By Anastasia John E.
The Federal Government of Nigeria allocated a staggering N8.94 trillion to debt servicing in the first nine months of 2024, representing 47% of total government expenditure for the period, according to data from the Central Bank of Nigeria (CBN). This marks a significant 56.8% increase from the N5.69 trillion spent on debt servicing during the same timeframe in 2023.
The escalating cost of debt servicing underscores the mounting pressure of Nigeria’s debt obligations amid growing fiscal deficits. Notably, the debt-to-revenue ratio has deteriorated, with debt servicing consuming 147% of retained revenue in 2024, up from 132% in 2023.
During this period, the government collected N6.08 trillion in revenue, overshadowed by the debt servicing costs, indicating a greater dependency on borrowing for budgetary needs and debt obligations.
Expenditure Breakdown
Recurrent expenditure rose sharply to N15.11 trillion, a 45.6% increase from N10.38 trillion in the same period of 2023. Key components include:
- Personnel Costs: Up by 20% to N3.59 trillion from N2.99 trillion.
- Overhead Costs: Increased by 51.4% to N892.85 billion from N589.63 billion.
- Transfers: More than doubled, soaring by 83.8% to N1.31 trillion from N711.36 billion.
- Pensions and Gratuities: Slightly decreased from N339.66 billion in 2023 to N336.61 billion in 2024.
Capital expenditure also rose by 20.8% to N3.86 trillion, compared to N3.19 trillion in 2023. However, the modest growth in capital spending compared to recurrent expenditure highlights how rising debt obligations are limiting investments in crucial infrastructure.
Fiscal Deficit Expansion
The fiscal deficit widened by 39.3%, escalating from N9.25 trillion in 2023 to N12.89 trillion in 2024. This growing deficit indicates a persistent gap between government revenue and expenditure, exacerbated by increasing debt servicing costs.
Government’s Stance and Economic Outlook
In his Independence Anniversary address, President Bola Tinubu claimed that his administration had reduced the debt service-to-revenue ratio from 97% to 68%. He emphasized ending the dependence on borrowing for public spending, stating that the country could not sustain spending 90% of revenue on debt servicing. However, the recent CBN data contradicts this assertion, showing a worsening debt service ratio of 147%.
Tileriwa Adebayo, CEO of The CFG Advisory, has expressed concern over the fiscal policies of President Tinubu’s administration. He highlighted the alarming increase in debt servicing costs, projected to rise from N8 trillion in 2024 to N16 trillion in 2025, labeling it a ‘red flag.’ Adebayo urged the government to restructure its financial strategy, consider asset sales, and explore alternative financing options to reduce reliance on borrowing.
The increasing debt servicing burden, expanding fiscal deficit, and diminishing fiscal space raise significant concerns about Nigeria’s fiscal sustainability and economic future.
