By the conclusion of the second quarter of 2024, Nigeria’s public debt stock had risen to N134.3 trillion ($91.3 billion).
This represents a 10.35% rise compared to the N121.7 trillion ($91.5 billion) reported by the Debt Management Office (DMO) for the first quarter.
The spike, mostly caused by the naira’s devaluation, underscores persistent issues with currency rate volatility, per an official Ministry of Finance document that Nairametrics has received.
The document stated: “In Q2 2024, the debt stock increased in naira terms to N134.3 trillion ($91.3 billion) from N121.7 trillion ($91.5 billion) in Q1 2024, owing primarily to exchange rate depreciation. The dollar amount of debt was nearly the same.”
The influence of currency fluctuations on debt valuation is highlighted by the fact that, despite an increase in overall debt in naira terms, the debt’s dollar equivalent was comparatively steady.
Domestic Debt Constitutes 53% Of Overall Debt
Strategic borrowing patterns may be seen in Nigeria’s foreign and domestic debt portfolios, with domestic debt still accounting for most of the country’s governmental debt in Q2 2024.
53% of the total debt, or N71.2 trillion ($48.4 billion), came from domestic sources, while 47%, or N63.1 trillion ($42.9 billion), came from overseas sources.
The data’s additional indication of a rising trend in the nation’s debt-to-GDP ratio, which is still climbing to over 50%, raises concerns over fiscal sustainability.
FGN Bonds Account For 78% Of Domestic Debt
The government’s reliance on local bond markets was highlighted by the fact that FGN Bonds comprised a substantial 78% of domestic debt.
Other local market instruments, such as Nigerian Treasury Bills, Savings Bonds, Sukuk, Promissory Notes, and Green Bonds, reflect a variety of borrowing choices for public funding.
Most of Nigeria’s external debt—50.4%—came from multilateral loans, indicating the country’s penchant for borrowing from global financial organizations such as the World Bank and the African Development Bank (AfDB).
Commercial loans accounted for 35.9% of external debt, while bilateral loans came in second with 13.7%.
What To Note
Nigeria and other frontier markets have maintained significant activity in the debt market throughout 2024, despite rising financing costs compared to pre-2021 levels, according to Tobias Adrian, the IMF’s financial counsellor and director of monetary and capital markets, who spoke at a press conference on the global financial stability report at the IMF/World Bank annual meetings in Washington, D.C., on Tuesday.
He continued: “Frontier markets, including Nigeria, have been active in the debt market this year, and though access to financing is still more expensive than before, the overall issuance levels have been encouraging.”
According to a statement released by the Ministry of Finance on Tuesday, Mr. Wale Edun, the Minister of Finance and Coordinating Minister of the Economy, intends to advocate for sufficient and reasonably priced funding to assist Nigerian reforms.
The statement said Edun, who is leading Nigeria’s team, would be at the forefront of talks on bolstering Nigeria’s economic resilience, especially in light of the country’s ongoing structural changes.
“He is expected to make a case for increased international support to ensure the success of these domestic initiatives, emphasizing that access to adequate and affordable financing is critical to maximizing the benefits of the country’s economic adjustments.”
THE NEWS CHRONICLES previously reported that Nigeria’s debt servicing payments increased by 69% in the first half of 2024, to N6.04 trillion, up from N3.58 trillion in the same time in 2023.
Since debt repayment takes up a large amount of the Federal Government’s financial resources, this dramatic increase in debt service obligations – likely caused by the depreciation of the naira for foreign debt repayments – reflects the mounting strain on the government.
Data from the Central Bank of Nigeria’s (CBN) most recent statistical bulletin shows that debt service accounted for a startling 162% of the N3.73 trillion in total revenue earned during the period and 50% of the N12.17 trillion in total expenses in H1 2024.
