Nigeria’s Debt Management Office (DMO) has announced a substantial increase in the nation’s total public debt, which has surged to N121.67 trillion (approximately $91.46 billion) as of March 31, 2024.
This significant rise comes against a backdrop of declining oil production, the country’s primary revenue source, and escalating economic challenges.
The latest figures reveal a significant increase in the total public debt recorded at the end of 2023, which stood at N97.34 trillion (approximately $108.23 billion). This represents an increase of N24.33 trillion or 24.99% within just three months. The primary driver behind this sharp rise is the devaluation of the naira, which has effectively reduced the debt in dollar terms by $16.77 billion or 18.34%.
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Breakdown of Domestic and External Debt
As of March 31, 2024, Nigeria’s domestic debt accounted for 53.96% of the total debt, amounting to N65.65 trillion (approximately $46.29 billion). The external debt component stood at N56.02 trillion (approximately $42.12 billion). Excluding the impact of naira exchange rate movements, domestic debt saw a notable increase from N59.12 trillion at the end of December 2023 to N65.65 trillion in March 2024, an increment of N6.53 trillion or 11.05%.
The DMO attributed the increase in domestic debt to new borrowing aimed at part-financing the 2024 Budget deficit and the securitization of a portion of the N7.3 trillion Ways and Means Advances from the Central Bank of Nigeria (CBN).
The DMO’s statement elaborated: “Excluding Naira exchange rate movements in Q1 2024, only the Domestic Debt component of Total Public Debt grew from N59.12 trillion on December 31, 2023, to N65.65 trillion on March 31, 2024. The increase was from new borrowing to part-finance the 2024 Budget deficit and securitization of a portion of the N7.3 trillion Ways and Means Advances at the Central Bank of Nigeria.”
Declining Oil Production
The burgeoning debt profile comes at a time when Nigeria is grappling with a significant decline in oil production, its major source of revenue. In May 2024, Nigeria’s total oil production saw a slight uptick, rising by 1.45% to reach 1.46 million barrels per day (mbpd), compared to 1.44mbpd in April. Despite this increase, the production level still fell short of the country’s OPEC quota of 1.5mbpd and the 1.7mbpd benchmark set for the 2024 national budget. The drop in oil output has exacerbated the country’s economic vulnerabilities as it limits government revenue.
Bayo Onanuga, a presidential spokesman, highlighted the severity of the situation, noting that the government currently spends an alarming 96% of its revenue on debt servicing. This staggering figure underscores the immense financial strain on the country and raises questions about the sustainability of its debt management strategy.
Recent Borrowings
Nigeria’s public debt has also been fueled by recent borrowings totaling $4.95 billion from the World Bank over the past year. These loans, aimed at addressing critical infrastructure and social issues, include:
- A $750 million loan was approved on June 9, 2023, to enhance Nigeria’s power sector performance.
- A $500 million loan was approved on June 27, 2023, to scale up the Nigeria for Women Programme.
- A $700 million loan was granted in September 2023 for the Adolescent Girls Initiative for Learning and Empowerment project.
- A $750 million loan was approved on December 14, 2023, to boost electricity access through distributed renewable energy solutions.
The latest funding, totaling $2.25 billion, includes $1.5 billion for economic stabilization reforms and $750 million to enhance non-oil revenues and protect oil and gas revenue. Additionally, the Nigerian government anticipates further loans, including a $500 million loan to improve connectivity and market access, a $750 million loan contingent on the reintroduction of previously suspended taxes, a $500 million loan to address challenges faced by Internally Displaced Persons (IDPs), and a $2.7 billion loan from the African Development Bank (AfDB) for economic and budget support.
While the rising public debt profile has been defended by the government, referring to other countries equally borrowing, critics have argued that there is nothing tangible to show for it. They said most of the loans taken by the Nigerian government have been used to service debt, pay salaries, and fund the extravagant lifestyle of public office holders.