In a stark illustration of Nigeria’s mounting fiscal challenges, the Central Bank of Nigeria (CBN) has reported that debt servicing consumed a staggering 61% of the country’s revenue in the first nine months of 2024, amounting to N8.93 trillion. This figure, detailed in the CBN’s quarterly statistical bulletin, highlights the growing burden of debt obligations on Nigeria’s economy, raising concerns about fiscal sustainability and the government’s ability to fund critical sectors such as infrastructure, education, and healthcare. This article provides an in-depth analysis of the debt servicing crisis, its causes, implications, and potential solutions, situating the issue within the broader context of Nigeria’s economic and policy landscape as of September 5, 2025.
Overview of the Debt Servicing Crisis
The CBN’s data reveals that Nigeria spent N8.93 trillion on debt servicing between January and September 2024, a significant increase from the N5.69 trillion recorded in the same period of 2023. This represents a 56.8% year-on-year rise, underscoring the rapid escalation of the country’s debt burden. The debt servicing figure accounts for 47% of total government expenditure during the period, highlighting the extent to which debt repayments are crowding out other budgetary priorities. More alarmingly, the debt-to-revenue ratio reached 147%, meaning that debt servicing costs far exceeded the government’s retained revenue of N6.08 trillion in the same period.
This high debt-to-revenue ratio indicates a troubling trend: Nigeria is increasingly reliant on borrowing to meet its financial obligations, including servicing existing debts. The situation has been exacerbated by factors such as naira devaluation, high interest rates on both domestic and international loans, and a persistent fiscal deficit. The CBN’s report contradicts earlier claims by President Bola Tinubu, who stated during Nigeria’s 64th Independence Anniversary address that the debt service-to-revenue ratio had improved from 97% in 2023 to 68% in 2024. The latest data, showing a ratio of 147%, suggests that the fiscal situation is far more precarious than previously reported.
Breakdown of Debt Servicing Costs
The CBN’s quarterly bulletin provides a detailed breakdown of debt servicing costs for the first nine months of 2024, revealing significant month-on-month variations:
January 2024: N755.9 billion, a 37% increase from N550.3 billion in January 2023.
February 2024: N505.9 billion, a slight 2.5% decrease from N518.7 billion in February 2023.
March 2024: N1.01 trillion, a 12.2% rise from N897.9 billion in March 2023.
April 2024: N821 billion, a 3.2% decline from N847.9 billion in April 2023.
May 2024: N2.26 trillion, a dramatic 332% surge from N523.8 billion in May 2023, likely due to significant principal repayments or naira devaluation.
June 2024: N689 billion, a 186% increase from N241.3 billion in June 2023.
July to September 2024: The remaining balance, contributing to the total of N8.93 trillion.
The sharp spike in May 2024 reflects the compounding effect of naira devaluation, which increases the cost of servicing foreign debts, as well as potential large principal repayments. The overall trend indicates a growing fiscal strain, with debt servicing consuming an increasingly large share of government resources.
External Debt Servicing: A Growing Concern
In addition to domestic debt servicing, Nigeria’s external debt obligations have also risen significantly. According to the CBN, the country spent $3.53 billion on external debt servicing in the first nine months of 2024, a 38% increase from $2.56 billion in the same period of 2023. This $970 million jump reflects the impact of currency depreciation and rising global interest rates, which have made servicing dollar-denominated loans more expensive.
A month-by-month analysis highlights the volatility in external debt servicing costs:
January 2024: $560.52 million, up from $112.35 million in January 2023.
February 2024: $283.22 million, slightly below $288.54 million in February 2023.
March 2024: $276.17 million, a 31% decrease from $400.47 million in March 2023.
April 2024: $215.20 million, a 132% increase from $92.85 million in April 2023.
May 2024: $854.37 million, a 287% surge from $221.05 million in May 2023.
June 2024: $50.82 million, slightly below $54.36 million in June 2023.
July 2024: $542.50 million, a 15% decline from $641.69 million in July 2023.
August 2024: $279.95 million, a 10% reduction from $309.96 million in August 2023.
September 2024: $515.81 million, a 17% increase from $439.06 million in September 2023.
The cumulative increase in external debt servicing underscores Nigeria’s vulnerability to global economic conditions, particularly fluctuations in exchange rates and interest rates. The naira’s devaluation, which began with the Central Bank’s decision to float the currency in June 2023, has significantly increased the cost of servicing foreign loans, as more naira is required to meet dollar-based obligations.
Factors Driving the Debt Crisis
Several factors have contributed to Nigeria’s escalating debt servicing costs, reflecting both domestic and global economic challenges:
Naira Devaluation: The floating of the naira in June 2023 led to a significant depreciation, with the currency losing over 50% of its value against the dollar. This has made servicing external debts more expensive, as Nigeria must allocate more naira to meet fixed dollar-based payments.
High Interest Rates: Both domestic and international borrowing have become costlier due to rising interest rates. Nigeria’s reliance on commercial loans, which often carry higher interest rates than concessional loans from multilateral institutions, has further strained the budget.
Fiscal Deficit: Nigeria’s fiscal deficit widened by 39.3% in the first nine months of 2024, reaching N12.89 trillion from N9.25 trillion in the same period of 2023. This growing gap between revenue and expenditure has forced the government to borrow heavily, increasing debt servicing obligations.
Revenue Shortfalls: Despite efforts to boost revenue through reforms such as fuel subsidy removal and improved tax collection, Nigeria’s retained revenue of N6.08 trillion in 2024 remains insufficient to cover its expenditure needs, let alone debt servicing costs.
