Nigerian states spend N139.92 billion servicing exterior debt in first six months of 2024
Story highlights
- Nigerian states have skilled a 122% enhance in exterior debt servicing within the first six months of 2024, reaching N139.92 billion in comparison with N63.06 billion in 2023.
- This surge displays heightened borrowing prices amid forex depreciation, considerably impacting subnational expenditure and financial well being.
- Kaduna and Lagos states pay the best exterior debt servicing prices, as some states search aid from rising debt compensation prices.
Nigerian states have collectively spent about N139.92 billion on servicing exterior debt within the first half of 2024.
That is in line with an evaluation of Federal Account Allocation Committee (FAAC) information from the Nationwide Bureau of Statistics (NBS).
The quantity spent is a rise of 122% from the N63.06 billion spent in the identical interval final 12 months.
What the information says
The info reveals that states have moved from spending round N9 billion to over N20 billion month-to-month, which is greater than doubled debt service value doubtless because of the naira devaluation.
- In January 2024, Nigerian states spent N9.88 billion on exterior debt servicing, a lower from N13.67 billion in January 2023. This discount of 27.7% means that some states could have fewer debt service obligations for this month. Additionally, the trade fee traded majorly between N830/$1 and N1,000/$1, which was the bottom vary inside the interval analyzed on this report. It seems that the trade fee issue was but to be felt within the first month of 2024, as the quantity deducted is similar as the typical month-to-month quantity deducted for many of 2023.
- By February 2024, debt servicing funds soared to N24.53 billion, a 148.2% enhance from N9.88 billion in February 2023. This sharp rise highlights the potential for forex depreciation impacting compensation prices. Such a leap signifies heightened {financial} pressures on state budgets.
- March 2024 noticed the best expenditure on debt servicing at N40.41 billion, marking a 309.1% enhance in comparison with March 2023’s N9.88 billion. This dramatic escalation may very well be attributed to increased maturing debt obligations on the finish of 1 / 4.
- From April to June 2024, the full exterior debt servicing prices stabilized at N21.70 billion every month. In comparison with the N9.88 billion spent in these similar months in 2023, this represents a constant 119.70% enhance every month. In April 2024, there was a discount from the March peak. The lower from March could mirror accomplished debt cycles, but the continued excessive ranges spotlight ongoing {financial} burdens.
This substantial expenditure highlights the rising fiscal strain on state governments as they grapple with mounting debt obligations.
Kaduna and Lagos Lead in exterior debt servicing bills
- Kaduna and Lagos states have been probably the most distinguished spenders, with Kaduna allocating N23.08 billion and Lagos committing N32.44 billion over the six months. Kaduna witnessed an almost threefold enhance in its exterior debt servicing, rising from N9.89 billion, a rise of 133%.
- Lagos State, one other main {economic} hub, additionally noticed a big escalation in debt servicing prices. The state’s exterior debt service prices surged from N16.88 billion within the first half of 2023 to N32.44 billion in 2024, a rise of 92%.
- These two states paid 40% of the full exterior debt servicing prices for the interval beneath evaluate in 2024.
- Equally, Cross River and Bauchi states skilled appreciable will increase of their debt servicing obligations. Cross River’s debt servicing prices escalated dramatically from N2.21 billion in 2023 to N7.87 billion in 2024, rising by 256%. Bauchi State additionally noticed its debt servicing bills surge from N3.28 billion to N6.33 billion throughout the identical interval, an increase of about 93%.
- Ogun State additionally noticed a marked enhance in its exterior debt servicing prices, with expenditures rising from N1.57 billion in 2023 to N4.29 billion in 2024, reflecting a 173% enhance. Equally, Oyo State’s debt servicing prices rose considerably, from N2.61 billion in 2023 to N6.36 billion in 2024, marking a 144% enhance.
- Rivers State additionally witnessed a big enhance in its exterior debt servicing prices, rising from N1.76 billion in 2023 to N4.62 billion in 2024, a 162% enhance.
The info paints an image of escalating fiscal strain on Nigerian states as they proceed to service their exterior debt obligations.
What it is best to know
Nairametrics earlier reported that no less than three Nigerian states Ekiti, Cross River, and Ogun have expressed issues over the rising prices of international debt service attributable to extreme international trade volatility.
One of many states referred to as for a attainable suspension of the debt compensation for multilateral loans to ease their money circulation.
The Commissioner of Finance of Ekiti State famous that the {financial} pressure attributable to rising trade charges has escalated the prices of international debt repayments. He additionally famous that important deductions from the statutory income for financial savings have drastically decreased state balances.
Equally, the Commissioner of Finance of Cross River State expressed fears concerning the state’s capacity to fund capital initiatives attributable to decreased revenues.
He steered a suspension of sure deductions, together with these for multilateral mortgage repayments, particularly when distributable income is low.
As states battle with rising debt servicing prices, they’ve been working to lower their debt inventory. In Q1 2024, states’ whole home debt dropped by 31% from N5.86 trillion in This fall 2023 to N4.07 trillion and by 26% from N5.48 trillion in Q1 2023.
Nevertheless, the marked enhance in exterior debt servicing raises issues concerning the fiscal well being of Nigerian states, as rising debt prices might divert funds from vital sectors like well being and training.
