Nigeria’s Public Debt Soars to N97.34 Trillion, Raising Concerns

According to the Debt Management Office (DMO), Nigeria’s public debt has surged to a staggering N97.34 trillion ($108.23 billion) as of December 2023.

This figure marks a whopping 146% increase from the previous year’s N39.56 trillion ($95.77 billion).

The primary driver behind this exponential rise is the inclusion of the Central Bank of Nigeria’s (CBN) N20 trillion ($48 billion) in Ways and Means lending to the government, coupled with a significant 60% devaluation of the naira.

Both the federal and state governments bear the weight of this debt, which comprises a mix of domestic and foreign borrowings.

Domestic debt, predominantly denominated in the local currency, the naira, includes various instruments such as FGN securities, treasury bills, and the recent addition of CBN’s Ways and Means.

On the foreign front, Nigeria owes substantial sums to countries like China, France, Germany, and Japan, known as bilateral debts, as well as multilateral institutions like the World Bank, International Monetary Fund (IMF), Islamic Development Bank (IsDB), and the African Development Bank (AfDB).

Domestic Debt Dynamics

The lion’s share of Nigeria’s domestic debt stems from bonds issued to the local market, totaling approximately N59.12 trillion, with states accounting for N5.86 trillion of this sum. FGN securities, including bonds, constitute a significant portion of this debt, representing 40% of Nigeria’s total debt.

The breakdown of domestic debt reveals significant increases across various instruments:

• FGN Bonds: A substantial surge of 169.5% year-over-year, attributed largely to the integration of Ways and Means into FGN Bonds.
• Treasury Bills: A notable uptick of 47.5% year-over-year, reaching N6.5 trillion by December 2023.
• Promissory Notes: A remarkable increase of 150.8% year-over-year, reflecting robust utilization for settling arrears and funding infrastructural projects.
• FGN Sukuk Fund: Witnessed a growth of 47.1% year-over-year, signaling increased funding for infrastructure development.
• FGN Saving Bonds: Marked a 42.4% year-over-year increase, indicating heightened public investment in government-backed savings.

Foreign Debt Dynamics

As of December 2024, Nigeria’s external debt stands at $42.5 billion (N38.22 trillion), with states owing $4.61 billion (N4.15 trillion). Notable increases include:

• Islamic Development Bank: A substantial 70.01% year-over-year surge in lending, reaching $238.17 million.
• Africa Growing Together Fund: An encouraging 28.50% increase year-over-year, reflecting a commitment to sustainable growth on the continent.
• Exim Bank of China: Loans rose by 20.30% year-over-year, highlighting a strengthening financial relationship focused on infrastructure investments.
• International Development Association: Recorded an 11.30% increase in financial support, indicating sustained backing for poverty reduction strategies.
• International Fund For Agricultural Development: Demonstrated a 9.80% rise in lending, emphasizing continued support for agricultural development.

Analysis and Implications

Nigeria’s total public debt, amounting to about N97.34 trillion, represents approximately 42% of the country’s gross domestic product (GDP). While this is within international limits, it surpasses Nigeria’s self-imposed 40% threshold, raising concerns.

Moreover, the majority of Nigeria’s debts are denominated in the local currency, indicating a moderate level of control over domestic debt management. However, the substantial portion of foreign currency debt, combined with dwindling external reserves, poses challenges in servicing these obligations.

Given the current state of government revenues and the devaluation of the naira, Nigeria faces limitations in acquiring further foreign debts.

However, to address budget deficits, the government may resort to issuing more FGN securities, albeit with caution to avoid exacerbating the debt burden.