Global Economic Pressures: Rising global interest rates, driven by monetary policy tightening in advanced economies, have increased borrowing costs for developing countries like Nigeria. Additionally, sluggish global growth and currency volatility have limited Nigeria’s export earnings, further straining its fiscal position.
Implications for Nigeria’s Economy
The high debt servicing burden has profound implications for Nigeria’s economy, affecting both immediate budgetary priorities and long-term development goals:
Crowding Out Critical Investments: With 61% of revenue allocated to debt servicing, the government has limited fiscal space to fund essential sectors such as infrastructure, education, and healthcare. For instance, capital expenditure in the first nine months of 2024 rose by only 20.8% to N3.86 trillion, compared to a 45.6% increase in recurrent expenditure to N15.11 trillion, highlighting the prioritization of debt servicing over development projects.
Increased Borrowing Dependency: The 147% debt-to-revenue ratio indicates that Nigeria is borrowing not only to finance its budget but also to service existing debts. This cycle of borrowing to repay debt is unsustainable and could lead to a debt trap if not addressed.
Economic Vulnerability: The reliance on external borrowing exposes Nigeria to global economic shocks, such as interest rate hikes or currency fluctuations. This vulnerability could undermine investor confidence and affect the country’s credit rating, making future borrowing even more expensive.
Social Impact: The diversion of revenue to debt servicing limits the government’s ability to address poverty, unemployment, and inequality. With over 40% of Nigerians living below the poverty line, the lack of investment in social services could exacerbate socioeconomic challenges.
Policy Contradictions: The discrepancy between President Tinubu’s claim of a 68% debt-to-revenue ratio and the CBN’s reported 147% raises questions about transparency and accuracy in government communication. This could erode public trust and complicate efforts to implement fiscal reforms.
Government and Expert Reactions
The escalating debt servicing costs have drawn reactions from government officials, economists, and analysts. President Tinubu’s administration has emphasized efforts to reduce the debt burden through revenue-enhancing reforms, such as the removal of fuel subsidies and the liberalization of the foreign exchange market. However, the CBN’s data suggests that these measures have yet to yield the desired results, as debt servicing continues to consume a disproportionate share of revenue.
Tilewa Adebajo, CEO of The CFG Advisory, expressed concern over the sustainability of Nigeria’s debt profile, stating, “The debt profile is too high and unsustainable. The federal government must implement policies to grow the economy and create employment to address these challenges effectively.” Adebajo’s comments highlight the need for structural reforms to boost revenue and reduce reliance on borrowing.
Analysts have also pointed to the role of naira devaluation in exacerbating debt servicing costs. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, noted that the increase in government revenue due to exchange rate gains and subsidy removal has not kept pace with the rising cost of debt servicing. He recommended prioritizing concessional loans from multilateral institutions, which offer lower interest rates, to reduce the fiscal burden.
Potential Solutions and Policy Recommendations
Addressing Nigeria’s debt servicing crisis requires a multi-faceted approach that combines fiscal discipline, revenue generation, and strategic borrowing. Key recommendations include:
Revenue Diversification: Nigeria must reduce its reliance on oil revenues by diversifying its economy into sectors such as agriculture, manufacturing, and technology. Investments in non-oil exports and tax reforms can boost revenue and reduce the need for borrowing.
Concessional Borrowing: The government should prioritize loans from multilateral institutions like the World Bank and African Development Bank, which offer lower interest rates and longer repayment periods compared to commercial loans.
Debt Restructuring: Exploring debt restructuring options, such as extending repayment periods or negotiating lower interest rates, could alleviate the immediate pressure on the budget.
Fiscal Discipline: Reducing wasteful expenditure and improving budgetary efficiency can free up resources for development projects and reduce the fiscal deficit.
Economic Growth Initiatives: Policies to stimulate economic growth, such as infrastructure development, job creation, and support for SMEs, can expand the tax base and increase revenue.
Transparency and Accountability: The government must improve transparency in its fiscal reporting to build public trust and ensure accurate communication of economic data.
Broader Context: Nigeria’s Economic Challenges
Nigeria’s debt servicing crisis is part of a broader set of economic challenges facing the country as of September 5, 2025. Inflation remains a persistent issue, with rates exceeding 30% in 2024, driven by rising food and energy prices. The naira’s depreciation has increased the cost of imports, contributing to inflationary pressures and higher debt servicing costs. Additionally, insecurity, including banditry and oil theft, has disrupted economic activities, particularly in the Niger Delta, reducing government revenues.
Despite these challenges, Nigeria has significant opportunities for growth. The country’s youthful population, abundant natural resources, and strategic location position it as a potential economic powerhouse in Africa. By addressing its fiscal challenges and implementing sound policies, Nigeria can achieve sustainable development and reduce its reliance on debt.
Conclusion
The revelation that Nigeria spent N8.93 trillion on debt servicing in the first nine months of 2024, consuming 61% of its revenue, underscores the urgent need for fiscal reforms. The high debt-to-revenue ratio, coupled with rising external debt servicing costs, highlights the country’s growing fiscal vulnerability. While government reforms such as fuel subsidy removal and exchange rate liberalization have aimed to boost revenue, the CBN’s data indicates that these measures have not been sufficient to curb the debt burden.
Addressing this crisis requires a combination of revenue diversification, concessional borrowing, fiscal discipline, and economic growth initiatives. By prioritizing sustainable policies and transparent communication, Nigeria can reduce its reliance on debt and create fiscal space for critical investments in infrastructure, education, and healthcare. The debt servicing challenge is a call to action for policymakers, stakeholders, and citizens to work together to build a more resilient and prosperous economy.
