Nigeria’s public debt reached N97.34 trillion ($108.23 billion) in December 2023, as reported by the Debt Management Office (DMO).
This statistic represents a massive 146% growth over the previous year’s N39.56 trillion ($95.77 billion).
The principal cause of this exponential surge is the inclusion of the Central Bank of Nigeria’s (CBN) N20 trillion ($48 billion) in Ways and Means lending to the government, combined with a massive 60% depreciation of the currency.
The federal and state governments bear the brunt of this debt, which is made up of both domestic and foreign borrowings.
Domestic debt is mostly denominated in the native currency, the naira, and includes a variety of instruments such as FGN securities, treasury bills, and the recently added CBN’s Ways and Means.
Nigeria has bilateral debts with China, France, Germany, and Japan, as well as multilateral institutions such as the World Bank, IMF, IsDB, and AfDB.
The majority of Nigeria’s domestic debt, reaching around N59.12 trillion, comes from bonds issued on the local market, with states accounting for N5.86 trillion of that total. FGN instruments, including bonds, account for around 40% of Nigeria’s overall debt.
The breakdown of domestic debt shows considerable rises in several instruments:
FGN Bonds: A significant increase of 169.5% year on year, owing largely to the incorporation of Ways and Means into FGN bonds.
Treasury Bills: An increase of 47.5% year on year, reaching N6.5 trillion by December 2023.
Promissory Notes: A significant rise of 150.8% year on year, demonstrating strong utilization for arrears settlement and infrastructure financing.
The FGN Sukuk Fund has grown by 47.1% year on year, indicating increasing finance for infrastructure development.
FGN Saving Bonds: Up 42.4% year on year, suggesting increased public investment in government-backed savings.
As of December 2023, Nigeria’s external debt was $42.5 billion (N38.22 trillion), with states owing $4.61 billion (N4.15 trillion). Significant increases include:
Islamic Development Bank: Lending increased by 70.01% year on year, totaling $238.17 million.
Africa Growing Together Fund: An encouraging 28.50% increase year on year, indicating a commitment to long-term growth on the continent.
Exim Bank of China: Loans increased by 20.30% year on year, indicating a stronger financial partnership centered on infrastructure developments.
The International Development Association reported an 11.30% rise in financial assistance, demonstrating continued support for poverty reduction measures.
International Fund for Agricultural growth: Lending increased by 9.80%, indicating ongoing support for agricultural growth.
Nigeria’s entire public debt, estimated at N97.34 trillion, accounts for nearly 42% of the country’s GDP. While this is within international norms, it exceeds Nigeria’s self-imposed 40% level, causing alarm.
Furthermore, the majority of Nigeria’s debts are denominated in local currency, showing modest control over domestic debt management. However, a significant share of foreign currency debt, along with declining external reserves, makes fulfilling these commitments challenging.
Given the current status of government earnings and the naira’s devaluation, Nigeria’s ability to incur additional foreign debt is limited.
To alleviate budget shortfalls, the government may issue more FGN securities, but only with caution so as not to exacerbate the debt burden.
