Nigeria’s debt burden is projected to soar to N187.79 trillion by 2025, driven by rising borrowing costs, naira depreciation, and aggressive government borrowing, according to a recent report by investment and research firm CardinalStone. The report, titled “Pressure to Plateau,” also estimates that the nation’s debt will reach N153.04 trillion by the end of 2024.
Key Drivers of Rising Debt
The accumulation in Nigeria’s debt stock is attributed to several factors:
- Issuance of a $900 billion dollar-denominated domestic bond.
- Regular borrowing via Nigeria Treasury Bills (NTBs) and bonds.
- A return to the Eurobond market, raising $2.20 billion.
The country’s total debt surged from N49.85 trillion before the 2023 general elections to N134.30 trillion by the end of June 2024. Domestic borrowing now accounts for 53% of the debt profile, with federal government obligations standing at N66 trillion and states at N4 trillion. Meanwhile, foreign debt stands at N63 trillion, representing 47% of the total.
Alarming Debt Ratios and Revenue Challenges
The Federal Government’s debt service cost reached N6.0 trillion in the first half of 2024, a 69% year-on-year increase, consuming 50% of aggregate expenditure. The debt-service-to-revenue ratio climbed to 162%, up from 128% in the same period of 2023, underscoring the strain on government finances.
Despite a public debt-to-GDP ratio below the IMF’s 60% benchmark for emerging markets, Nigeria’s weak revenue base and foreign exchange volatility pose significant risks.
Debt Maturities and Servicing Outlook
Nigeria faces Eurobond maturities averaging $1.33 billion annually over the next decade, excluding coupon payments. Total annual debt servicing costs could average $2.24 billion, keeping the fiscal burden high in the medium term.
While external debt metrics remain within the IMF’s prescribed thresholds, analysts warn of a potential debt crisis if current trends persist. Elevated debt service costs could crowd out capital expenditure, exacerbating the country’s economic challenges during its worst cost-of-living crisis in decades.
Conclusion
The rising debt profile highlights the urgency for fiscal reforms to bolster revenue generation, manage expenditure, and stabilize the nation’s economy. Failure to address these challenges may further strain public finances and threaten economic sustainability.
