Nigeria’s debt soars to N142.3trn as analysts’ debate sustainability amidst economic strains

Nigeria’s public debt surged to ₦142.3 trillion by September 30, 2024, marking a 5.97% increase (₦8.02 trillion) compared to ₦134.3 trillion in June 2024, according to the Debt Management Office (DMO).

This rise reflects the dual pressures of increasing domestic borrowing and the depreciation of the naira against the US dollar, which significantly inflated the naira equivalent of external debt.

In dollar terms, external debt grew marginally by 0.29%, from $42.90 billion in June to $43.03 billion in September.

However, due to naira depreciation—from ₦1,470.19/$ to ₦1,601.03/$ during the period—the naira equivalent of external debt surged by 9.22%, from ₦63.07 trillion to ₦68.89 trillion.

Domestic debt declined by 5.34% in dollar terms (from $48.45 billion to $45.87 billion), but increased by 3.10% in naira terms, from ₦71.22 trillion to ₦73.43 trillion.

The Federal Government accounted for most of this increase, with its domestic debt rising to ₦69.22 trillion by September.

Federal Government bonds rose by 4.47% to ₦54.65 trillion, making up 78.95% of total domestic debt. The introduction of Nigeria’s first domestic dollar-denominated bond added ₦1.47 trillion to the debt stock.

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In December 2024, Nigeria raised $2.2 billion through Eurobonds—$700 million for 6.5 years at 9.625% and $1.5 billion for 10 years at 10.375%.

Despite subscriptions exceeding $9 billion, only $2.2 billion was allotted to address revenue shortfalls and rising public spending. Analysts anticipate that these funds will further inflate external debt in Q4 2024.

The rising debt, coupled with naira depreciation, has raised alarms about Nigeria’s debt sustainability: Dr. Chukwuemeka Onuorah, an economist, highlighted the risks: “Nigeria’s growing debt burden, particularly the reliance on domestic borrowing, threatens fiscal stability. The rising cost of servicing this debt is unsustainable without substantial revenue reforms.”

Kemi Abiola, a public finance expert, emphasized the impact of exchange rate volatility: “The naira’s depreciation is exacerbating the debt problem, inflating external obligations in local terms. Policymakers must prioritize exchange rate stability and fiscal discipline.”

Idris Mohammed, an investment analyst, cautioned against over-reliance on Eurobonds: “While tapping international markets can be strategic, Nigeria must balance this with sustainable domestic revenue generation to avoid debt traps.”

The DMO has reiterated that Nigeria’s debt remains within acceptable limits. However, with debt servicing costs consuming a significant portion of government revenue, experts are urging reforms to address structural challenges. These include expanding the tax base, curbing corruption, and diversifying the economy to reduce over-dependence on oil revenue.

As Nigeria faces mounting fiscal pressures, the debate over debt sustainability underscores the urgency of implementing bold economic reforms to stabilize public finances and support long-term growth.