MON MAY 13 2024-theGBJournal|Based on data released by the Central Bank of Nigeria (CBN), international payments made by the apex rose by 22.7% q/q to USD1.61 billion in Q1-24 (vs Q4-23: USD1.31 billion).
We attribute the significant increase to higher foreign debt service and payments (+18.7% q/q to USD1.12 billion) and direct remittances (+127.0% q/q to USD 282.62 million). On the other hand, payments for letters of credit declined by 15.6% q/q to USD204.47 million (vs Q4-23: USD242.29 million).
Notably, debt service payments accounted for 69.7% of total CBN international payments in Q1-24, explaining the large drawdowns on the FX reserves witnessed in the near-recent past.
We highlight that the higher debt service can be linked to interest payments on commercial (Eurobond), bilateral and multilateral loans.
Looking forward, we expect FG’s external debt service to remain elevated, owing largely to the country’s high external debt, underpinning increased international payments by the CBN.
This is likely to sustain the depletion of the external reserves in the near term, barring any significant inflows from external trade and international borrowings.
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