Nigeria’s public debt surged to N134.3 trillion ($91.3 billion) by the end of the second quarter of 2024, marking a 10.35% increase from the N121.7 trillion ($91.5 billion) recorded in the first quarter. This rise, primarily fueled by the naira’s devaluation, highlights ongoing challenges related to exchange rate volatility, according to an exclusive document from the Ministry of Finance obtained by Nairametrics.
While the debt increased in naira terms, the dollar equivalent remained relatively stable, underscoring the currency’s impact on debt valuation.
Domestic Debt Dominates Public Debt Landscape
In Q2 2024, domestic debt accounted for 53% of the total, amounting to N71.2 trillion ($48.4 billion), while external debt made up 47%, totaling N63.1 trillion ($42.9 billion). This division reflects strategic borrowing trends, with the government relying heavily on domestic markets. The debt-to-GDP ratio has exceeded 50%, raising concerns over fiscal sustainability.
FGN Bonds dominate the domestic debt market, constituting 78% of it. Other domestic instruments include Nigerian Treasury Bills, Savings Bonds, Sukuk, Promissory Notes, and Green Bonds. On the external side, multilateral loans account for 50.4% of external debt, with bilateral loans at 13.7% and commercial loans at 35.9%, illustrating Nigeria’s preference for diverse borrowing sources.
Focus on Sustainable Debt Management
During the IMF/World Bank annual meetings in Washington D.C., Tobias Adrian, the IMF’s financial counsellor, noted that Nigeria and other frontier markets have been active in the debt market despite increased financing costs since 2021. The Minister of Finance, Mr. Wale Edun, emphasized the need for adequate and affordable financing to support Nigeria’s economic reforms and resilience.
Edun is expected to advocate for increased international support to ensure the success of domestic initiatives, emphasizing the critical role of financing in maximizing the benefits of the country’s economic adjustments.
Rising Debt Servicing Costs
Nairametrics previously reported a 69% surge in Nigeria’s debt servicing payments in the first half of 2024, reaching N6.04 trillion, up from N3.58 trillion in the same period of 2023. This increase, likely driven by naira devaluation affecting foreign debt repayments, is consuming a significant portion of the Federal Government’s financial resources. Data from the Central Bank of Nigeria reveals that debt servicing accounted for 50% of total expenditure and 162% of total revenue generated in H1 2024.