Nigeria’s total public debt rose to N142.3 trillion as of September 30, 2024, representing an increase of 5.97 per cent (N8.02trn) compared to N134.3trn in June 2024.
The debt, comprising external and domestic obligations, reflects the significant impact of exchange rate depreciation on external borrowings when converted to naira terms.
Data from the Debt Management Office showed that external debt in dollar terms increased marginally by 0.29 per cent, from $42.90bn in June to $43.03bn in September.
However, in naira terms, external debt surged by 9.22 per cent, rising from N63.07trn to N68.89trn within the quarter.
This sharp increase was attributed to the depreciation of the naira, with the exchange rate weakening from N1,470.19/$ in June to N1,601.03/$ by the end of September.
Domestic debt, on the other hand, reduced by 5.34 per cent in dollar terms, falling from $48.45bn in June to $45.87bn in September.
However, domestic debt in naira terms rose by 3.10 per cent, increasing from N71.22trn to N73.43trn during the period.
The Federal Government’s external debt accounted for $38.12bn in September, up from $38.01bn in June, while states and the Federal Capital Territory held $4.91bn in external debt, a slight increase from $4.89bn.
For domestic debt, the Federal Government’s obligations rose from N66.96trn to N69.22trn, while states and the FCT recorded a minor reduction from N4.27trn to N4.21trn.
Overall, Nigeria’s total public debt in dollar terms fell by 2.70 per cent, from $91.35bn in June to $88.89bn in September.
However, the naira-denominated debt burden remained substantial.
The rising debt profile, particularly in naira terms, raises concerns over debt sustainability, especially with the exchange rate volatility driving up the local currency cost of external obligations.
Further analysis showed that the Federal Government’s domestic debt stock of N69.22trn as of September 30, 2024, was largely driven by increased issuance of Federal Government bonds and a rise in promissory notes, highlighting the government’s reliance on domestic borrowing to meet fiscal obligations.
Analysis of the debt by instruments shows that Federal Government bonds remained the largest component, rising by 4.47 per cent to N54.65trn in September from N52.32trn in June.
This represents 78.95 per cent of the total domestic debt stock, up from 78.13 per cent in the previous quarter.
The issuance of bonds in naira accounted for the majority of the increase, as the dollar-denominated bond was newly introduced to the domestic debt stock at N1.47trn.
Nigeria recently successfully launched its first-ever domestic dollar-denominated bond, seeing over $900m in subscriptions.
The $500m bond, coordinated by the Africa Finance Corporation, marked a pivotal moment in Nigeria’s economic development and highlights the growing confidence in the country’s capital market.
The five-year bond, which was issued at par with a 9.75 per cent annual coupon, witnessed a 180 per cent subscription.
This domestic bond added N1.47trn to Nigeria’s domestic debt.
Further analysis showed that Nigerian Treasury Bills, the second-largest component, experienced a marginal decline, falling by 0.66 per cent to N11.73trn from N11.81trn in the previous quarter.
The reduction aligns with efforts to moderate short-term debt instruments, likely in response to concerns over rollover risks and rising interest rates.
Promissory notes, issued to settle government obligations such as contractor payments, grew by 5.80 per cent to N1.77trn in September from N1.67trn in June.
This includes a significant increase in foreign-denominated promissory notes, which rose from N1.18trn to N1.19trn, reflecting adjustments due to currency fluctuations.
FGN Sukuk, a key instrument for infrastructure funding, decreased by 9.14 per cent to N992.56bn, down from N1.09trn.
Meanwhile, FGN Savings Bonds increased by 16.11 per cent, rising to N64.09bn from N55.20bn, reflecting higher participation by retail investors.
The Green Bond component remained unchanged at N15bn, maintaining its minimal contribution of 0.02 per cent to the domestic debt stock.
The overall increase in domestic debt highlights the Federal Government’s growing dependence on local markets to finance budget deficits amid constrained foreign exchange reserves and limited external borrowing options.
While the bond market continues to dominate, the expansion in promissory notes and retail-focused savings bonds indicates a broadening of the domestic debt portfolio.
Economic analysts have repeatedly raised concerns about the sustainability of the rising debt levels, particularly as interest payments consume a significant portion of government revenue.
Earlier, the Chief Executive Officer of the Centre for the Promotion of Public Enterprises, Muda Yusuf, warned that Nigeria may end up in a vicious circle, noting the country may end up in a debt trap.
He said, “I think there is a need for us to be very conscious of and watch the rate of growth of our public debt. Because it could create macro-economic challenges especially if the burden of debt service continues to grow.”
Yusuf added that there is a need for the government to reduce the exposure to foreign debts because the number has grown so due to the exchange rate.
The modest decline in short-term instruments like treasury bills could mitigate refinancing risks, but the reliance on long-term bonds may increase the overall cost of debt servicing in the long term.
Analysis of Nigeria’s external debt stock of $43.03bn by the end of September 2024 shows a largely stable external debt profile, with changes driven by minor adjustments in multilateral and bilateral obligations.
