Nigeria’s domestic debt hits N67trn amid higher service cost warnings

The Debt Management Office (DMO) has reported a significant increase in Nigeria’s domestic debt stock, which reached N66.957 trillion by mid-2024.

This marks an 8.74 per cent rise from the N61.578 trillion recorded at the end of the first quarter, highlighting the government’s aggressive borrowing amid fiscal pressures.

The federal government accumulated an additional N5.379 trillion in debt during the second quarter through various financial instruments such as Federal Government of Nigeria (FGN) Bonds, Nigerian Treasury Bills (NTBs), FGN Savings Bonds, and Promissory Notes, all managed by the DMO and the Central Bank of Nigeria (CBN).

At the beginning of 2024, the government projected a deficit of N9.1 trillion, equating to 3.8 per cent of GDP. However, this gap widened further due to a supplementary budget of N6.2 trillion introduced mid-year, which intensified borrowing needs.

Economic analyst Dr. Ibrahim Yusuf noted, “The increasing reliance on domestic borrowing reflects the government’s need to fill budget gaps quickly, especially in the face of declining foreign investment and limited external financing options.”

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He added that while domestic debt may seem more controllable, it brings heightened risks, including steep debt servicing costs.

“The continuous interest rate hikes are a double-edged sword,” explained financial strategist Nkechi Adedeji.

“While they help curb inflation and attract investments into government securities, they also raise the cost of servicing debt substantially, putting additional pressure on the government’s fiscal position.”

By June 2024, Nigeria’s money supply (M3) saw a remarkable year-on-year increase of 56.32 per cent, growing from N64.906 trillion in June 2023 to N101.461 trillion.

By September 2024, this figure had further risen to N108.954 trillion, underscoring the CBN’s efforts to control liquidity.

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FGN Bonds continue to dominate Nigeria’s domestic debt landscape, accounting for N52.315 trillion or 78.13 per cent of the total domestic debt by mid-2024. Of the N13.699 trillion in debt raised during the first half of the year, FGN Bonds contributed N8.055 trillion, representing 58.8 per cent of new borrowing.

NTBs followed as the second most significant contributor, with a debt stock of N11.808 trillion, making up 17.64 per cent of the domestic total. The government raised N5.286 trillion through NTBs, which comprised 38.59 per cent of the total debt accrued during the second half of 2024.

Promissory Notes contributed N1.671 trillion to the debt stock, accounting for 2.5 per cent of the total, with an additional N342.654 billion raised in the period.

FGN Savings Bonds were the smallest segment, at N55.2 billion or 0.08 per cent, with N16.091 billion added during the first half of 2024.

Looking ahead, financial experts predict that the federal government will continue to lean heavily on domestic borrowing to meet budgetary needs.

“While the new domestic dollar bond can attract investment and provide immediate funding relief, it could increase the government’s debt service obligations in the long term,” stated economist Funmi Adebanjo.

“Policymakers need to balance the benefits of such measures with the risks associated with a rising debt service-to-revenue ratio.”