According to an investment firm report, Cardinalstone, Nigeria’s debt stock is projected to escalate to N187.79 trillion again by 2025, as it continues to reel from growing costs associated with borrowing, coupled with the naira depreciation and continued aggressive accumulation of debts. The report revealed a total debt forecast at N153.04 trillion, which is expected by the end 2024.
Key components of this increase in debt include the issuance of domestic bonds denominated in dollars for amounts up to $900 billion, continuous borrowing through Nigeria Treasury Bills (NTBs) and bonds, and a recent Eurobond issuance of $2.2 billion.
The increase in the government’s debt has been very alarming, increasing from N49.85 trillion before the 2023 elections to N134.30 trillion by mid-2024.
According to the Debt Management Office (DMO), Nigeria’s foreign debt was N63 trillion ($43 billion) in the second quarter of 2024, accounting for 47% of total debt. Most of this debt is owed by the Federal Government, which incurred N56 trillion in direct borrowing, while states and the Federal Capital Territory (FCT) together have an outstanding N7 trillion borrowing from foreign lenders.
The debt to GDP ratio of Nigeria moved from 53% in the first quarter to 58% in the second quarter of 2024. However, it surpassed the 40% debt ceiling stipulated by the DMO but remained below the IMF’s threshold of 60% for emerging markets.
The prevailing scenario signifies growing concern over debt-service ratios even as debt persists on the increase. For instance, debt service levels soared by 69% year-on-year to about N6.0 trillion in H1 2024 and accounted for 50% of the Federal Government total expenditure, thus coming up with a debt service to revenue ratio of 162%, against the 128% posted in H1 2023.
The analysts warn that Nigeria might plunge into a debt crisis as it witnesses its worst cost-of-living crisis in decades. It also notes pending liabilities with an average of $1.33 billion worth of Eurobond maturities every year over the next decade. As stated in the report, total debt servicing costs, including coupon payments, would represent expected annual expenditure of a whopping $2.24 billion.
