Nigeria’s debt service obligations hit ₦696.27bn in January 2025- CBN

Nigeria's debt service obligations have hit ₦696.27 billion naira, while total retained revenue amounted to only ₦483.47 billion naira in January 2025, according to data from the Central Bank of Nigeria's Monthly Economic report. Femi Oladehin, Partner at Argentil Capital Partners, discussed this issue and the key outcomes from the IMF/World Bank spring meetings in a recent interview on CNBC Africa. Oladehin emphasized the positive reception of Nigeria's economic reforms by international institutions, highlighting the country's recent ratings upgrade from B minus to B and a stable outlook. The economic team's focus on reform-driven policies has garnered praise, with an emphasis on fiscal responsibility, exchange rate flexibility, and subsidy removal. Despite these reforms, challenges persist, with inflation remaining high and borrowing costs elevated. The revenue tilt for the government continues to be a significant challenge, especially with crude oil prices hovering around $60-$65 per barrel. Nigeria's budgeted oil price of $74-$75 per barrel for its fiscal year is facing pressure, leading to constrained revenues and high debt service requirements due to the prevailing interest rate environment. While the government has shown fiscal discipline, the need to rebuild economic buffers to withstand potential shocks remains crucial, as reserves have only recently started to increase. Regarding debt service obligations, which accounted for 144% of government earnings in January 2025, Oladehin cautioned against overreacting to one-month figures. He stressed the importance of focusing on the government's borrowing plan and ensuring that debt is used to fund infrastructure projects that spur economic growth and enhance the business environment. Looking ahead, Oladehin expressed optimism about investor sentiment and market robustness, citing corporate profitability improvements and a liquidity overhang. With the government planning to raise 1.2 trillion naira from the domestic bond market, coupled with positive market indicators, he expects increased investments from both local and international investors. In conclusion, Nigeria's economic reforms have received positive feedback from international financial institutions, with a focus on sustainable policies and fiscal discipline. While challenges persist, particularly in managing debt service obligations and revenue generation, the country's progress in rebuilding economic buffers and attracting investments bodes well for its economic outlook in the near term.