Nigeria’s total public debt has surged to N121.67 trillion, marking an increase of N24.33 trillion or 24.99% in just three months, according to the Debt Management Office (DMO).
As of December 2023, the country’s debt stood at N97.34 trillion ($108.23 billion). The DMO’s recent statement reveals that the new debt figure encompasses the total domestic and external debts of the Federal Government of Nigeria, the 36 state governments, and the Federal Capital Territory between January and March 2024.
The report states, “Nigeria’s total public debt stood at N121.67 trillion ($91.46 billion) as of March 31, 2024. The comparative figure for December 31, 2023, was N97.34 trillion ($108.23 billion). Total Domestic Debt was N65.65 trillion ($46.29 billion) while total external debt was N56.02 trillion ($42.12 billion).”
The significant increase is largely attributed to the depreciation of the naira, which reduced the total debt in dollar terms by $16.77 billion or 18.34%. The DMO used an official exchange rate of N1,330/$ to convert external debts to naira, compared to N899.39/$ in December 2023.
Excluding the naira’s exchange rate impact, domestic debt rose sharply from N59.12 trillion on December 31, 2023, to N65.65 trillion by March 31, 2024. The 36 states and the Federal Capital Territory also hold an external debt of $3.1 billion and domestic debt of N4.068 trillion.
The debt increase is further driven by new borrowings to partly finance the 2024 budget deficit and the securitization of a portion of the N7.3 trillion Ways and Means advances at the Central Bank of Nigeria.
“Excluding naira exchange rate movements in Q1 2024, only the Domestic Debt component of Total Public Debt grew from N59.12 trillion on December 31, 2023, to N65.65 trillion on March 31, 2024,” the DMO statement added. “The increase was due to new borrowing to part-finance the 2024 Budget deficit and securitization of a portion of the N7.3 trillion Ways and Means Advances at the Central Bank of Nigeria.”
Despite the continuous borrowing as stipulated in the 2024 Appropriation Act, the government anticipates improvements in revenue to enhance debt sustainability.
Recent reports from The PUNCH indicate that the government has borrowed a total of $4.95 billion from the World Bank in the past year, amidst concerns over rising debt servicing costs. Additionally, the government is awaiting loan approvals worth $4.4 billion from the World Bank and the African Development Bank over the next year.
An analysis shows that the World Bank approved funding for six projects: $750 million for power sector financing, $500 million for women empowerment, $700 million for girl child education, $750 million for renewable energy solutions, $750 million for resource mobilization reforms, and $1.5 billion for economic stabilization reforms.
President Bola Tinubu has expressed his administration’s commitment to breaking the cycle of reliance on borrowing for public spending, which places a heavy burden on government revenues due to debt servicing. He emphasized, “Can we continue to service external debts with 90% of our revenue? It is a path to destruction. It is not sustainable. We must make the very difficult changes necessary for our country to wake up from slumber and be respected among the world’s great nations.”
Finance Minister and Coordinating Minister of the Economy, Wale Edun, has also been vocal against excessive borrowing, stressing the need for the country to stabilize its economy through reduced borrowing. However, it remains to be seen if this promise will be upheld.
In his document titled, “2024: The Hard Road Ahead,” Bismarck Rewane, CEO of Financial Derivatives Company, highlighted the unsustainable nature of Nigeria’s debt, which consumed 99% of its revenue in the first half of 2023. He warned that high-interest rates in 2024 would exacerbate the debt burden and emphasized the importance of efficiently using borrowed funds to ensure debt sustainability. Rewane also noted that a 1% increase in public debt could negatively impact GDP by 16.7%, predicting that if public debt rises to $114.3 billion, real GDP growth would fall to 2.12%.
Despite the high debt burden, Rewane believes Nigeria is likely to withstand the economic shock.
