Nigeria’s debt servicing costs surge amid falling oil prices, rising loans

• The Nigerian authorities plans to summation outer borrowing by astir $26 cardinal successful 2025–2026 to screen fund shortfalls and stimulate economical growth
• Despite a caller diminution successful nationalist indebtedness owed chiefly to naira devaluation, indebtedness servicing costs stay high, with overmuch of the caller borrowing expected to money recurring expenditures
• Experts pass that continued indebtedness maturation amid stagnant gross and falling lipid prices risks fiscal instability, urging stronger accountability and growth-focused policies

Legit.ng writer Zainab Iwayemi has 5-year-experience covering the Economy, Technology, and Capital Market.

Given that the national authorities intends to summation its outer borrowing efforts contempt increasing fiscal pressures and a precarious economical outlook, the International Monetary Fund (IMF) and fiscal analysts person expressed interest implicit Nigeria's rising nationalist debt.

Analysts stock concerns astir President Bola Tinubu's caller petition for a $21.5 cardinal loan. Photo credit: IMF, FG
Source: UGC

In an email, analysts astatine Cowry Asset Management voiced their concerns astir President Bola Tinubu's caller petition for a $21.5 cardinal indebtedness to the National Assembly, which forms portion of a larger borrowing program for 2025–2026 aimed astatine bridging backing shortfalls and spurring economical growth.

In summation to this request, the authorities is considering borrowing €2.2 cardinal ($2.5 billion), 15 cardinal yen ($104 million), and $2 cardinal domestically, totalling astir $26 cardinal successful caller indebtedness plans.

Cowry Research warned that astir 60% of the anticipated spending volition beryllium covered done caller borrowings, pointing retired the expanding reliance connected indebtedness to concern the 2025 budget.

It added:

‘This marks a concerning displacement from earlier promises to trim dependence connected indebtedness by focusing connected overseas nonstop concern and equity financing.’

Cowry analysts cautioned that a ample information of the funds is apt to concern recurring and superior expenditures with constricted interaction connected generating semipermanent sustainable revenue.

The borrowing connection targets sectors specified arsenic infrastructure, health, education, agriculture, and economical reforms, successful enactment with Nigeria's Medium-Term Expenditure Framework and the Fiscal Responsibility Act.

The nation's nationalist indebtedness decreased from $108.23 cardinal to $94.23 billion, oregon N144.67 trillion, arsenic of December 2024, according to information from the Debt Management Office (DMO). However, this diminution was chiefly owed to the devaluation of the naira alternatively than existent repayments.

In 2024 alone, full outer indebtedness servicing amounted to $4.66 billion, which included $1.74 cardinal successful involvement payments and $2.8 cardinal successful main repayments. Multilateral creditors received the largest repayments ($2.62 billion), followed by commercialized lenders ($1.47 billion) and bilateral lenders ($570.67 million), according to a breakdown by lender.

Despite the strain, since taking bureau successful May 2023, the Tinubu medication has obtained $7.2 cardinal successful outer loans, each from the World Bank.

These comprise $750 cardinal for the electricity industry, $800 cardinal for societal information nets, and $2.25 cardinal for economical stabilisation. An further $632 cardinal is owed by March 2025, with different $1.57 cardinal anticipated successful September 2024.

The IMF warned that if near uncontrolled, nationalist indebtedness whitethorn transcend 100 per cent of planetary GDP by 2030, pointing retired that indebtedness is already expanding much rapidly successful economies that relationship for 80 per cent of planetary GDP successful its astir caller Fiscal Monitor blog post.

“Countries indispensable trim nationalist indebtedness and rebuild fiscal buffers with credible medium-term plans,” the IMF advised, stressing the value of macroeconomic stableness and targeted maturation policies, stating, ‘Governments request to physique trust, taxation fairly, and walk wisely.’

Analysts noted the quality betwixt Nigeria's stagnating gross maturation and rising indebtedness servicing cost. Photo Credit: FG
Source: Getty Images

Cowry Research highlighted the discrepancy betwixt Nigeria's stagnating gross maturation and rising indebtedness servicing costs, which is exacerbated by the information that planetary lipid prices person fallen beneath the benchmark of $75 per barrel.

“This exposes Nigeria to outer shocks, fixed the country’s overdependence connected lipid revenues for budgetary support. There is an urgent request to fortify accountability mechanisms, guarantee due money utilisation, and prosecute growth-friendly policies that pull investments, not conscionable loans,” Cowry stated.

Nigeria’s indebtedness hits historical precocious

Legit.ng reported that arsenic Africa's astir populous state continues to trust connected borrowing to conscionable its fiscal obligations, Nigeria's full nationalist indebtedness deed its highest level ever.

According to information released connected Friday, April 4, by the Debt Management Office, the country's indebtedness illustration accrued to N144.6 trillion astatine the extremity of 2024 from N97.3 trillion the twelvemonth before.

Nigeria's debt, however, decreased successful dollar terms, going from $108.2 cardinal successful 2023 to $94.2 cardinal past year, indicating reduced volatility successful the overseas currency market.

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Source: Legit.ng