Nigeria’s Debt Hits Record High
Nigeria’s total public debt surged to ₦142.3 trillion by the end of September 2024, representing a 5.97% increase from the ₦134.3 trillion recorded in June, according to the latest report by the Debt Management Office (DMO). The sharp rise highlights the mounting pressure on the country’s fiscal position.
Key Drivers of the Debt Surge
The increase in debt stock was primarily attributed to rising domestic borrowing and the depreciation of the naira, which inflated the naira equivalent of external debts. “The Federal Government remains the primary driver of domestic debt, rising from ₦66.96 trillion in June to ₦69.22 trillion in September,” the DMO stated.
External Debt in Dollar and Naira Terms
In dollar terms, Nigeria’s external debt showed a marginal increase of 0.29%, climbing from $43.03 billion in June to $43.15 billion in September. However, the naira equivalent of the external debt jumped significantly by 9.22%, increasing from ₦63.07 trillion to ₦68.89 trillion.
Impact of Naira Depreciation
This dramatic rise in naira terms was driven by the weakening of the naira against the dollar. The exchange rate deteriorated from ₦1,470.19/$ in June to ₦1,601.03/$ by September. Analysts have pointed out that the naira’s depreciation exacerbates the debt burden, making it more expensive to service external obligations.
Mixed Trends in Domestic Debt
Domestic debt presented contrasting trends when measured in dollar and naira terms. While it declined by 5.34% in dollar terms, falling from $48.45 billion to $45.87 billion, it rose by 3.10% in naira terms, increasing from ₦71.22 trillion to ₦73.43 trillion during the same period.
States and FCT Debt Declines Slightly
Interestingly, debt owed by Nigerian states and the Federal Capital Territory (FCT) saw a marginal decline, reducing from ₦4.27 trillion in June to ₦4.21 trillion in September. This suggests that sub-national governments are exercising more restraint in borrowing compared to the Federal Government.
Experts Warn of Fiscal Risks
The rising debt has drawn concern from financial experts, who stress the need for urgent fiscal reforms. “Nigeria’s growing debt stock underscores the pressure on the economy and the need for measures to stabilize the naira and reduce borrowing costs,” a financial analyst stated.
Implications of Rising Debt Stock
The implications of this debt increase are significant. With the naira’s depreciation and higher borrowing, the cost of servicing debt is expected to rise, further straining Nigeria’s already tight fiscal space. This could potentially divert resources away from critical sectors like health and education.
Call for Sustainable Debt Management
Economists are urging the Federal Government to adopt sustainable debt management strategies, including boosting revenue generation and reducing reliance on borrowing. They argue that without fiscal discipline, Nigeria risks falling into a deeper debt trap.
