Can Nigeria’s Debt Burden Slacken Down as the Naira-Dollar Crisis Eases Up?

Following a series of borrowing and the uptick in the greenback appreciation against the naira, Nigeria’s debt burden at some points tested N110 trillion last December. It spiked higher in 2024 when the naira-dollar crisis worsened, and the rate dipped N1445 to the dollar officially. 

Then the debt burden stood at 108bn, according to the last DMO update.

But since the naira rally began weeks ago, Nigerians have witnessed their currency firming up against the dollar. And the bounce is not about to stop. 

As of April 16, the official exchange rate is around N1139 to the dollar. It tested N1000/dollar on the black market. 

JP Morgan, one of the leading financial figure crunchers, has even projected the naira will find its real value at N850 per dollar by December.

Earlier, CBN Gov Yemi Cardoso once said the naira was “undervalued”. In Cardoso-speak, 

that meant outcomes of distortions by currency manipulators 

The Coordinating Minister of Economy Wale Edun was even looking on the brighter side when he made his own forecast months ago.

He cited the possibility of capital inflows coming to the rescue, per Turkey’s experience then.

“It is in such direction that the solution to the shortage of liquidity in the foreign exchange 

market is being sought including increase in oil production as a result of better security,” he said.

“It is difficult to predict because the capital markets take all the liquidity of their own. I want to say that the fundamental value of the naira should be somewhere around N700/$1.”

The DMO is yet to release its latest data on Nigeria’s indebtedness as the naira rallies. Those tearing their hear out about the rising debt figures will have to wait some more.

For the supporters of the administration, maybe it’s nothing much to make a song or dance about yet. President Bola Tinubu will keep borrowing. 

He started last year, selling bonds and treasury bills (bills issued with interest when a government is broke), adding up to N7 trillion, besides the $2.25 billion of the $3.3 billion Afrexim Bank will lend his administration. Tinubu is in the process of borrowing more.  

Many analysts say borrowing to fund infrastructure is not a lousy idea.

Problem is how that works in a country that needs about N9tr to fund its 2024 budget deficit, when 43 percent of the entire budget goes to funding recurrent expenditure—for bread and butter.