Data from the Debt Management Office (DMO) shows that Nigeria’s total Treasury Bills (T-Bills) debt is N10.4 trillion, a 60% increase in just three months.
According to a study conducted by Nairalytics, the research division of Nairametrics, which looked at data from central bank records going back at least to 2010, this is the greatest T-Bills debt total ever.
As part of its strategy to combat inflation, the DMO has held many Treasury Bill auctions through the central bank in the first half of 2024. This has allowed the government to meet its short-term spending needs by utilizing a combination of monetary and fiscal policy tools.
Treasury Bills have increased in importance as a key source of short-term funding for the government, particularly under the leadership of the All Progressives Congress (APC). Under Goodluck Jonathan’s Peoples Democratic Party (PDP) administration, their balance was N2.8 trillion, but it is today N10.4 trillion.
By the conclusion of 2023’s second quarter, it had risen to N5.8 trillion, mostly during the Muhammadu Buhari presidency.
What the information indicates
As of December 2023, Nigeria’s Treasury Bill balance was N6.5 trillion, or 11% of the country’s total domestic debt, according to the DMO. But as of March 2024, the amount has increased by 60% to N10.4 trillion, or 16% of the portfolio of all domestic debt.
According to this, Nigeria’s debt in T-Bills is currently equivalent to 4.37% of GDP.
TNC’s analysis indicates that in the first quarter of 2024, the central bank offered N2.1 trillion in Treasury Bills. Nonetheless, investors desperate for yields bid N21.7 trillion to subscribe for the one-year bills.
Out of the entire amount available, the central bank allocated N5.64 trillion. In the first quarter of the year, yields reached a maximum of 21.1% due to investors rebalancing their portfolios and shifting their cash from stocks to fixed-income assets.
In the second quarter of 2024, Treasury Bill auctions increased in volume, with an additional N1.64 trillion anticipated to be sold. But the whole sum is maturing bills that are anticipated to be rolled over, so they won’t be paid back right away; instead, they will be postponed until a later time.
The growing debt profile of Tinubunomics
In stark contrast to the Buhari administration, which predominantly depended on the Central Bank’s Ways and Means Advances, the Bola Tinubu administration has primarily relied on the domestic debt market, particularly treasury bills, to fund short-term obligations.
Due to a large deficit in fiscal income, the government is forced to rely on public debt to cover its spending commitments. In the meantime, to entice holders of Treasury Bills, the central bank, led by Yemi Cardoso, has used monetary policy instruments like high interest rates.
Fixed-income astute investors continue to oversubscribe T-Bills in almost all of the auctions that Nairametrics tracks, suggesting that the approach is effective. The growing expense of servicing Nigeria’s domestic debt, particularly Treasury Bills with real yields closer to 30% annually, is still cited by detractors, nevertheless.
Growing Public Debt Profile
Nigeria’s overall domestic debt profile increased by 11% to N65.6 trillion in Q1 2024 from N59.1 trillion as of December 2023. In the same time frame, Nigeria’s debt to the IMF decreased, causing the foreign debt profile to drop from $42.9 billion to $42.1 billion.
On March 31, 2024, the public debt profile amounts to N114.7 trillion in naira, assuming an exchange rate of N1,309 at that time. Nigeria has $92.2 billion in national debt as of March 2024, expressed in US dollars.
According to data from the National Bureau of Statistics (NBS), as of the first quarter of 2024, Nigeria’s GDP was recorded at N237.5 trillion, based on the last four quarters. This implies that Nigeria has surpassed its self-imposed debt-to-GDP ceiling of 40%, with its debt-to-GDP currently standing at 48.2%.
Nonetheless, the DMO has clarified that currency devaluation was a major factor in the increase in overall debt expressed in naira.
The debt management organization stated in a statement that only over N7.71 trillion in borrowing came from local sources in the first quarter of 2024.
Things To Note
Concerns regarding the possibility of increased interest payments, which would account for a sizable portion of Nigeria’s declining revenue, have been raised by the country’s mounting debt.
According to a recent report by Moody’s Ratings, interest expenses in Nigeria might increase by 1% of GDP and account for roughly 36% of total government revenue by 2024.
PricewaterhouseCoopers (PwC) has previously issued a warning, stating that the nation’s debt profile will eventually worsen if the federal government continues to issue more debt without also raising revenue.
