Nigeria’s debt profile continues its upward trajectory with total debt stock rising to N134.30 trillion by the end of the first half of 2024, according to a recent report by Cardinalstone, an investment and research firm.
The sharp rise reflects ongoing challenges, including naira depreciation, rising borrowing costs, and the Federal Government’s aggressive borrowing strategy.
The report revealed that the Federal Government accounted for a significant portion of the debt, borrowing approximately N122 trillion while the 36 states and the Federal Capital Territory (FCT) contributed N12 trillion.
This includes N63 trillion in external debt, which accounts for 47% of the total, and N71 trillion in domestic borrowings, making up 53% of the debt stock.
“We estimate government debt to reach N187.79 trillion in 2025. The sharp rise in government debt has heightened concerns about its sustainability,” the Cardinalstone analysts noted in their report titled Pressure to Plateau.
This increase represents a steep climb from N49.85 trillion recorded before the 2023 general elections.
The surge is attributed to multiple factors, including policy-induced naira depreciation, higher domestic borrowing through treasury bills and bonds, and the issuance of a $900 billion dollar-denominated domestic bond.
Also, the Federal Government’s return to the Eurobond market to raise $2.20 billion has further contributed to the debt burden.
The Debt Management Office (DMO) recently disclosed that Nigeria’s public debt-to-GDP ratio now stands at 58%, surpassing the agency’s self-imposed debt ceiling of 40% as outlined in its Medium-Term Debt Management Strategy.
Although this remains below the International Monetary Fund’s 60% benchmark for emerging markets, analysts warn that Nigeria’s weak revenue profile and foreign exchange volatility could escalate the debt burden further.
In the first six months of 2024, debt service obligations surged by 69% year-on-year to N6 trillion, consuming half of the Federal Government’s aggregate expenditure.
This equates to a debt-service-to-revenue ratio of 162%, up from 128% in H1 2023, signaling a growing challenge in managing the nation’s finances.
“The sharp increase primarily reflects the impact of policy-induced naira depreciation, aggressive government borrowing, and rising borrowing costs,” the report stated.
Cardinalstone’s analysis highlighted that Nigeria’s reliance on external debt could pose long-term challenges. With Eurobond maturities averaging $1.33 billion annually over the next decade and total annual debt servicing costs expected to average $2.24 billion, the financial strain is unlikely to ease in the near term.
“These maturities suggest that debt repayment and servicing costs are likely to remain high in the near to medium term, but we reiterate that the country’s external debt-linked ratios (such as external debt service as % of exports, external debt to exports, and debt service to exports) are still favourably within IMF’s prescribed thresholds,” the analysts concluded.
