Debt Servicing Swallowed N696 Billion in January, CBN Reports – Intl. Ed.

In January 2025, the financial standing of the Federal Government deteriorated significantly, with debt service costs surpassing the overall retained income by a considerable gap, according to the Central Bank of Nigeria’s January 2025 Monthly Economic Report.

The report states that the Federal Government's debt servicing costs for the month were N696.27 billion, whereas the total retained revenue was just N483.47 billion. This means that servicing the debt alone used up approximately 144 percent of the government’s income.

This advancement underscores the increasing debt load and shrinking financial room for maneuver confronting Nigeria, Africa's biggest economy.

Even though there were minor enhancements in certain income areas, the retained earnings remained insufficient to handle necessary debt payments, highlighting the government’s ongoing dependence on loans to fulfill essential duties.

Further examination of the report showed that retained earnings in January 2025 saw a slight 0.89 percent rise from the N479.21 billion reported in the same period of 2024.

The report stated, "During the review period, FGN's retained income decreased primarily due to reduced inflows from Federal Government Independent Revenue and a smaller portion of exchange gains attributed to FGN."

At ₦0.48 trillion, the provisional federal government retained revenue stood at 69.19 percent and 70.40 percent lower than the amounts recorded in the previous period and the monthly target, respectively.

Although this indicates stagnation instead of progress, the slight increase was nullified by substantial debt payments.

The retained revenue components indicated that the Federation Account provided N167.69 billion, whereas the VAT Pool Account generated N90.73 billion.

A crucial element known as Independent Revenue, anticipated to showcase the effectiveness of various government bodies including Ministries, Departments, and Agencies, dropped significantly to ₦32.28 billion. This marks an enormous 66.14% decrease compared to the ₦95.34 billion reported in January 2024.

Exchange gains offered a reprieve since revenues in this area increased by 35.6%, jumping from ₦138.67 billion in January 2024 to ₦188.09 billion in January 2025.

Excess crude oil sale revenues and the 'Others' category did not contribute anything to the retained revenue for January, contrary to what was projected in the budget. This has exacerbated worries about the strength of Nigeria's revenue generation system.

The month-to-month comparison revealed an even more dire situation. Retained revenue in December 2024 was N1.57 trillion, indicating that the figure of N483.47 billion recorded in January represented a significant 69.19 percent drop in governmental income over just one month.

In December 2024, debt servicing comprised just 44.37 percent of the total revenue.

By January 2025, this percentage had surged to 144 percent, underscoring the government’s increasing susceptibility to income deficits and indicating a perilous course towards a debt crisis.

On the contrary, debt servicing commitments stayed fairly consistent throughout those months. The debt service spending of ₦696.27 billion in January 2025 was merely 7.88 percent less than the ₦755.86 billion noted in January 2024.

Nevertheless, since there wasn't significant improvement in revenue generation, the debt-to-revenue ratio deteriorated markedly. This highlights the government’s growing incapacity to fulfill financial responsibilities without relying on additional loans.

Previously, the International Monetary Fund cautioned that Nigeria is encountering heightened budgetary strain due to declining global oil prices, exacerbating the nation’s mounting fiscal difficulties.

Kristalina Georgieva, the IMF’s Managing Director, disclosed this information during a press conference about the organization’s 2025 Global Policy Agenda held in Washington, D.C., recently. She mentioned that the decline in oil prices has put nations such as Nigeria, which rely heavily on oil production, into a challenging situation.

Oil-producing countries such as Nigeria are experiencing fiscal strain because of reduced oil prices," stated Georgieva. "Conversely, nations that import oil might see advantages. However, overall, the deceleration in global economic expansion will impact all parties involved, and we have consequently revised downward our forecast for the continent's growth.

Georgieva urged Nigeria and other African nations to rapidly increase their efforts in raising domestic revenues.

She encouraged governments to cease making justifications for inaction and utilize technology to broaden their tax base, decrease evasion, and reinforce fiscal reserves.

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