Nigeria’s public debt has reached a new peak, climbing to N142 trillion at the end of September 2024, according to data released by the Debt Management Office (DMO). This represents a significant 5.97 percent increase from N134.3 trillion recorded in the second quarter of the year. The surge is primarily attributed to the persistent depreciation of the Naira, which has significantly increased the local currency cost of external borrowings.
The country’s external debt, which accounted for 48.4 percent of the total debt stock, soared by 9.22 percent within the quarter, rising from N63.07 trillion to N68.89 trillion. This translates to approximately  in June to N1,601.03/$ by September, significantly impacted the naira value of these external obligations.
Domestic Debt Growth Remains a Concern
While domestic debt reduced by 5.34 percent in dollar terms, it rose by 3.10 percent in naira terms, increasing from N71.22 trillion to N73.43 trillion during the period. This highlights the dual impact of exchange rate fluctuations on both external and domestic debt obligations. The rising debt profile, particularly in naira terms, raises serious concerns about debt sustainability.
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DMO’s Debt Ceiling Ignored
Despite the DMO’s self-imposed public debt ceiling of 40 percent, outlined in its Medium-Term Debt Management Strategy, Nigeria’s debt-to-GDP ratio has increased from 78.13 percent in June 2024 to 78.95 percent in September. While the current ratio of about 55 percent remains below the IMF’s 60 percent benchmark for emerging market economies, the nation’s weak revenue generation and the volatile foreign exchange market pose significant risks to further debt escalation.
Economic Strain and Potential Crisis
The rising debt service costs associated with this growing debt burden are placing a significant strain on the Nigerian economy. “Analysts have expressed concerns over the rising debt levels, warning that it could trigger a debt crisis for a country that’s reeling from its worst cost of living crisis in a generation,” noted [Source for this quote – if available].
Government Response and Outlook
While the recent volatility in the exchange rate has shown signs of moderation due to the Central Bank of Nigeria’s interventions, the government is seeking to address the underlying issues. Proposed tax reforms, if implemented, could potentially boost government revenue and alleviate the need for further borrowing.
If You Ask Me
Nigeria’s rising public debt presents a significant challenge to the nation’s economic stability. The continued impact of Naira depreciation on external debt obligations, coupled with weak revenue generation, necessitates a comprehensive and sustainable approach to debt management. Addressing these challenges requires a multifaceted strategy that includes enhancing revenue generation, improving economic growth, and implementing prudent fiscal policies.
