Nigeria’s debt service payments dropped to $276 million in February 2025, a significant decline from $540 million in January. This reduction is attributed to government efforts in restructuring debt and improving liquidity. Concurrently, Letters of Credit rose, indicating increased trade financing. Despite these improvements, concerns over Nigeria’s debt sustainability linger amid rising total debt obligations.
In February 2025, Nigeria experienced a notable reduction in total debt service payments, which fell to $276 million from $540 million in January. This information was released by the Central Bank of Nigeria (CBN) via its latest data on external sector payments. This decline aligns with the federal government’s ongoing efforts to restructure its debt portfolio, enhance dollar liquidity, and mitigate pressure on the foreign exchange market.
The CBN’s published data indicates the rising strain of debt obligations on Nigeria’s external reserves and overall fiscal sustainability. Analysts attribute the reduced outflows partially to recent debt repayment deferrals and negotiations with multilateral lenders, which may have played a role in minimizing service payments for the month.
In contrast to the decline in debt service payments, Letters of Credit (LCs) experienced a significant increase, reflecting heightened financing for trade transactions. February 2025 saw the issuance of LCs totaling $95.6 million, marking a substantial 48% rise from $64.6 million in January 2025. This uptick in LCs suggests a recovery in import-related activities as businesses adapt to fluctuations in the naira exchange rate and government policies focusing on stabilizing trade financing.
President Bola Tinubu highlighted that during the first 17 months of his administration, Nigeria’s revenue-to-debt service ratio markedly decreased from 97% to 65%. Concurrently, the federal government is actively engaging with global lenders and investors to alleviate Nigeria’s burgeoning debt burden. The CBN’s recent monetary policy aims to stabilize the naira while balancing the nation’s external obligations.
The Debt Management Office (DMO) reported a dramatic 69% increase in Nigeria’s debt servicing payments during the first half of 2024, which reached N6.04 trillion, up from N3.58 trillion in the same timeframe of 2023. This surge is believed to be largely due to naira devaluation for foreign debt repayments, which significantly strains the Federal Government’s financial resources.
Furthermore, the World Bank has voiced concerns regarding the escalating debt service costs affecting developing countries globally. Indermit Gill, the World Bank’s Chief Economist, warned of the outbreak of a widespread financial crisis if immediate and coordinated measures are not implemented. Experts suggest that higher oil revenues, enhanced tax collection, and strategic debt restructuring may help maintain lower debt service payments in the forthcoming months. Nonetheless, apprehensions persist regarding Nigeria’s rising total debt stock and the necessity for robust fiscal discipline to avert excessive borrowing.
In summary, Nigeria’s debt service payments have significantly decreased in February 2025, indicating positive movement towards managing the country’s fiscal challenges. Despite the improved debt service ratio and rising Letters of Credit, concerns about escalating debt obligations remain. Sustaining lower debt service payments while enhancing fiscal discipline will be essential for the nation’s long-term economic stability.
Original Source: nairametrics.com
