Nigeria's debt servicing costs have skyrocketed in the first five months of 2023, reaching a staggering N2.2 billion, according to the latest data from the Central Bank of Nigeria (CBN).
This figure is nearly half of the $4.8 billion projected for the entire year by Fitch Ratings, which had predicted a further increase to $5.2 billion in 2024.
The government's focus on domestic borrowing has done little to alleviate the burden, as external debt servicing continues to consume a significant portion of the country's resources.
In May alone, the Federal Government spent $854.36 million on debt financing, the highest amount in a single month over the past year and a 297% increase compared to April.
The rising debt servicing costs have raised concerns about the sustainability of Nigeria's debt profile. FBNQuest Research reported that external debt service payments increased by $1.1 billion to $3.5 billion in 2023, comprising $1.9 billion in market debt payments and $1.6 billion in non-market debt payments.
To address the situation, the Federal Government plans to raise additional external borrowing of N1.8 trillion and another N1.1 trillion in loans from concessional lenders, as outlined in the 2024 budget.
The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, has announced that Nigeria will be receiving $2.25 billion in funding from the World Bank in the coming weeks, with $1.5 billion designated as Development Policy Financing.
However, the government's reliance on external borrowing has not been without its challenges.
The nation's foreign exchange situation has significantly impacted the volume of letters of credit issued, which declined by 63.26% to $279 million in the first five months of 2023 compared to the same period in 2022.
