As of September 30, 2024, Nigeria’s total national debt was N142.3 trillion, up 5.97 percent (or N8.02 trillion) from N134.3 trillion in June 2024. When translated to naira terms, the debt, which consists of both domestic and foreign commitments, shows the substantial effect that currency rate depreciation has on external borrowings.CONTINUE FULL READING>>>>>
According to data from the Debt Management Office, external debt rose slightly by 0.29 percent in terms of dollars, from $42.90 billion in June to $43.03 billion in September. But throughout the quarter, external debt increased by 9.22% in naira, from N63.07 trillion to N68.89 trillion.
The depreciation of the naira, which caused the exchange rate to drop from N1,470.19/$ in June to N1,601.03/$ by the end of September, was blamed for this dramatic increase. In contrast, domestic debt decreased by 5.34 percent in terms of dollars, from $48.45 billion in June to $45.87 billion in September. Nonetheless, at that time, domestic debt increased by 3.10 percent, from N71.22 trillion to N73.43 trillion. While states and the Federal Capital Territory held $4.91 billion in external debt, a tiny increase from $4.89 billion, the Federal Government’s external debt amounted to $38.12 billion in September, up from $38.01 billion in June.
In terms of internal debt, states and the FCT saw a slight decrease from N4.27 trillion to N4.21 trillion, while the Federal Government’s commitments increased from N66.96 trillion to N69.22 trillion. In sum, Nigeria’s national debt decreased 2.70 percent from $91.35 billion in June to $88.89 billion in September. The debt load in naira, however, continued to be significant.
Concerns over debt sustainability are raised by the growing debt profile, notably in naira terms, especially as exchange rate volatility is making external obligations more expensive in local currency. Further investigation revealed that the Federal Government’s reliance on domestic borrowing to meet fiscal obligations was largely driven by an increase in the issuance of Federal Government bonds and a rise in promissory notes, which together accounted for N69.22 trillion of the government’s domestic debt stock as of September 30, 2024.
Federal Government bonds continued to be the largest component of the debt, increasing by 4.47 percent from N52.32 trillion in June to N54.65 trillion in September, according to an analysis of the debt by instruments. This is an increase from the previous quarter’s 78.13 percent to 78.95 percent of the entire domestic debt stock. Since the dollar-denominated bond was recently added to the domestic debt stock at N1.47 trillion, the majority of the rise was due to the issuing of bonds in naira.
released its first domestic dollar-denominated bond with success, receiving over $900 million in subscriptions. Coordinated by the Africa Finance Corporation, the $500 million bond was a significant milestone in Nigeria’s economic growth and demonstrated the increasing trust in the nation’s capital market. The subscription for the five-year bond, which was issued at par with a 9.75 percent annual coupon, was 180 percent. With this domestic bond, Nigeria’s domestic debt increased by N1.47 trillion. Subsequent investigation revealed that Nigerian Treasury Bills, the second-largest component, had a little decrease, dropping 0.66 percent to N11.73 trillion from N11.81 trillion in the prior quarter. The cut is consistent with initiatives to limit short-term debt instruments, most likely in reaction to growing interest rates and rollover risks.
Issued to satisfy government debts, including contractor payments, promissory notes increased 5.80% from N1.67 trillion in June to N1.77 trillion in September. This includes a notable rise in promissory notes denominated in foreign currencies, which increased from N1.18 trillion to N1.19 trillion as a result of currency movements. A crucial tool for financing infrastructure, FGN Sukuk, saw a 9.14% decline from N1.09 trillion to N992.56 billion. Retail investor involvement grew, as seen by the 16.11% growth in FGN Savings Bonds, which went from N55.20 billion to N64.09 billion.
At N15 billion, the Green Bond component was constant and continued to contribute a negligible 0.02 percent to the total amount of domestic debt. With limited foreign exchange reserves and few external borrowing options, the Federal Government is increasingly depending on local markets to fund budget shortfalls, as evidenced by the overall rise in domestic debt. The rise in promissory notes and savings bonds targeted at consumers suggests that the domestic debt portfolio is becoming more diverse, even though the bond market still has a dominant position.
Given that interest payments take up a sizable amount of government revenue, economic commentators have frequently expressed doubts about the sustainability of the growing debt levels. Dr. Muda Yusuf, the CEO of the Center for the Promotion of Public Enterprises, had earlier issued a warning that Nigeria would become trapped in a vicious cycle and fall into a debt trap.
“I believe we need to be very aware of and keep an eye on the rate of growth of our public debt,” he stated. because it can lead to macroeconomic problems, particularly if the debt servicing load keeps increasing. Yusuf went on to say that the government must lessen its exposure to foreign debts because the exchange rate has caused their number to increase.
Refinancing risks may be reduced by the little drop in short-term securities like Treasury bills, but the long-term cost of debt servicing may rise as a result of the increased reliance on long-term bonds. An analysis of Nigeria’s $43.03 billion external debt stock as of the end of September 2024 reveals a generally constant external debt profile, with variations primarily due to small revisions in bilateral and multilateral commitments.
