Data from the Central Bank of Nigeria (CBN) shows that Nigeria incurred a debt service of $3.5 billion for its external loans in the 2023 fiscal year. This represents a 55% increase over the $2.6 billion spent in 2022 on payments connected to the countrys external loans. The information is contained in the most recent Quarterly Statistical Bulletin published by the central bank.

Nigerias overall external debt portfolio is $42.29 billion, up from $41.69 billion in 2022, according to data from the Debt Management Office (DMO).

Nigeria incurred $801.36 million, $368.26 million, $1,390.72 million, and $943.17 million in debt servicing costs across the first, second, third, and fourth quarters, respectively, according to figures released by the apex bank.

This significant increase in debt servicing heavily burdens Nigerias annual budget, limiting government spending on vital areas like healthcare and education. It may also discourage foreign investment and endanger the countrys economic growth, both of which are essential for economic stability.

Nigerias external debt, primarily denominated in US dollars, has recently risen due to the multi-year economic difficulties the country has been experiencing as a result of the COVID-19 pandemic. Nigerias external debt was just $27.6 billion but rose to $33.4 billion as COVID-19 forced the need for external support for frontier markets like Nigeria.

For instance, Nigeria increased its International Monetary Fund (IMF) loans by $3.5 billion, while its International Development Association (IDA) loans, which are associated with the World Bank, increased to $11.1 billion from $9.6 billion. The countrys IDA balances reached $14.9 billion by 2023 as a result of its ongoing reliance on the World Bank.

Nigeria also made use of the commercial debt market, as evidenced by the increase in Eurobond debt from $10.8 to $15.1 billion. Over the past five years, loans from multilateral organizations like the AfDB as well as bilateral sources like China and France have increased.

Additionally, Nigeria paid back $500 million in Eurobond loans that were taken out six years prior at an annual coupon rate of 6.375%. Eurobond payments are usually made from Nigerias foreign reserves or through a separate fund set aside for the repayment of external bonds.

Nigeria has refunded $1.8 billion in securities that were listed on the International Capital Market (ICM) in the last six years as a result of this redemption, says DMO. (Daily Sun)