FG Spends $2.2 Billion on Debt Servicing in Five Months

 

The latest release of data from the Central Bank of Nigeria (CBN) underscores the significant financial commitments of the federal government, revealing an expenditure of approximately $2.2 billion on debt servicing within the initial five months of this year.

A meticulous breakdown of the ‘International Payments Data’ report delineates that the federal government allocated the most substantial portion towards debt financing in May, reaching a noteworthy $854.36 million.

This figure not only stands as the highest payment in a single month in the past year but also represents a striking 297 percent increase from the preceding month of April and a notable 286.49 percent escalation from May 2023, which recorded an expenditure of $221.05 million.

The preceding months of the year saw a consistent allocation towards debt servicing by the federal government, with April, March, February, and January registering expenditures of $215.20 million, $276.16 million, $283.22 million, and $560.52 million, respectively.

The cumulative expenditure of $2.2 billion within the initial five months of 2024 marks an approximately 96.32 percent increase from the corresponding period in 2023, where debt servicing amounted to $1.12 billion.

FBNQuest Research provides additional insights, indicating that Nigeria’s external debt service payments surged by $1.1 billion to $3.5 billion in 2023, comprising $1.9 billion and $1.6 billion in market and non-market debt payments, respectively.

In response to the financial strain, Minister of Finance and Coordinating Minister of the Economy, Wale Edun, disclosed during an interview on June 2, that Nigeria anticipates financial assistance from the World Bank.

Edun revealed, “In two weeks, the board of the World Bank will consider a $2.25 billion package for Nigeria, which would be virtually free or almost grant funding, very low interest.”

Also, another prospective source of funding for the federal government this year would be the Eurobond, slated for the latter half of 2024. Bloomberg reported the engagement of Citibank NA, Goldman Sachs, and JPMorgan Chase & Co. as advisors for the proposed Eurobond issuance.

Meanwhile, the latest CBN data indicates a significant decline in letters of credit (LCs) during the initial five months of the year compared to the same period in 2023. LCs, pivotal in facilitating international trade, decreased by 63.26 percent to $279 million from $762.03 million in the corresponding period last year.

Despite this decline, the CBN International Payments Data underscores a positive note, with total direct remittances surging to $841 million within the first five months, marking a substantial 28.55 percent increase from the previous year’s corresponding period, accentuating the resilience of Nigeria’s international financial transactions landscape.