The Federal Government’s expenditure on debt financing rose to $854.36 million in May alone, according to data released by the Central Bank of Nigeria (CBN).
This figure marks the highest single-month spending on debt servicing recorded in the past year, raising alarms about the sustainability of the country’s borrowing practices.
The data from the CBN’s International Payments Report revealed a sharp escalation in debt servicing expenditure, with May’s figure representing a significant surge compared to previous months.
The $854.36 million spent in May is nearly four times higher than the amount disbursed for debt servicing in April and reflects a 286.49% increase from the same period in 2023.
The exponential rise in debt financing expenditure comes despite the Nigerian government’s claims of shifting its borrowing focus towards the domestic market.
Such a substantial outlay on debt servicing raises questions about the government’s ability to manage its fiscal responsibilities while maintaining economic stability and growth.
Analysts have voiced concerns over Nigeria’s increasing reliance on external borrowing, which poses risks to the country’s long-term financial health.
Fitch Ratings previously projected Nigeria’s external debt servicing to escalate to $5.2 billion next year, highlighting the urgency for prudent financial management and strategic debt reduction measures.
The Federal Government’s mounting debt burden has prompted calls for transparency and accountability in fiscal policies.
Stakeholders emphasize the need for effective debt management strategies to mitigate the adverse effects of escalating debt levels on the economy.
Despite assurances from government officials regarding plans to raise additional funds from concessional lenders and international financial institutions, including the World Bank, concerns persist over the sustainability of Nigeria’s borrowing trajectory.
The recent announcement by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, regarding an impending $2.25 billion World Bank package underscores the government’s reliance on external financing to meet its financial obligations.
As Nigeria grapples with the economic challenges exacerbated by the COVID-19 pandemic and fluctuating global oil prices, achieving fiscal stability remains paramount.
Efforts to diversify revenue sources, enhance transparency in public expenditure, and implement prudent debt management practices are crucial for safeguarding Nigeria’s financial future and fostering sustainable economic growth.
