As of September 30, 2024, Nigeria’s total public debt has risen to N142.3 trillion, marking a 5.97% increase (N8.02 trillion) from N134.3 trillion in June 2024. This debt, which includes both external and domestic obligations, reflects the significant effect of the naira’s depreciation on external borrowings when converted to local currency.
The Debt Management Office’s data shows that Nigeria’s external debt increased by 0.29% in dollar terms, from $42.90 billion in June to $43.03 billion in September. However, in naira terms, external debt surged by 9.22%, climbing from N63.07 trillion to N68.89 trillion within the quarter. This rise is largely attributed to the naira’s depreciation from N1,470.19/$ in June to N1,601.03/$ by September.
Domestic debt, in contrast, decreased by 5.34% in dollar terms, falling from $48.45 billion in June to $45.87 billion in September. In naira terms, however, it increased by 3.10%, from N71.22 trillion to N73.43 trillion.
The Federal Government’s external debt stood at $38.12 billion in September, a slight increase from $38.01 billion in June. States and the Federal Capital Territory (FCT) held $4.91 billion in external debt, up marginally from $4.89 billion. Regarding domestic debt, the Federal Government’s obligations grew from N66.96 trillion to N69.22 trillion, while states and the FCT saw a small decrease, from N4.27 trillion to N4.21 trillion.
Nigeria’s total public debt in dollar terms decreased by 2.70%, from $91.35 billion in June to $88.89 billion in September. Despite this, the naira-denominated debt burden remains significant, raising concerns about debt sustainability, particularly with exchange rate fluctuations increasing the local currency cost of external debt.
Further analysis reveals that the increase in domestic debt is primarily due to the issuance of Federal Government bonds, which rose by 4.47%, reaching N54.65 trillion in September from N52.32 trillion in June. Bonds now account for 78.95% of total domestic debt, up from 78.13% in the previous quarter.
Nigeria also introduced its first-ever domestic dollar-denominated bond, raising N1.47 trillion. Treasury bills, the second-largest component of domestic debt, saw a slight decline of 0.66%, dropping from N11.81 trillion to N11.73 trillion. Meanwhile, promissory notes, used to settle government obligations like contractor payments, rose by 5.80% to N1.77 trillion in September.
The growing reliance on local borrowing, alongside the increasing issuance of promissory notes and savings bonds, reflects Nigeria’s efforts to manage its fiscal deficit amid foreign exchange constraints and limited access to external loans. Despite these efforts, concerns about the long-term sustainability of the country’s rising debt burden persist, with analysts warning of potential macroeconomic challenges, particularly if debt servicing costs continue to escalate.
Dr. Muda Yusuf, CEO of the Centre for the Promotion of Public Enterprises, cautioned that Nigeria could risk falling into a debt trap if borrowing continues at the current pace, especially given the burden of servicing foreign debt amid fluctuating exchange rates.
In response to the growing debt levels, the Federal Government has reiterated its commitment to boosting revenue generation to fund critical infrastructure and stimulate economic growth. Minister of Budget and Economic Planning, Abubakar Bagudu, highlighted the administration’s progress in addressing decades of underinvestment in key sectors and noted a reduction in the fiscal deficit. He also emphasized the importance of passing key tax reforms to achieve the government’s 18% revenue-to-GDP target.
Bagudu further pointed out that the government’s economic reforms, including the removal of fuel and forex subsidies, have enhanced liquidity at the sub-national level, contributing to increased FAAC allocations to states and local governments. He assured that these reforms would continue to drive the country’s economic growth, with additional focus on sectors like petroleum, solid minerals, and creative industries to generate further national income.
Peoplesmind
