The nation’s total debt stock as of March 31, 2024, stood at a staggering N121.67trillion or $91.46billion from N97trillion recorded in the last quarter of 2023. This represents N24.33trillion or 30.4 per cent increase in three months. A breakdown of the debt stock shows that the domestic component stood at N65.65trillion. The local borrowings include funds raised through Treasury Bills, Federal Government Bonds and Savings Bonds. The external borrowings amounted to $42.12billion or N56.02trillion. In the first quarter of this year alone, the Debt Management Office (DMO) figures showed that external debt servicing gulped $1.12billion or 70 per cent of government’s revenue. In the same period in 2023, external debt servicing was $801.36 million, a 39.7 per cent increase over that of Q1 2023.
On the average, Nigeria spends about 95 per cent of its revenue on debt repayment annually. This exceeds both recurrent and capital expenditures. This is unprecedented, and has even heightened the fears that Nigeria may be heading towards a debt trap or default in no distance future if the nation’s rising debt is not checked. The consequences are dire. Moreover, the N10trillion deficit in the 2024 budget is unsustainable. The Moody’s Ratings recently warned that Nigeria’s debt interest payment could consume up to 36 per cent of the federal government’s revenue this year.
Without measures to boost government’s revenue, the rising debt will lead to prolonged economic stagnation. In the case of debt default, Nigeria could be in the infamous league of African countries such as Ghana, Zambia and Ethiopia that are in debt overhang. This calls for urgent restructuring of both domestic and external debts, alongside meaningful economic reforms. This is one of the ways the country can avoid the looming debt trap, reminiscent of the imposition from the Paris and London creditors that Nigeria went through two decades ago. It was the administration of ex-President Olusegun Obasanjo and the astute management of the economy under Dr. Ngozi Okonjo-Iweala that get debt relief for Nigeria in 2006.
That Nigeria’s public debt hit N121trillion, out of which over N24trillion was accumulated in about three months underscores the urgent need for prudent management of our finances. Any borrowed money must be tied to specific project that can repay the loan. The era of borrowing for consumption is gone. We agree with some experts’ advice that the federal government should give a detailed breakdown of the utilisation of all borrowed funds, as well as demonstrate their tangible impact on national growth. If the current trend continues, there are fears that our total debt stock might exceed N150trillion by the end of this year. Nigeria’s rising debt burden is troubling in the face of declining revenue.
The country’s debt-to-GDP ratio has also increased from 25 per cent to 40 per cent since 2021. According to a recent report from the International Monetary Fund (IMF), Nigeria’s public debt to GDP is projected to reach 46.6 per cent this year, and 46.8 per cent in 2025. As a result of this development, the IMF has downgraded Nigeria’s fiscal balance to GDP ratio to -4.6 per cent in 2024 from -4.2 percent. It attributed this to accumulated loans on concessional terms, high inflation resulting in unfavorable interest growth differentials that are suffocating businesses. The high interest rates charged by banks would discourage investment in the economy. The World Bank’s report says that Nigeria’s debt servicing costs are taking more than 96 per cent of government revenues, up from 83 per cent in 2021.
Currently, Nigeria’s indebtedness to the World Bank Group has exceeded N7trillion. This represents an increase of about 125 per cent in the last 8 years. Besides, Nigeria’s debt to China has reportedly increased by 209 per cent over the last eight years. As of December 2022, it stood at $4.29billion. The DMO has recently expressed concern over this trend, and said that N15.5trillion inflows would be needed in order to achieve sustainable debt. As already stated, the 2024 budget has a deficit of N10trillion or 3.88 per cent of the GDP. The nation’s estimated fiscal deficit at six per cent of GDP in 2024 breaches the stipulated limit.
The government should come up with measures that will strengthen the economy. There is need for proper implementation and monitoring of the budget. To reduce the amount spent on debt servicing, there should be effective and efficient budgetary control and drastic reduction of the cost of governance.