Nigeria’s debt-to-GDP ratio has surpassed 50% for the first time in history, signaling a concerning milestone for Africa’s largest economy. The Debt Management Office (DMO) reported a public debt portfolio of N121 trillion, comprising N65.6 trillion in domestic debt and a foreign debt portfolio of $42.1 billion as of the latest figures. This represents a significant increase from the comparative figures for December 2023, raising concerns about the country’s fiscal sustainability.
The surge in Nigeria’s debt-to-GDP ratio is attributed to the nominal gross domestic product (GDP) of N229.9 trillion in December 2023, which recorded a modest 2.74% growth in real terms. These figures reflect a challenging economic landscape where the debt burden has outpaced the growth of the economy, raising alarm bells among analysts and economic observers. The first quarter of 2024 witnessed a nominal GDP increase to N58.5 trillion, further intensifying concerns about the country’s ability to manage its burgeoning debt.
Additionally, Nigerian states have faced a notable escalation in their external debt servicing obligations, with a 123% increase in the first four months of 2024 compared to the same period in 2023. Data from the National Bureau of Statistics revealed that total external debt service payments soared to N96.52 billion, marking a substantial rise from the previous year. This surge in external debt servicing costs has heightened apprehensions about the sustainability of Nigeria’s debt dynamics and the implications for the country’s financial stability.
The rising debt and its accompanying servicing costs have sparked widespread apprehensions among economic experts. The DMO’s announcement of the surge in public debt to N121.67 trillion in March 2024, a N24.33 trillion increase within three months, has intensified these concerns. Notably, the DMO clarified that the increase in naira terms of N24.33 trillion is not solely attributed to new borrowing. It encompasses a variety of factors, including new domestic borrowing provided in the 2024 Appropriation Act and the securitization of Ways and Means Advances approved by the National Assembly, as well as the depreciation in the official naira exchange rate.
The rapid escalation in Nigeria’s total public debt and the growing burden of external debt servicing costs have ignited a series of discussions among economic stakeholders. The implications of the country’s debt overhang on economic growth and financial stability are under scrutiny, as fears of a potential debt crisis loom large over Nigeria’s economic landscape. With the debt-to-GDP ratio crossing the critical 50% threshold and external debt obligations surging, the Nigerian government faces the urgent challenge of formulating sustainable debt management strategies to navigate these treacherous fiscal waters.
In conclusion, Nigeria’s surging debt-to-GDP ratio and escalating external debt servicing costs have stoked concerns about the country’s fiscal health and economic stability. The imperative to address these challenges and institute prudent fiscal measures has become increasingly urgent, as the ramifications of the burgeoning debt burden reverberate across Nigeria’s financial landscape.
