Lagos, Nigeria — Nigeria’s public debt stock has surged to N134.3 trillion ($91.3 billion) by the end of the second quarter of 2024, marking a significant increase of 10.35% from N121.7 trillion ($91.5 billion) recorded in the previous quarter, as reported by the Debt Management Office (DMO).
An official document from the Ministry of Finance highlights that this increase is primarily driven by the devaluation of the naira, which continues to pose challenges related to exchange rate volatility. Despite the rise in naira terms, the dollar equivalent of Nigeria’s debt has remained relatively stable, underscoring the impact of currency fluctuations on debt valuation.
Debt Composition
The breakdown of Nigeria’s debt portfolio reveals that domestic debt accounts for 53%, amounting to N71.2 trillion ($48.4 billion), while external debt constitutes 47%, totaling N63.1 trillion ($42.9 billion). The growing debt-to-GDP ratio has escalated to over 50%, raising concerns about fiscal sustainability.
Notably, FGN Bonds represent a significant 78% of domestic debt, indicating the government’s heavy reliance on local bond markets for financing. Other instruments in the domestic market include Nigerian Treasury Bills, Savings Bonds, Sukuk, Promissory Notes, and Green Bonds, reflecting a diverse approach to public financing.
On the external front, multilateral loans comprise 50.4% of external debt, with bilateral loans at 13.7% and commercial loans making up 35.9%. This balance between concessional and market-based borrowing highlights Nigeria’s strategy to manage debt obligations while navigating the complexities of global financial markets.
Growing Debt Servicing Costs
Nigeria has faced rising debt servicing costs, with payments surging by 69% in the first half of 2024, totaling N6.04 trillion, compared to N3.58 trillion during the same period in 2023. This increase, largely attributed to naira devaluation for foreign debt repayments, places considerable strain on the Federal Government’s financial resources.
According to the Central Bank of Nigeria (CBN), debt servicing accounted for 50% of total expenditure (N12.17 trillion) and an alarming 162% of the N3.73 trillion total revenue generated in the same period.
Moving Forward
During the recent IMF/World Bank annual meetings, Tobias Adrian, the IMF’s financial counsellor, noted that Nigeria and other frontier markets have remained active in the debt market despite higher financing costs. He highlighted that while access to financing has become more expensive, the overall issuance levels have been encouraging.
Minister of Finance Wale Edun is expected to advocate for increased international support to bolster Nigeria’s economic resilience amid ongoing structural reforms. He emphasized the need for adequate and affordable financing to maximize the benefits of the country’s economic adjustments.
As Nigeria navigates these fiscal challenges, effective debt management and strategic financial policies will be crucial in stabilizing its economy and ensuring sustainable growth.
