Nigeria’s public debt stock surged to an alarming N134.30 trillion in the second quarter of 2024, marking a sharp 10.38% increase from N121.67 trillion in the first quarter, according to the latest data from the Debt Management Office (DMO) published by the Nigerian Bureau of Statistics (NBS).
This rapid growth in debt reflects the mounting fiscal challenges facing the country amid dwindling oil revenues, rising global interest rates, and a depreciating naira.
The report highlighted that Nigeria’s external debt reached N63.07 trillion in Q2 2024, while domestic debt rose to N71.22 trillion. Domestic debt accounted for 53.04% of the total public debt, while external debt comprised 46.96%.
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Lagos State topped the chart as the most indebted state domestically, with a staggering N885.99 billion, followed by Rivers State at N389.20 billion. At the other end of the spectrum, Jigawa and Ondo States recorded the lowest domestic debts of N1.82 billion and N15.10 billion, respectively.
On the external front, Lagos State again led with $1.20 billion, followed by Kaduna State at $640.99 million. Meanwhile, Yobe and the Federal Capital Territory (FCT) recorded the least external debts, with $20.49 million and $20.85 million, respectively.
Raising the Cost of Debt Servicing
The rising debt has significantly strained Nigeria’s finances. By August 2024, the cost of servicing external debt skyrocketed to N3.8 trillion, exceeding the budgeted N1.83 trillion for the entire year by an alarming N1.97 trillion. This dramatic overshoot reflects a 107.7% increase, largely driven by unfavorable exchange rates, rising global interest rates, and increased borrowing to meet fiscal shortfalls.
The total budget for debt servicing in 2024, including domestic and foreign debts, was set at N7.41 trillion. However, actual payments by August had already reached N5.51 trillion, accounting for 34.4% of the total budget. Domestic debt servicing costs also slightly surpassed the budgeted amount of N3.53 trillion, climbing to N3.6 trillion, an increase of N71 billion.
Declining Oil Revenues Fuel Borrowing
One of the major drivers of Nigeria’s rising debt profile is the shortfall in oil revenue. Oil and gas revenue for 2024 was projected at N20 trillion, but only N9.83 trillion was realized by August—a realization rate of 72.1%. After statutory deductions, net inflows to the Federation Account amounted to N8.5 trillion, falling short of prorated targets by 25.3%.
The underperformance in oil revenue is attributable to persistent challenges such as crude oil theft, production constraints, and global price volatility. These issues have undermined the government’s ability to capitalize on Nigeria’s natural resource wealth, forcing it to increasingly rely on borrowing to fund expenditures.
President Bola Tinubu’s administration is seeking additional loans to bridge the fiscal gap, including a $2.2 billion loan from the World Bank, recently approved by the Senate. While such borrowing may provide short-term relief, experts have warned that it would further compound the long-term challenge of debt sustainability.
The Lagos Chamber of Commerce and Industry (LCCI) said on Friday, that the growing debt profile, currently exceeding 50% of GDP, poses significant risks to economic stability.
“A critical perspective of further borrowing is the risk of losing steam on infrastructure financing as debt servicing alone may rise above what is set aside for capital expenditure in the 2025 federal budget.
“Another concern is the exposure to the external currency shocks that may result from the depreciation of the naira against the dollar in the course of servicing these accumulated debts,” Director-General of LCCI, Chinyere Almona, said in a statement.
Analysts have warned that with a significant portion of government revenue going towards debt repayment, critical investments in infrastructure, healthcare, and education are being sidelined. They note that the rising debt and the associated cost of servicing it pose significant risks to Nigeria’s economic stability.
It is also noted that the reliance on external borrowing exposes Nigeria to exchange rate risks. The naira’s depreciation against major currencies has amplified the cost of servicing foreign debt, further tightening fiscal space.
Experts have called for urgent reforms to reduce the debt burden. Measures include diversifying the economy to reduce dependence on oil revenues, improving tax collection, and curbing wasteful government expenditures.