Q1 2024 alone, Nigeria spent approximately $1.12 billion on foreign debt service payments, indicating a 39.7 percent increase from the previous year.
Meanwhile, the World Bank has expressed deep concern over the escalating debt service costs facing developing countries, highlighting the risk of a financial crisis if proactive measures are not taken. The high debt service to revenue ratio underscores Nigeria’s urgent need for comprehensive economic reforms to enhance revenue generation and reduce dependency on borrowed funds.
Recently, Nigeria’s Debt Management Office (DMO) reported a significant rise in the nation’s total public debt, reaching N121.67 trillion (approximately $91.46 billion) as of March 31, 2024, up from N97.34 trillion (approximately $108.23 billion) at the end of December 2023. This increase, attributed in part to naira devaluation, poses further challenges to the country’s economic stability and development efforts.
