Nigeria has spent $817.4 million (approximately N1.26 trillion) on debt servicing in the first two months of 2025, according to data from the Central Bank of Nigeria (CBN). This represents a 3.12% decline compared to the $843.73 million spent during the same period in 2024.
The CBN’s International Payments Report reveals that the federal government allocated $540.7 million to debt servicing in January 2025 and $276.7 million in February. This follows a total of $3.81 billion (about N5.9 trillion) spent on debt servicing in 2024.
Budgetary Context
The debt servicing figures come amid Nigeria’s record-breaking N54.99 trillion budget for 2025, dubbed the “Budget of Restoration” by President Bola Tinubu. The budget, which represents a 56.89% increase from the N35.05 trillion budgeted in 2024 (including a supplementary N6.2 trillion), aims to stabilize the economy and drive growth.
Debt servicing accounts for a significant portion of the budget, with N16.3 trillion allocated—a 95% increase from the N8.25 trillion budgeted in 2024. This highlights the growing burden of Nigeria’s debt obligations, even as the government seeks to address economic challenges and implement development projects.
Foreign Trade and Letters of Credit
In addition to debt servicing, the CBN report also sheds light on Nigeria’s foreign trade performance. Letters of Credit (LC) payments, a key indicator of a country’s creditworthiness, fell by 0.55% year-on-year (YoY) to $160 million in the first two months of 2025, down from $160.9 million in the same period of 2024.
LC payments for 2024 stood at $801.06 million, marking a 39% YoY decline from $1.32 billion in 2023. The decline in LC payments reflects broader trends in Nigeria’s import trade volume and economic activity, as well as potential challenges in accessing credit for international transactions.
Economic Implications
The significant allocation to debt servicing underscores the pressure on Nigeria’s fiscal resources, limiting the government’s ability to invest in critical infrastructure and social programs. While the decline in debt servicing costs for the first two months of 2025 offers some relief, the overall debt burden remains a major concern for policymakers and economists.
The reduction in LC payments further highlights the need for measures to boost foreign trade and improve Nigeria’s creditworthiness. As the government implements its 2025 budget, stakeholders are calling for strategies to enhance revenue generation, reduce borrowing, and stimulate economic growth.
Looking Ahead
Nigeria’s economic outlook for 2025 will depend on its ability to manage debt obligations, attract foreign investment, and diversify its revenue sources. The success of the “Budget of Restoration” will hinge on effective implementation and prudent fiscal management, particularly in the face of global economic uncertainties and domestic challenges.
As the country navigates these complexities, the government’s commitment to stabilizing the economy and fostering sustainable growth will be critical in ensuring long-term prosperity for Nigerians.
