Nigeria’s public debt has reached a staggering ₦142.3 trillion as of September 30, 2024, an increase of ₦8.02 trillion in just three months. This represents a 5.97% surge from the ₦134.3 trillion reported in June 2024, according to data released by the Debt Management Office (DMO). The sharp rise highlights the challenges posed by increasing domestic borrowing and the depreciation of the naira.
How Did Nigeria’s Debt Reach This Level?
External Debt Fueled by Currency Depreciation
Nigeria’s external debt in dollar terms only grew marginally by 0.29%, rising from $42.90 billion in June to $43.03 billion in September 2024. However, due to the weakening naira, the naira equivalent of external debt surged by 9.22%, climbing from ₦63.07 trillion to ₦68.89 trillion.
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The naira’s exchange rate against the US dollar depreciated significantly, from ₦1,470.19/$ in June to ₦1,601.03/$ by the end of September, amplifying the naira-denominated debt burden.
| Category | June 2024 | September 2024 | Percentage Change |
|---|---|---|---|
| External Debt (USD) | $42.90 billion | $43.03 billion | 0.29% |
| External Debt (₦) | ₦63.07 trillion | ₦68.89 trillion | 9.22% |
Domestic Debt on the Rise
Domestic debt showed mixed trends. While it declined by 5.34% in dollar terms, from $48.45 billion in June to $45.87 billion in September, its naira equivalent rose by 3.10%, reaching ₦73.43 trillion.
Federal Government bonds, the largest component of domestic debt, saw significant growth, rising from ₦52.32 trillion to ₦54.65 trillion, driven largely by the issuance of naira-denominated bonds.
| Domestic Debt Component | June 2024 | September 2024 | Percentage Change |
|---|---|---|---|
| Federal Government Bonds | ₦52.32 trillion | ₦54.65 trillion | 4.47% |
| Treasury Bills | ₦11.81 trillion | ₦11.73 trillion | -0.66% |
| Promissory Notes | ₦1.67 trillion | ₦1.77 trillion | 5.80% |
Key Drivers of the Debt Surge
- Naira Depreciation: The weakening of the naira against the dollar significantly increased the naira value of external debt.
- Increased Borrowing: The Federal Government issued more bonds to fund infrastructure and budget deficits.
- New Debt Instruments: The introduction of Nigeria’s first domestic dollar-denominated bond contributed to the rising domestic debt stock.
Public Concerns Over Debt Sustainability
The rapid increase in public debt has raised serious concerns about Nigeria’s debt sustainability. The Tinubu administration’s reliance on borrowing to cover revenue shortfalls and fund public spending has left many questioning the long-term implications for the economy.
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Implications of Rising Debt
- Higher Debt Servicing Costs: As debt grows, so do the costs of servicing it, especially with rising interest rates.
- Pressure on Revenue: With limited revenue streams, the government may face challenges meeting debt obligations without cutting essential services or raising taxes.
- Weakened Currency: Continued depreciation of the naira could further inflate the naira value of external debt, worsening the fiscal outlook.
The ₦8.02 trillion increase in public debt during the third quarter of 2024 underscores the growing financial pressures faced by Nigeria. While the funds may be intended to support economic growth and infrastructure development, the long-term consequences of ballooning debt are a cause for concern.
As Nigerians continue to grapple with the effects of inflation and a weakening currency, the government must prioritize fiscal reforms to ensure debt sustainability and economic stability.
Stay updated as we follow this developing story and its impact on Nigeria’s economy.
