How Nigerian States Spent N139.92 Billion on External Debt Servicing in Six Months of 2024

In the first half of 2024, Nigerian states faced an unprecedented financial challenge as they spent a whopping N139.92 billion on servicing external debt.

This amount represents a 122% increase from the previous year, signaling a fiscal strain that could reshape future budgets and economic policies across the nation. What are the details behind these figures and the implications for Nigeria’s economic health?

Escalating costs amid economic challenges

The significant leap in debt servicing costs has come at a time when Nigeria’s economic landscape is marred by currency devaluation and rising borrowing costs. 

Initially, in January, the states collectively managed a lower expense of N9.88 billion compared to N13.67 billion the previous year, a hopeful sign of financial management. 

However, this relief was short-lived as, by February, the debt servicing figures had ballooned to N24.53 billion, marking a 148.2% increase from the preceding year. 

The sharp rise continued through March, with states shelling out N40.41 billion, the highest monthly expenditure in this period, reflecting the severe impact of currency depreciation and maturing debt obligations.

High spenders – Kaduna and Lagos at the forefront

Kaduna and Lagos states led the pack in spending, with Kaduna allocating N23.08 billion and Lagos N32.44 billion over the first six months. Kaduna’s external debt servicing costs jumped nearly threefold, increasing by 133% from N9.89 billion.

Lagos, a key economic center, also faced a steep rise in debt servicing, with costs climbing from N16.88 billion in the first half of 2023 to N32.44 billion in 2024, a 92% increase.

Together, these two states accounted for 40% of the total external debt servicing costs for the period in 2024.

States like Cross River and Bauchi also experienced sharp increases in their debt obligations. Cross River’s costs soared by 256%, from N2.21 billion in 2023 to N7.87 billion in 2024, while Bauchi saw a 93% rise, from N3.28 billion to N6.33 billion.

Similarly, Ogun and Oyo states reported significant hikes in their debt servicing costs, with increases of 173% and 144%, respectively.

Rivers State’s debt servicing also rose significantly by 162%, from N1.76 billion in 2023 to N4.62 billion in 2024. This trend underscores the growing fiscal challenges facing Nigerian states as they manage their external debt.

It’s impact on development and economic stability

The rising debt servicing costs are not just numbers on a balance sheet; they translate into real economic consequences. 

With such a substantial portion of state revenues being diverted to debt repayments, the capacity of these states to fund essential services and developmental projects is severely compromised. 

The escalating costs have prompted calls from several state officials for relief measures, including the suspension of repayments on multilateral loans. 

For instance, the Finance Commissioners of Ekiti and Cross River States have expressed concerns over the crippling impact of these costs on their budgets and have suggested suspending certain deductions to improve cash flow and ensure the funding of critical state projects.

As the states grapple with these financial burdens, they are also actively seeking strategies to mitigate the impact. 

Reducing the overall debt stock has been one approach, with states reducing their total domestic debt by significant percentages in the early months of 2024. However, the effectiveness of these strategies in the face of rising external debt servicing costs remains to be seen.