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The Federal Government overspent its debt service budget by N2.74tn within the first nine months of 2024 despite earning far less revenue than projected.
This is according to the latest third-quarter budget implementation report for 2024 published by the Budget Office of the Federation.
Figures from the document obtained by our correspondent on Friday showed that actual debt service rose to N8.94tn as against a prorated budget of N6.20tn, showing the fiscal pressures confronting the country.
The debt service figure rose by 54 per cent from N5.79tn in the same period of 2023, representing an increase of N3.15tn.
This shows the surging burden of both domestic and foreign debt obligations on the nation’s finances.
The report also showed that the government had projected N25.88tn in revenue for the full year, with N19.41tn expected by the end of September.
However, actual inflows stood at N14.55tn, creating a shortfall of N4.86tn.
On a quarterly basis, the approved benchmark was N6.47tn, but actual collections were inconsistent, with N3.59tn recorded in the first quarter, N4.88tn in the second, and N6.08tn in the third.
The underperformance points to the persistent fragility of the revenue base, particularly oil income, despite improved non-oil receipts.
Debt servicing was the most significant driver of the fiscal imbalance, as domestic debt service amounted to N4.39tn, compared to the N3.97tn budgeted.
Foreign debt service also climbed to N5.46tn against a projection of N2.06tn, an excess of N3.40tn.
This sharp rise reflects the impact of the naira’s depreciation on the cost of servicing dollar-denominated loans.
Together, the two categories pushed the subtotal for debt service to N8.93tn, far above the N6.04tn target.
The sinking fund provision of N167.75bn was not implemented, while interest on ways and Means bond got N3.05bn during the period.
“Total Debt Service in the first three quarters of 2024 stood at N8,934.30bn, higher than the prorated projection of N6,035.47bn in the 2024 Budget by N2,898.82bn (48.03 per cent). Interest on Ways and Means during the period amounted to N3.05bn.
“The sum of N4,386.09bn was used for domestic debt servicing, a difference of N411.31bn (10.35 per cent) from the prorated projection for the period, while N4,548.21bn was spent on external debt servicing during the period under review,” the report read without including the amount budgeted for sinking fund to retire maturing loans.
Analysis of the figures shows that debt service consumed 61 per cent of government revenue in the period under review.
This means that out of every N1 collected by the government, about 61 kobo was spent on debt obligations.
“Debt service-to-revenue ratio remains elevated; fiscal space is constrained, requiring urgent revenue mobilisation and expenditure reprioritisation,” the report read.
The weight of debt was also visible in relation to recurrent expenditure. Out of N14.44tn spent on recurrent costs in the three quarters, debt service alone accounted for 62 per cent, leaving little room for personnel, overheads and other essential obligations.
Nigeria spent 4.1 per cent of its Gross Domestic Product on debt servicing in 2024, according to the Country Focus Report by the African Development Bank.
The figure represents an increase from 3.7 per cent recorded in 2023 and reflects the rising cost of borrowing amid tightening global financial conditions and high domestic interest rates.
According to the report, the increase in debt service obligations was driven by higher interest payments on government securities and fresh borrowings to finance the budget deficit.
It added that the increased expenditure was largely driven by debt servicing costs, which consumed a larger share of public finances despite recent fiscal reforms. Public debt rose sharply to 52.3 per cent of GDP in 2024, up from 41.5 per cent in 2023, largely due to increased financing needs and a weaker naira.
According to the report, “Debt servicing increased to 4.1 per cent of GDP from 3.7 per cent in 2023. The debt servicing-to-federal-government-revenue ratio stood at 76.8 per cent in 2023, rising slightly to 77.5 per cent in 2024.”
The AfDB warned that this trend could limit the government’s ability to invest in critical infrastructure and social development.
Debt service obligations gulp a significant portion of Nigeria’s fiscal resources, the report stated, noting that limited fiscal space is constraining the capacity to meet pressing development priorities.
