By Okafor Joseph Afam
January 22, 2025

Nigeria’s total public debt climbed to N142.3 trillion by September 30, 2024, marking a 5.97% increase (N8.02 trillion) from N134.3 trillion in June 2024.

The surge, driven by exchange rate depreciation and increasing borrowing, encompasses external and domestic debts. Data from the Debt Management Office (DMO) indicates external debt rose slightly in dollar terms from $42.90 billion in June to $43.03 billion in September, a 0.29% increase. However, in naira terms, external debt spiked by 9.22%, from N63.07 trillion to N68.89 trillion, due to the naira’s depreciation from N1,470.19/$ to N1,601.03/$.

Domestic debt in dollar terms fell by 5.34%, from $48.45 billion to $45.87 billion. Nevertheless, in naira terms, it rose by 3.10%, from N71.22 trillion to N73.43 trillion, as the Federal Government relied heavily on domestic borrowing to bridge fiscal gaps.

Debt Composition and Trends

The Federal Government’s external debt increased to $38.12 billion, while states and the FCT accounted for $4.91 billion. For domestic obligations, the Federal Government’s debt rose from N66.96 trillion to N69.22 trillion, while states and the FCT recorded a slight decline, from N4.27 trillion to N4.21 trillion.

The issuance of Federal Government bonds, which account for 78.95% of domestic debt, rose by 4.47% to N54.65 trillion. Notably, Nigeria introduced its first domestic dollar-denominated bond worth $500 million, attracting $900 million in subscriptions, contributing N1.47 trillion to domestic debt.

Promissory notes, primarily used to settle government liabilities, increased by 5.80% to N1.77 trillion, while FGN Sukuk decreased by 9.14% to N992.56 billion. Retail-focused savings bonds grew by 16.11%, reflecting rising interest among individual investors.

Impact of Exchange Rate Depreciation

The naira’s depreciation significantly inflated Nigeria’s external debt in local currency terms. While external debt in dollar terms remained relatively stable, the exchange rate volatility has raised concerns over debt sustainability, with experts warning of mounting repayment challenges.

Economic Analysts Raise Alarm

Economic experts are concerned about the implications of Nigeria’s rising debt. Dr. Muda Yusuf, CEO of the Centre for the Promotion of Public Enterprises, warned of a potential debt trap.

“There is a need to watch the growth rate of public debt. If unchecked, it could lead to macroeconomic instability, especially with the rising burden of debt servicing,” Yusuf cautioned.

He emphasized reducing reliance on foreign debt to mitigate exchange rate risks and prioritizing domestic revenue generation.

Future Debt Projections

Nigeria’s external debt is expected to rise further, with the government raising $2.2 billion through Eurobond auctions to fund the 2024 budget. These bonds, issued with tenors of 6.5 and 10 years, were oversubscribed, reflecting confidence in Nigeria’s capital markets.

Government’s Revenue Generation Strategy

The Federal Government remains committed to addressing fiscal challenges through aggressive revenue generation. Minister of Budget and Economic Planning, Abubakar Bagudu, highlighted ongoing reforms under President Bola Tinubu’s administration, emphasizing the removal of subsidies and innovative financing strategies to fund infrastructure projects.

Bagudu stated, “The Renewed Hope Agenda is yielding results. Our GDP has grown by over 3% for three consecutive quarters, and FAAC allocations to states have increased significantly.”

He called for the passage of tax reform bills to achieve the government’s revenue-to-GDP target of 18%, emphasizing that increased revenue would support higher expenditure for critical sectors.

Conclusion

As Nigeria’s debt profile grows, balancing fiscal responsibility with economic growth remains a key priority. While domestic borrowing and reforms aim to stabilize the economy, experts stress the need for caution to avoid long-term debt sustainability issues.