By Benson Daniel
Nigeria’s external debt service payments fell by 31.5 per cent to $954.06 million in the first quarter of 2026, reflecting a significant reduction from the $1.39 billion spent servicing external obligations during the corresponding period of 2025.
The latest figures, released by the Debt Management Office, show that the decline amounted to about $437 million compared with the first quarter of last year.
The Q1 2026 debt service bill comprised $308.33 million in principal repayments, $623.22 million in interest payments and $22.50 million in other charges.
Interest payments accounted for the largest portion of the total obligation, highlighting the continued cost of servicing Nigeria’s external borrowing despite the overall decline in quarterly payments.
The reduction in external debt service comes as Nigeria continues to implement measures aimed at improving government revenue, strengthening the country’s fiscal position and managing its debt obligations.
External debt service represents payments made by the government to meet its obligations to foreign creditors, including principal repayments, interest and associated charges.
The latest decline provides some relief for the Federal Government at a time when debt servicing remains one of the major demands on public finances.
Nigeria has faced significant pressure from debt servicing in recent years, particularly as foreign exchange shortages and naira depreciation increased the local currency cost of servicing dollar denominated obligations.
The relative stability of the naira in recent months has also become an important factor in the management of the country’s external debt burden. A stronger naira reduces the amount of domestic currency required to meet dollar denominated obligations when converted into naira.
The reduction in external debt service also comes against the backdrop of Nigeria’s changing debt structure. The Federal Government has increasingly relied on domestic borrowing to finance budget deficits, while continuing to manage existing external obligations.
The DMO’s latest debt data showed that Nigeria’s total public debt stood at N159.35 trillion as of March 31, 2026. The figure represented an increase from the previous quarter, although the stronger naira reduced the naira value of the country’s external debt.
The distinction between external and domestic debt remains important because movements in the exchange rate can significantly influence the naira value of foreign currency obligations.
For the government, lower external debt service payments could create additional fiscal space if the trend is sustained. Resources that would otherwise be allocated to debt obligations could potentially be directed towards infrastructure, healthcare, education and other priority areas.
However, the decline in quarterly payments does not necessarily mean that Nigeria’s overall debt burden has fallen. Debt service payments fluctuate depending on repayment schedules, interest obligations and the timing of specific loans.
Nigeria therefore still faces the challenge of maintaining debt sustainability while financing development and meeting recurrent government expenditure.
The government has continued to emphasise the need to improve domestic revenue mobilisation as a way of reducing dependence on borrowing and strengthening its capacity to service existing obligations.
Higher revenue would allow the government to meet debt obligations without placing excessive pressure on borrowing or cutting spending on essential public services.
The latest figures nevertheless represent a positive development for Nigeria’s external debt position, particularly if lower servicing costs are sustained over subsequent quarters.
Financial analysts and investors will continue to monitor the country’s debt profile, exchange rate performance, revenue generation and borrowing plans as indicators of fiscal sustainability.
For now, the $954.06 million external debt service bill in the first quarter represents a substantial reduction from the previous year’s level and offers some relief to the government’s fiscal position.
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