Recent data from the Central Bank of Nigeria (CBN) reveals a significant increase in international payments, rising by 30.8% year-on-year (y/y) to USD3.31 billion in the first five months of 2024 (5M-24), compared to USD2.53 billion during the same period in 2023 (5M-23). This growth is largely attributed to a substantial rise in foreign debt servicing and payments.
Foreign debt service and payments surged by 96.3% y/y, reaching USD2.19 billion, and accounted for 66.1% of total international payments by the CBN. The increase reflects Nigeria’s commitment to meeting its foreign debt obligations, especially in the face of challenging economic conditions.
Direct remittances also saw a notable increase, growing by 28.5% y/y to USD841.37 million. This rise is underpinned by increased payments for international services by Nigerian residents, indicating a stronger demand for cross-border services despite the economic pressures.
However, payments for letters of credit experienced a sharp decline, falling by 63.3% quarter-on-quarter (q/q) to USD279.99 million, down from USD762.03 million in 5M-23. This reduction can be partly attributed to decreased consumer demand, which has been influenced by high inflationary pressures and the depreciation of the naira, making imports more expensive.
Looking ahead, international payments are expected to remain elevated as the Federal Government (FG) continues to repay maturing debts, particularly those owed to multilateral and bilateral creditors, as well as interest payments. The FG’s focus on fulfilling these obligations will likely sustain the upward trend in international payments.
Additionally, trade imports are anticipated to improve in the short term, driven by the reduced depreciation of the naira and the FG’s 150-day import duty removal on specific agricultural produce. This policy could stimulate demand for certain imports, further contributing to the rise in international payments.
