According to the Debt Management Office (DMO), Nigeria’s public debt profile increased from N134.3 trillion in June 2024 to N142.32 trillion on September 30, 2024.
This most recent number indicates that, when N142.32 trillion is divided by the estimated 216.78 million people living in Nigeria, each Nigerian may be in debt to the tune of around N656,514 per capita.
However, the DMO claimed that the debt stock included both domestic and foreign borrowings, implying that the external debt was converted to Naira using the Central Bank of Nigeria’s (CBN) official exchange rate of N1,601.028/$1 as of September 30, 2024, as opposed to N1,470.19/$1 as of June 30, 2024.
Nigeria’s national debt increased from $91.35 billion in June 2024 to $88.89 billion in September 2024, indicating a larger debt profile brought on by the naira’s depreciation versus the dollar.
While domestic debt increased from N71.22 trillion to N73.43 trillion, external debt increased from N63.07 trillion to N68.89 trillion. Given that the federal government issued $2.2 billion Eurobonds in December of last year, it is anticipated to increase even more by the fourth quarter.
According to DMO data, the Federal Government of Nigeria (FGN) owes N69.22 trillion, while the 36 states and Federal Capital Territory (FCT) owe N4.21 trillion of the domestic debt stock.
The FGN domestic debt stock rose from N66.96 trillion in June 2024 to N69.22 trillion in September 2024, according to a quick glance at the debt stock. This increase may have been caused by a rise in the issuing of FGN bonds and other fixed-income securities.
Nonetheless, throughout the review period, the states’ and FCT’s debt stock decreased from N4.27 trillion to N4.21 trillion.
An additional analysis of the DMO’s statistics reveals that the weight of domestic debt is 51.60 percent more than that of external debt, which is 48.40 percent.
Only Cross Rivers State’s domestic debt stock was as of June 30, 2024, according to the DMO; all other states and the Federal Capital Territory were as of September 2024.
Concerns over Nigeria’s debt sustainability have been raised by the country’s rising debt profile, particularly in light of the exchange rate volatility that has increased the cost of external obligations in local currency.
The federal government’s increasing reliance on local markets to cover budget shortfalls in the face of limited foreign exchange reserves is highlighted by the overall rise in domestic debt.
Given that the government is requesting N15.81 trillion for debt servicing in the 2024 budget estimates, economic observers are concerned about the risk that Nigerians face as a result of their debt.
According to Economy Associates CEO Ayo Teriba, “borrowing is not criminal because the country faces serious infrastructure challenges, but borrowing to pay interest on outstanding debts is wrong.”
The Tinubu-led administration’s propensity for taking on new loans while the nation struggles to pay off its debts and its crumbling infrastructure is the main source of criticism among Nigerians.
Notwithstanding these enormous debts, politicians continue to lead extravagant lives, prioritizing long convoys over fundamental amenities like reasonably priced primary healthcare, well-maintained roads, and reasonably priced housing.
Financial analysts have frequently expressed doubts about the sustainability of the growing debt levels, especially as interest payments take up a sizable amount of government revenue.
According to a World Bank analysis last year, Nigeria spent more than 96% of its 2022 revenue on debt service, and the ongoing fiscal deficit has made the nation’s public debt stock worse.
Economic observers, aside from the World Bank, maintain that Nigeria’s desire for Eurobonds exposes the country to greater currency concerns brought on by the unstable exchange rate.
Since the Eurobond is a commercial loan, we should be concerned about the interest rate we pay on it. Additionally, the interest rates on Treasury bills and Federal Government bonds are currently excessively high. Muda Yusuf, the former director-general of the Lagos Chamber of Commerce and Industry (LCCI) and the CEO of the Center for the Promotion of Private Enterprise (CPPE), stated that these factors put a great deal of strain on government finances from the perspective of debt payment.
Additionally, Yusuf stated that it is imperative that Nigeria’s exposure to Eurobonds be significantly decreased moving forward.
“I think we need to be more careful about how quickly we take on these debts because more debt will lead to more debt service obligations,” he emphasized.
The naira’s depreciation from N1,470.19/$ to N1,601.03/$ between June and September 2024 made the burden of external debt in local currency much worse.
President Bola Tinubu’s 2025 budget proposal, which is presently being examined by the National Assembly, calls for a N13.08 trillion deficit and N15.81 trillion in debt servicing.
The President sent the N47.90 trillion 2025 budget to the National Assembly in December 2024 for approval.
The proposed budget is projected to generate N34.82 trillion in income, assume 2.06 million barrels of crude oil per day (mbpd), have a 15% inflation rate, and have a N1,500 naira-to-dollar exchange rate.
