Nigeria’s Debt Now a Major Cause for Concern

Nigeria’s Debt Management Office (DMO) has recently released a report that reveals some concerning numbers about the country’s debt.

According to the report, Nigeria’s total domestic debt is N65.65 trillion, while its external debt is N56.02 trillion. Altogether, the total debt reaches a staggering N121.67 trillion.

Nairametrics, a financial analysis platform, pointed out that Nigeria’s total GDP was N229.9 trillion at the end of last year, though it only grew by 2.74% in real terms.

This slow growth has pushed Nigeria’s debt-to-GDP ratio above 50% for the first time, raising concerns about the country’s financial health.

The rising debt means Nigeria has less room to take on more loans, especially now when the economy is struggling.

Usually, with a lower debt-to-GDP ratio, Nigeria spends less of its national budget on interest payments, allowing more funds for other important needs.

Nigeria’s Growing Debt Over the Years

Nigeria’s debt has been increasing steadily, particularly during the administration from 2015 to 2023. During this time, the national debt rose from N12.6 trillion to N97.3 trillion, with an average annual increase of N10.6 trillion.

In the first quarter of 2024 alone, N7.71 trillion was added to the debt, pushing it to levels many consider unsustainable.

In an effort to manage the economic challenges, the Tinubu administration recently secured a $500 million loan from the World Bank and plans to obtain another $2.25 billion.

This shows the ongoing struggle to balance economic growth with debt management.

Comparing Nigeria with Other African Economies

Despite these alarming figures, Nigeria has usually had a lower debt-to-GDP ratio compared to other major African economies.

For example, Kenya, Ghana, and South Africa have debt-to-GDP ratios of 70.1%, 84.9%, and 72.2% respectively.

However, Nairametrics notes that while these countries have higher debt-to-GDP ratios, Nigeria has always struggled with a high debt service-to-revenue ratio, making it difficult to meet debt payments.