Nigeria’s public debt has accumulated further, with the debt-to-GDP ratio nearly reaching a 25-year high, prompting worries about the sustainability of the nation’s finances and public debt.
In 1999, Nigeria’s total public debt stock was N3.37 trillion; by 2022, it had grown to N26.25 trillion; by 2023, it had reached N97.34 trillion; and as of the first quarter of 2024, it stands at N121.67 trillion.
The most populous country in Africa reached a high of 61.51 percent for its debt-to-GDP ratio in 1999 and a low of 7.26 percent in 2006 after securing a debt relief fund in June 2005 to erase 60 percent of its entire public debt.
Nigeria’s debt-to-GDP ratio, which was 48.68 percent in the first three months of 2024, is rising and may eventually reach the pre-debt relief period, according to a recent report titled “Nigeria’s Debt Is Rising Fast: 25 Years of ‘Democratic’ Debt Accumulation” from Analysts Data Services and Resources (ADSR), a research and data intelligence firm.
“The country’s debt situation is looking more like the pre-debt relief years,” according to ADSR analysts, with a debt-to-GDP ratio of 48.68% in 2024 Q1.
The International Monetary Fund (IMF) had previously predicted in its fiscal monitor that Nigeria’s government debt-to-GDP ratio would increase from 46.3 percent in 2023 to 46.6 percent in 2024.
A financial measure called the debt-to-GDP ratio contrasts the total amount of public debt held by a nation with its GDP (gross domestic product). It indicates a nation’s capacity to repay its debt and is given as a percentage.
The Central Bank of Nigeria’s securitization of ways and means, additional borrowing, and currency devaluation were all cited by the Ibadan-based research institute as the causes of the current increase.
The report said, “Recent increase can be attributed to: securitization (recognising) of the N22.7 trillion Ways & Means earlier advanced by the CBN; new borrowing to fund the rising government’s budget deficits; exchange rate devaluation leading to increased valuation of existing and new external debts.”
As compared to many other nations, Nigeria’s government debt-to-GDP ratio is still manageable, but ongoing oversight and careful fiscal management are essential to preserving financial stability and fostering long-term economic growth, according to a person with knowledge of the situation.
In addition, the source stated that “it’s important to assess this increase in the broader context of Nigeria’s economic performance and fiscal policies, even though a higher debt-to-GDP ratio can raise concerns about fiscal sustainability and debt servicing capacity.”
Nigeria’s overall debt stock increased by N24.33 trillion in the first quarter of 2023 to N121.67 trillion from N97.34 trillion as of December 2023, according to data acquired from the Debt Management office.
The Abuja-based organisation stated that it “expects improvements in the Government’s Revenue to enhance debt sustainability,” while noting that Nigeria will continue to borrow as allowed by the 2024 Appropriations Act.
However, ADSR urged the government to make the most of the resources used to finance these borrowings, some of which are social programmes, infrastructure projects, or ways to lessen the economic effects of external shocks.
Therefore, there should be a greater emphasis on the amount and calibre of assets produced with these loans. According to the analysts, this is essential for Nigeria’s public debt sustainability and fiscal health.
