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Nigeria’s Debt Service Consumes 70% of Q1 Dollar Outflow, Strains Economy

Daud Olatunji

 Nigerian government has expanded $1.12 billion to  service  external debt, 70 percent  of the total $1.61 billion expended between January and March 2024, according to data sources from the Central Bank of Nigeria.

PLATFORM TIMES reports that Nigeria’s financial landscape bears the weight of escalating debt service obligations, with a staggering 70% of its dollar outflow directed towards servicing external debts during the first quarter of 2024.

 Data sourced from the Central Bank of Nigeria (CBN) revealed that  this surge marks a notable escalation from the previous year, where debt service accounted for a comparatively lower 49% of the first-quarter outflows, underscoring the mounting burden of external debt on the nation’s finances.

Delving into the monthly breakdown of debt service payments, the data showed that  January 2024 commenced on a somber note as the nation faced a formidable debt servicing obligation of $560.52 million, a staggering increase from January 2023’s figure of $112.35 million, nearly quintupling the previous year’s expenditure. 

The CBN data also shows that although February offered a slight reprieve, with debt servicing payments moderating to $283.22 million, the burden remained substantial.

 March echoed the ominous trend, albeit at a slightly reduced scale, with $276.17 million directed towards debt servicing, a marginal decrease from March 2023’s figure of $400.47 billion.

PLATFORM TIMES observed that the  precarious state of Nigeria’s foreign exchange (FX) reserves further exacerbates the economic woes, with the recent one-month dip streak reflecting the strain of debt repayments and other financial obligations.

 CBN Governor, Yemi Cardoso, attributes the declining reserves primarily to debt obligations and routine financial duties, rather than efforts to bolster the ailing naira. 

Despite weeks of persistent decline, Nigeria’s FX reserves witnessed a marginal resurgence of about $262 million over 19 days. 

As of May 7, 2024, the reserves cautiously rebounded to $32.369 billion, marking a recovery from the one-month dip of $32.107 billion. 

However, this revival comes after a steady decline from $34.45 billion on March 18th, propelled by the interplay of dwindling oil prices, burgeoning debt service costs, and other obligations confronting the CBN.

PLATFORM TIMES further reports that the  burgeoning debt service obligations pose a formidable challenge to Nigeria’s economic stability, necessitating prudent fiscal management and strategic initiatives to alleviate the burden and safeguard the nation’s financial integrity. 

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