Nigeria’s debt service payments fell from $540 million in January to $276 million in February 2025, as reported by the CBN. This decline is part of efforts to restructure debt and improve dollar liquidity. However, Letters of Credit surged to $95.6 million, indicating a recovery in trade activities. Despite improvement in the revenue-to-debt service ratio, the rising total debt remains a concern, emphasizing the need for fiscal discipline.
In February 2025, Nigeria’s debt service payments experienced a notable decline, reducing from $540 million in January to $276 million. This information was released by the Central Bank of Nigeria (CBN) and reflects ongoing initiatives by the federal government to restructure its debt portfolio, enhance dollar liquidity, and alleviate pressure on the foreign exchange market. The CBN’s published figures underscore the growing burden of debt obligations on Nigeria’s external reserves and fiscal sustainability.
Although debt service payments fell, there was a significant increase in Letters of Credit (LCs), which soared to $95.6 million in February 2025, marking a 48% rise from $64.6 million in January. This increase in LCs points to a recovery in trade transactions, with businesses adapting to the volatile naira exchange rate and government measures focusing on stabilizing trade financing.
President Bola Tinubu noted that the revenue-to-debt service ratio for Nigeria has improved from 97% to 65% during the first 17 months of his administration. The federal government remains engaged with international lenders and investors to alleviate the nation’s escalating debt burden. In recent months, the CBN has adopted a monetary policy strategy to stabilize the naira while managing external obligations effectively.
The Debt Management Office (DMO) reported that Nigeria’s debt servicing payments surged by 69% in the first half of 2024, reaching N6.04 trillion, compared to N3.58 trillion in the same period of 2023. This sharp increase can primarily be attributed to the effects of naira devaluation on foreign debt repayments, intensifying financial challenges for the Federal Government as a substantial share of its resources are directed toward debt service.
The World Bank has expressed concern about rising debt service costs affecting developing nations, with Indermit Gill, Chief Economist and Senior Vice President, warning of a potential financial crisis without prompt action. Experts advocate for a blend of increased oil revenues, enhanced tax collection, and strategic debt restructuring to maintain reduced debt service payments in the future, albeit cautioning about the rising total debt stock and the necessity for stricter fiscal discipline to mitigate excessive borrowing.
In summary, Nigeria’s debt service payments saw a substantial decrease in February 2025, indicating the country’s strategic efforts to manage its debt obligations amidst significant financial challenges. Concurrently, a rise in Letters of Credit suggests a rebound in trade financing. Continued governmental engagement with international investors and a focus on monetary policies signal a proactive approach towards fiscal sustainability. However, experts alert that the overall growing debt stock necessitates greater fiscal discipline to avoid an escalation of borrowing.
Original Source: nairametrics.com