Nigeria’s total public debt surged to a staggering N142.3 trillion as of September 30, 2024, marking a 5.97% increase (N8.02 trillion) from N134.3 trillion recorded in June 2024. This rise, attributed to increased borrowing and exchange rate depreciation, underscores the mounting fiscal challenges facing the nation.
Data released by the Debt Management Office (DMO) reveals that external debt in dollar terms grew marginally by 0.29%, increasing from $42.90 billion in June to $43.03 billion in September. However, due to the naira’s depreciation from N1,470.19/$ to N1,601.03/$ within the same period, the naira-equivalent of external debt soared by 9.22%, rising from N63.07 trillion to N68.89 trillion.
Conversely, domestic debt in dollar terms declined by 5.34%, falling from $48.45 billion in June to $45.87 billion in September. Despite this, domestic debt in naira terms rose by 3.10%, increasing from N71.22 trillion to N73.43 trillion during the quarter. The Federal Government’s domestic debt accounted for N69.22 trillion, up from N66.96 trillion, while states and the Federal Capital Territory (FCT) saw a minor reduction from N4.27 trillion to N4.21 trillion.
Breakdown of Nigeria’s Debt Portfolio
Nigeria’s total public debt in dollar terms experienced a 2.70% decline, dropping from $91.35 billion in June to $88.89 billion in September. However, the debt burden in naira terms continues to escalate due to exchange rate fluctuations, raising sustainability concerns.
The Federal Government’s reliance on domestic borrowing remains evident, driven by increased issuance of bonds and promissory notes. Federal Government bonds, which form the largest component of domestic debt, grew by 4.47%, rising from N52.32 trillion in June to N54.65 trillion in September. These bonds now constitute 78.95% of the total domestic debt stock, up from 78.13% in the previous quarter.
Additionally, Nigeria issued its first-ever domestic dollar-denominated bond, adding N1.47 trillion to the domestic debt stock. Coordinated by the Africa Finance Corporation, this $500 million bond attracted over $900 million in subscriptions, reflecting growing confidence in Nigeria’s capital markets. The bond, issued at par with a 9.75% annual coupon, was 180% oversubscribed, signaling strong investor interest.
Treasury Bills, the second-largest component of domestic debt, experienced a marginal decline of 0.66%, falling to N11.73 trillion from N11.81 trillion. This reduction aligns with efforts to mitigate rollover risks associated with short-term instruments. Meanwhile, promissory notes issued to settle government obligations grew by 5.80%, increasing from N1.67 trillion to N1.77 trillion.
Infrastructure-focused instruments such as FGN Sukuk bonds declined by 9.14%, falling to N992.56 billion from N1.09 trillion, while FGN Savings Bonds saw a significant 16.11% increase, rising to N64.09 billion from N55.20 billion. The Green Bond component remained unchanged at N15 billion, representing a negligible 0.02% of the domestic debt stock.
External Debt Dynamics
Nigeria’s external debt stock stood at $43.03 billion by September 2024, reflecting stability in dollar terms but a sharp rise in naira terms due to exchange rate volatility. Multilateral debt increased by 0.67%, rising from $21.62 billion in June to $21.77 billion in September, accounting for 50.60% of total external debt. This growth was driven by disbursements from institutions like the World Bank’s International Development Association, which added $513.06 million to its obligations, bringing its total to $16.84 billion.
Bilateral loans, however, declined by 1.33%, dropping from $5.89 billion to $5.81 billion. China, Nigeria’s largest bilateral lender, recorded a $99.98 million reduction in outstanding loans. Commercial loans, including Eurobonds, remained stable at $15.12 billion, representing 35.14% of the external debt. Syndicated loans and other commercial obligations saw minimal fluctuations, with syndicated loans holding steady at $270 million and a slight $59.02 million increase in other commercial debts.
The naira’s depreciation has significantly amplified the local currency cost of external obligations. For instance, the government raised $2.2 billion through a Eurobond auction in December 2023, adding to the external debt burden. This auction saw two bonds issued—a 6.5-year bond priced at 9.625% and a 10-year bond priced at 10.375%. The total subscription exceeded $9 billion, but only $2.2 billion was allotted.
Economic Reforms and Fiscal Strategy
The Federal Government has reiterated its commitment to aggressive revenue generation to fund critical infrastructure and drive economic growth. Speaking during the defence of his ministry’s 2025 financial estimates before the National Assembly, Minister of Budget and Economic Planning, Abubakar Bagudu, credited President Bola Tinubu’s leadership for steering the economy towards recovery.
Bagudu highlighted a reduction in the fiscal deficit from over 6.1% in 2023 to less than 4% in 2024 and three consecutive quarters of GDP growth exceeding 3%. These achievements, he noted, contrast with sub-1% growth in some industrialized nations. He also pointed to increased liquidity at sub-national levels, supported by higher FAAC allocations following the removal of fuel and forex subsidies.
The minister outlined plans to fund infrastructure projects through initiatives like the Renewed Hope Infrastructure Fund, Consumer Credit schemes, and agriculture and mortgage funds. He also emphasized the importance of unlocking revenue potential in sectors such as petroleum, solid minerals, and creative industries.
Bagudu urged lawmakers to pass key tax reform bills to achieve the government’s 18% revenue-to-GDP target. He assured that the administration remains focused on inclusive economic growth, with strengthened bilateral relations and high-level agreements supporting Nigeria’s development agenda.
Concerns Over Debt Sustainability
Economic analysts have expressed concerns about the sustainability of Nigeria’s rising debt levels. Interest payments consume a significant portion of government revenue, raising fears of a potential debt trap. Dr. Muda Yusuf, CEO of the Centre for the Promotion of Public Enterprises, cautioned against excessive foreign borrowing, noting that exchange rate volatility exacerbates the debt burden.
While the modest reduction in short-term instruments like treasury bills may help mitigate refinancing risks, the reliance on long-term bonds could increase the overall cost of debt servicing in the long run. Experts continue to call for a balanced approach to borrowing, emphasizing the need to boost revenue generation and curtail unnecessary expenditures.
As the DMO prepares to release Q4 2024 data, the government’s ability to balance fiscal sustainability with economic growth remains under scrutiny. The ongoing reforms, while yielding positive results, must address the root causes of Nigeria’s fiscal challenges to ensure a stable economic future.
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