According to data from the DMO, multilateral debt rose by 0.67 per cent from $21.62bn in June to $21.77bn in September, maintaining its dominance with 50.60 per cent of the total external debt.
This increase was largely influenced by additional disbursements from institutions such as the World Bank’s International Development Association, which saw its obligations increase by $513.06m to $16.84bn.
Bilateral loans decreased slightly by 1.33 per cent, dropping from $5.89bn in June to $5.81bn in September.
China, Nigeria’s largest bilateral lender, saw a reduction of $99.98m in outstanding loans, while obligations to other bilateral lenders like France and Germany remained relatively stable.
Commercial loans, consisting primarily of Eurobonds, were unchanged at $15.12bn, representing 35.14 per cent of the total external debt.
Similarly, syndicated loans and obligations to Deutsche Bank saw minimal fluctuations, with syndicated loans remaining at $270m and a small increase of $59.02m in other commercial obligations.
The marginal rise in external debt highlights the Federal Government’s cautious approach to international borrowing amid ongoing fiscal constraints and exchange rate volatility.
However, the naira’s depreciation, from N1,470.19/$ in June to N1,601.03/$ in September, has exacerbated the burden of external debt in local currency terms.
Nigeria raised $2.2bn through its Eurobond auction in December last year, marking a pivotal moment in the country’s ongoing efforts to address its growing fiscal deficit.
This auction, which saw the issuance of two bonds with varying tenors, follows the government’s return to the international capital markets for the first time since March 2022.
The funds raised would primarily be used to support Nigeria’s 2024 budget, which is under strain due to persistent revenue shortfalls and mounting public spending.
While Nigeria recorded a total subscription of over $9bn, only $2.2bn was allotted.
The allotments are $700m for the 6.5-year bond priced at 9.625 per cent and a larger $1.5bn for the 10-year bond priced at 10.375 per cent.
This means that Nigeria’s external debt is expected to rise further when the DMO releases the Q4 2024 data.
In a related development, the Federal Government has reiterated its commitment to aggressive revenue generation to fund critical infrastructure and drive economic growth.
According to a press statement, the Minister of Budget and Economic Planning, Abubakar Bagudu, stated this on Tuesday during the defence of his ministry’s 2025 financial estimates before the National Assembly Joint Committees on National Planning in Abuja.
Bagudu credited President Bola Tinubu’s leadership for steering the economy in the right direction, adding that the administration remains determined to sustain the ongoing reforms.
He noted that the Renewed Hope Agenda is yielding positive results, with the government addressing decades of underinvestment in critical sectors.
“President Bola Tinubu has steered the economy in the right direction, and we are determined to stay the course,” he told lawmakers led by Senator Yahaya Abdullahi and Isiaka Ibrahim.
He highlighted the country’s GDP growth of over 3 per cent for three consecutive quarters, contrasting it with less than 1 per cent growth in some industrialised nations.
He also noted a significant reduction in the fiscal deficit from over 6.1 per cent in 2023 to less than 4 per cent in 2024, a development acknowledged by global business leaders and rating agencies.
Bagudu pointed out that the government’s reforms, including the removal of fuel and forex subsidies, have enhanced liquidity at the sub-national level, with FAAC allocations to states and local governments increasing.
He assured legislators that the upward trend would be sustained through innovative revenue-generation strategies.
According to him, the petroleum, solid minerals, and creative industries have been tasked with unlocking their full potential to boost national income.
The minister outlined plans to fund critical infrastructure such as housing, roads, and railways through initiatives like the Renewed Hope Infrastructure Fund, Consumer Credit schemes, agriculture and mortgage funds, and energy transition projects.
He was quoted in the statement as saying, “As the chief marketer of the Renewed Hope Agenda and Agenda 2050 strategies, the Federal Ministry of Budget and Economic Planning is poised to intensify its innovative financing to take forward the delivery of the Renewed Hope Infrastructure, including housing, roads and railway.
“We shall more aggressively raise funding for our creative and high-impact programmes, including Renewed Hope Infrastructure Fund, Consumer Credit, National Agriculture Development Fund, Mortgage Fund, CNG Energy transition, Student Loans Fund, and support to NANO and MSMEs.”
He also stated that crude oil production would be ramped up beyond the current estimate of 2.06 million barrels per day as the Crude Oil Theft Committee intensifies efforts to curb losses.
Bagudu urged the National Assembly to pass key tax reform bills, noting that these measures are crucial for achieving the government’s 18 per cent revenue-to-GDP target.
He assured legislators that the Tinubu administration remains focused on inclusive economic growth, promising increased revenue to support higher expenditure.
The minister said the economic reforms had earned respect from development partners, with strengthened bilateral relations between Nigeria and countries such as China, the United Kingdom, and the European Union.
He highlighted recent high-level agreements signed with these partners, which he said would support the country’s development agenda.
