The federal government’s Promissory Notes debt increased 6.5% from March 2024 to N1.65 trillion as of June 2024, according to Nigeria’s Debt Management Office (DMO).
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Since President Bola Tinubu took office, the amount of this type of domestic debt has increased by an astounding 114%.
The federal government now uses promissory notes, a type of debt instrument that contains a written pledge by the issuer (in this case, the government) to return a certain amount, as its main means of covering debts that it is unable to pay for right away with cash or revenue.
This dramatic increase demonstrates the government’s increasing reliance on promissory notes to meet its financial obligations.
Key Data Insights
Nigeria’s domestic and international public debt increased to N71.2 trillion and $42.9 billion, respectively, according to the DMO’s 2024 half-year public debt report.
Compared to December 2023, when domestic debt was N59.1 trillion and foreign debt was $42.4 billion, representing increases of 20.4% and 1.1%, respectively, this represents a significant increase.
Under Tinubu’s leadership, domestic debt in particular has increased dramatically, rising from N54.1 trillion in June 2023 to the present N71.2 trillion.
Notably, Promissory Notes, which as of June 2023 totalled N780 billion, were responsible for a sizeable amount of this growth.
Promissory Notes Increase Reason
After it stopped depending on central bank funding through Ways and Means, the government found it difficult to redeem its Promissory Notes, according to a January story in THE NEWS CHRONICLES.
THE NEWS CHRONICLES reported a Central Bank of Nigeria report that claimed that exporters’ commitments under the Export Expansion Grant (EEG) program, which predate the Tinubu government, were the reason for the increase in Promissory Notes as of December 2023.
Although the precise causes of the N342.6 billion increase in promissory notes in 2024 were not specified, Nairametrics’ analysis indicates that it might be related to unpaid obligations owed to suppliers, oil marketers, and government contractors.
Fiscal Deficit Increases
As of August 2024, Nigeria’s budget deficit exceeded the authorised 3.8% objective for the year, reaching 7.6% of GDP, according to a recent Nairametrics analysis.
Members of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) expressed similar concerns, pointing to the growing disparity between revenue and expenditure.
The National Assembly adopted a N28.7 trillion budget for 2024 with a goal income of N19.5 trillion and a projected N9.1 trillion budget shortfall, or around 3.8% of GDP.
A supplemental budget of N6.2 trillion was issued later in the year, but the deficit has exceeded forecasts, further escalating budgetary constraints.
Prospects For The Fiscal Year 2025
The planned N47.9 trillion budget for 2025 has been made public by the federal government. This statement was provided by Minister of Budget and Economic Planning Atiku Bagudu during a meeting of the Federal Executive Council (FEC), which was presided over by President Tinubu.
Bagudu revealed that the Medium-Term Expenditure Framework (MTEF) for 2025–2027 was adopted by the council. It sets a benchmark price of $75 per barrel for crude oil and aims to produce 2.06 million barrels per day (bpd).
In addition, the budget framework forecasts a 6.4% GDP growth rate and fixes the exchange rate at N1,400 to the dollar.
The federal government’s growing reliance on Promissory Notes and mounting debt levels highlight the necessity for sustainable fiscal measures as long as fiscal difficulties persist.
The fiscal framework for 2025 will have a significant impact on how the economy develops during the Tinubu administration.
