The 36 States of the country have collectively spent about N139.92 billion on servicing external debt in the first half of 2024.
This is according to an analysis of Federal Account Allocation Committee (FAAC) data from the National Bureau of Statistics, (NBS). The amount spent is an increase of 122% from the N63.06 billion spent in the same period last year.
The data shows that States have moved from spending around N9 billion to over N20 billion monthly, which is more than doubled debt service cost likely due to the naira devaluation.
It said in January 2024, Nigerian States spent N9.88 billion on external-debt servicing, a decrease from N13.67 billion in January 2023. This reduction of 27.7% suggests that some States may have fewer debt service obligations for this month.
Also, the exchange rate traded majorly between N830/$1 and N1,000/$1, which was the lowest range within the period analysed in the report. It appears that the exchange rate factor was yet to be felt in the first month of 2024, as the amount deducted is the same as the average monthly amount deducted for most of 2023.
By February 2024, debt servicing payments soared to N24.53 billion, a 148.2% increase from N9.88 billion in February 2023. This sharp rise, according to experts, highlights the possibility of currency depreciation impacting repayment costs. Such a leap indicates heightened financial pressures on States budgets.
From April to June 2024, the total external-debt servicing costs stabilised at N21.70 billion each month. Compared to the N9.88 billion spent in these same months in 2023, this represents a consistent 119.70% increase each month. In April 2024, there was a reduction from the March peak. The decrease from March may reflect completed debt cycles, yet the continued high levels highlight on-going financial burdens.
This substantial expenditure highlights the growing fiscal pressure on State governments as they grapple with mounting debt obligations.
Kaduna and Lagos States were the most prominent spenders, with Kaduna allocating N23.08 billion and Lagos committing N32.44 billion over the six months.
Kaduna witnessed a nearly threefold increase in its external debt servicing, rising from N9.89 billion, an increase of 133%. Lagos State, another major economic hub, also saw a significant escalation in debt servicing costs. The States external debt service costs surged from N16.88 billion in the first half of 2023 to N32.44 billion in 2024, an increase. These two States paid 40% of the total external debt servicing costs for the period under review in 2024.
The data paints a picture of escalating fiscal pressure on Nigerian States as they continue to service their external debt obligations. Recall that at least three Nigerian States Ekiti, Cross River, and Ogun have expressed concerns over the rising costs of foreign debt service due to severe foreign exchange volatility.