Multilateral debt increased by 0.67 percent from $21.62 billion in June to $21.77 billion in September, according to DMO figures, retaining its leadership position with 50.60 percent of all external debt. Additional payments from organizations like the World Bank’s International Development Association, whose responsibilities rose by $513.06 million to $16.84 billion, had a significant impact on this increase.
Between June and September, bilateral loans fell from $5.89 billion to $5.81 billion, a 1.33 percent fall. Obligations to other bilateral lenders, such as France and Germany, stayed almost unchanged, but the amount of outstanding loans to China, Nigeria’s largest bilateral lender, decreased by $99.98 million.
The amount of commercial loans, which are mostly Eurobonds, remained constant at $15.12 billion, or 35.14 percent of the total amount of external debt. Likewise, there were only minor changes in syndicated loans and commitments to Deutsche Bank, with syndicated loans staying at $270 million and other commercial obligations slightly increasing by $59.02 million.
The slight increase in external debt demonstrates the Fed’s cautious foreign borrowing strategy in the face of persistent budgetary restraints and exchange rate volatility. However, in local currency terms, the burden of external debt has increased due to the depreciation of the naira, which went from N1,470.19/$ in June to N1,601.03/$ in September. An important milestone in Nigeria’s continuous attempts to resolve its widening budget imbalance was reached in December when the country raised $2.2 billion through its Eurobond auction.
Two bonds with different tenors were issued at this auction, which came after the government made its first appearance on global financial markets since March 2022. The majority of the money donated will go toward helping Nigeria’s 2024 budget, which is struggling because of ongoing revenue shortages and rising public spending. Only $2.2 billion was allocated, despite Nigeria recording a total subscription of almost $9 billion.
The allocations are $700 million for the 9.625 percent 6.5-year bond and a higher $1.5 billion for the 10.375 percent 10-year bond. This implies that when the DMO issues the Q4 2024 statistics, Nigeria’s external debt is anticipated to increase even more. In a related move, the federal government reaffirmed its determination to generate large sums of money in order to finance vital infrastructure and stimulate economic expansion.
Abubakar Bagudu, the Minister of Budget and Economic Planning, made this claim in a news release on Tuesday while defending his ministry’s 2025 financial forecasts before the National Assembly Joint Committees on National Planning in Abuja. Bagudu stated that the administration is still committed to maintaining the current reforms and complimented President Bola Tinubu’s leadership for guiding the economy in the right direction.
He pointed out that the government’s efforts to remedy decades of underinvestment in vital areas are paying off under the Renewed Hope Agenda. He informed lawmakers, who were led by Senator Yahaya Abdullahi and Hon. Isiaka Ibrahim, that President Bola Tinubu had guided the economy in the correct path and that they were committed to sticking with it.
He emphasized that the nation’s GDP grew by more than 3% for three quarters in a row, while some developed countries saw growth of less than 1%. Additionally, he pointed out that the fiscal deficit had significantly decreased from more than 6.1% in 2023 to less than 4% in 2024, a progress that rating agencies and world business leaders had recognized.
Bagudu said that the elimination of fuel and foreign exchange subsidies, among other government reforms, has improved subnational liquidity, as evidenced by the rise in FAAC funding for states and local governments. He promised lawmakers that creative approaches to generating cash would maintain the growing trend. He asserts that the task of maximizing the potential of the solid minerals, petroleum, and creative sectors to increase national income has been assigned to them.
Through programs like the Renewed Hope Infrastructure Fund, Consumer Credit schemes, agriculture and mortgage funds, and energy transition projects, the minister laid out plans to finance vital infrastructure like houses, roads, and railroads. The statement cited him as saying, “The Federal Ministry of Budget and Economic Planning is poised to intensify its innovative financing to take forward the delivery of the Renewed Hope Infrastructure, including housing, roads, and railways, as the chief marketer of the Renewed Hope Agenda and Agenda 2050 strategies.”
“Our innovative and high-impact programs, such as the Renewed Hope Infrastructure Fund, Consumer Credit, National Agriculture Development Fund, Mortgage Fund, CNG Energy Transition, Student Loans Fund, and assistance to NANO and MSMEs, will receive more aggressive funding raising.” He added that when the Crude Oil Theft Committee steps up measures to reduce losses, crude oil production would be increased above the present forecast of 2.06 million barrels per day.
In order to meet the government’s 18% revenue-to-GDP goal, Bagudu asked the National Assembly to approve important tax reform legislation. He promised more money to fund bigger spending and reassured lawmakers that the Tinubu administration is still committed to inclusive economic growth.
With improved bilateral ties between Nigeria and nations like China, the UK, and the EU, the minister claimed that the economic reforms had gained the respect of development partners. In order to assist the nation’s development plan, he cited recent high-level agreements that were inked with these partners.CONTINUE FULL READING>>>>>
