Nigeria's Debt Expected to Reach N130tn by December - Report

Nigeria's public debt stock is projected to reach ₦130 trillion by December 2024, according to a recent report by Afrinvest, an investment management company.

The report, titled "Bank Recapitalisation, Catalyst for a $1tn Economy," was unveiled in Abuja and highlights massive concerns regarding the country's debt-to-GDP ratio.

As of the first quarter of 2024, Nigeria's public debt stood at ₦121.67 trillion, up from ₦97.34 trillion in the fourth quarter of 2023, marking a growth rate of 24.99% on a quarter-on-quarter basis. The debt composition includes ₦77.5 trillion (63.6%) in domestic debt and ₦44.2 trillion (36.4%) in external debt.

The domestic debt comprises ₦44.8 trillion in Federal Government bonds, ₦20.3 trillion in Treasury bills, and ₦12.4 trillion in other domestic debt. The external debt is made up of ₦14.3 trillion from multilateral creditors, ₦10.9 trillion from bilateral creditors, and ₦19.0 trillion from commercial creditors.

Afrinvest's report also projects that by the end of 2024, the fiscal deficit, total public debt stock, debt-to-GDP ratio, and debt-servicing-to-revenue rate will exceed ₦13.0 trillion, ₦130 trillion, 55%, and 60%, respectively.

The report criticizes the 2024 budget for being based on "overly optimistic" revenue assumptions, which could lead to a repeat of historically disappointing budget performance. It states, "The expectation of a 43.9% share of the projected revenue from oil and other minerals is unrealistic."

In 2023, Nigeria's actual budget performance revealed a sustained under-performance, with actual revenue outpacing the budgeted amount by 7.6% to ₦11.9 trillion. However, aggregate expenditure rose by 31.8% to ₦18.8 trillion, leading to a higher deficit of ₦46.9 trillion.

The report notes, "The share of Federal Government’s debt in total public debt stock rose 44.6% year-on-year to ₦487.3 trillion, accounting for 89.7% of total public debt stock by year-end."

Afrinvest further warns that the Federal Government’s expansive borrowing plan could negatively impact banks' deposits due to the attractive yields on risk-free papers compared to interest on banks' deposits.

The report commends the Central Bank of Nigeria's efforts to streamline the number of Bureau De Change operators and sustain policies on the collapse of previous multiple forex segments.

However, it cautions that "what should have been a short-term pain from this policy action has become endemic, due to the weak forex reserve war chest to adequately meet up with market demand."

To address these challenges, the report recommends exploring alternative sources of forex, such as bilateral loans, natural resource-tied loans, debt-for-nature swaps, and asset concessions, to provide extended short-term reliefs.

It concludes that for the forex market to experience sustainable tranquillity, traditional forex inflow sources—oil production, remittances, and foreign portfolio investment—must be revitalized by supportive fiscal policies.