Nigeria’s public debt surges to N142.3 trillion in Q3 2024: A Growing Fiscal Concern

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Nigeria’s public debt surges to N142.3 trillion in Q3 2024: A Growing Fiscal Concern

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Nigeria’s total public debt climbed to a staggering N142.3 trillion as of September 30, 2024, reflecting a 5.97% increase (N8.02 trillion) from N134.3 trillion recorded in June 2024. The Debt Management Office (DMO) revealed these figures in its latest report, underscoring the country’s mounting fiscal challenges.

This significant rise highlights the dual pressures of increasing domestic borrowing and the impact of a depreciating naira on external debt when converted to local currency.

External Debt: Currency Depreciation Drives Naira-Equivalent Surge

In dollar terms, Nigeria’s external debt grew marginally by 0.29%, from $42.90 billion in June to $43.03 billion in September. However, the naira equivalent of external debt ballooned by 9.22%, rising from N63.07 trillion to N68.89 trillion within the same period.

The exchange rate played a pivotal role in this surge, with the naira weakening from N1,470.19/$ in June to N1,601.03/$ by the end of September. This sharp depreciation magnifies the burden of external debt repayments, compounding fiscal vulnerabilities in a country already grappling with revenue constraints.

Domestic Debt: The Federal Government Leads the Borrowing Spree

Domestic debt also saw mixed trends, with its dollar value declining by 5.34% from $48.45 billion in June to $45.87 billion in September. However, in naira terms, domestic debt rose by 3.10%, from N71.22 trillion to N73.43 trillion.

The Federal Government drove much of this increase, with its domestic debt rising from N66.96 trillion in June to N69.22 trillion in September. By contrast, domestic debt owed by states and the Federal Capital Territory (FCT) declined slightly from N4.27 trillion to N4.21 trillion.

Federal government bonds, the largest component of domestic debt, jumped by 4.47% to N54.65 trillion, constituting 78.95% of total domestic debt. The issuance of naira-denominated bonds and the introduction of Nigeria’s first domestic dollar-denominated bond, which added N1.47 trillion to the debt stock, were key contributors.

Other Domestic Debt Instruments: Mixed Performance

Treasury Bills: These declined by 0.66% to N11.73 trillion, reflecting efforts to reduce short-term debt exposure and mitigate rollover risks.

Promissory Notes: Increased by 5.80% to N1.77 trillion, indicating a continued reliance on these instruments to settle government obligations.

Sukuk Bonds: dropped by 9.14% to N992.56 billion, reflecting reduced infrastructure-focused borrowing.

Savings Bonds: Grew significantly by 16.11% to N64.09 billion, driven by rising retail investor participation.

Green Bonds: Remained unchanged at N15 billion, contributing a negligible 0.02% to domestic debt.

External Debt Breakdown: A Stable Yet Concerning Profile

Nigeria’s external debt stock of $43.03 billion showed a relatively stable composition with minimal fluctuations. However, the sustainability of these debts remains questionable given the naira’s continued depreciation.

Multilateral Debt: increased by 0.67% to $21.77 billion, driven by additional disbursements from institutions like the World Bank.

Bilateral Debt: Declined slightly by 1.33% to $5.81 billion, with reductions in loans from China, Nigeria’s largest bilateral lender.

Commercial Loans: Remained unchanged at $15.12 billion, dominated by Eurobonds.

Nigeria’s Eurobond Return and the Debt Sustainability Question

In December 2024, Nigeria raised $2.2 billion through Eurobond issuance, marking a significant return to international capital markets. Despite total subscriptions exceeding $9 billion, only $2.2 billion was allotted, comprising a $700 million bond at 9.625% for 6.5 years and a $1.5 billion bond at 10.375% for 10 years. The proceeds are expected to fund the 2024 budget amidst revenue shortfalls and ballooning public spending.

However, the addition of Eurobond proceeds in Q4 2024 is expected to further increase external debt, raising critical concerns about the sustainability of Nigeria’s debt profile. With total public debt nearing unsustainable levels, the government’s growing reliance on domestic and external borrowing, coupled with a weakening naira, presents significant risks to fiscal stability.

Implications and Recommendations

Nigeria’s escalating debt profile, exacerbated by currency depreciation and a growing appetite for borrowing, raises alarms about long-term economic stability. Key questions remain about the government’s capacity to service its debts without compromising essential public services and economic growth.

To mitigate these challenges, the government must:

Strengthen Revenue Mobilization: Diversify revenue sources and reduce dependence on oil exports.

Enhance Debt Transparency: Provide detailed plans for debt servicing and repayment.

Control Borrowing: Focus on borrowing for projects with clear economic returns rather than recurrent expenditures.

Stabilize the Exchange Rate: Implement monetary and fiscal policies to curb naira depreciation.

Without decisive action, Nigeria risks plunging deeper into a debt trap, threatening its economic future and the well-being of its citizens.

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Reference

Nigeria’s public debt surges to N142.3 trillion in Q3 2024: A Growing Fiscal Concern

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