Naira depreciation, domestic borrowings drive up public debt by N8tr in three months

Nigeria’s total public debt rose by 5.97 per cent or N8.02 trillion to N142.3 trillion as of September 30, 2024, the Debt Management Office (DMO) has said.

Nigeria has been battling rising debt profile, raising sustainability fear.

The DMO said the rise was driven by naira depreciation as well as the heavy domestic borrowings by the federal government.

The exchange rate weakened from N1,470.19/$ in June to N1,601.03/$ by the end of September.

According to the DMO, the Federal Government accounts for the bulk of domestic debt, which rose from N66.96 trillion in June to N69.22 trillion by September.

The potion owed by states and the Federal Capital Territory (FCT) declined slightly during the period, from N4.27 trillion to N4.21 trillion.

Nigeria’s total public debt was N134.3 trillion as of June 2024.

Data from the DMO showed that Nigeria’s external debt in dollar terms grew marginally from $42.9 billion in June to $43.03 billion in September.

However, the naira equivalent of external debt surged significantly by 9.22 per cent, rising from N63.07 trillion to N68.89 trillion during the same period.

Domestic debt recorded mixed performance, declining by 5.34 per cent in dollar terms from $48.45 billion in June to $45.87 billion in September. In naira terms, however, domestic debt increased by 3.1 per cent, from N71.22 trillion to N73.43 trillion.

It was observed that Federal Government bonds remained the largest component of domestic debt, increasing by 4.47 per cent to N54.65 trillion in September, up from N52.32 trillion in June.

This represents 78.95 per cent of the total domestic debt stock, an increase from 78.13 per cent in the previous quarter.

The issuance of bonds in naira terms accounted for the majority of this growth.

It was also noticed that Nigeria’s first domestic dollar-denominated bond added N1.47 trillion to the debt stock.

The report also shows that the second-largest domestic debt component, Treasury Bills, declined marginally by 0.66 per cent to N11.73 trillion, from N11.81 trillion in the previous quarter.

This reduction aligns with efforts to moderate short-term debt and mitigate rollover risks.
Promissory notes, used to settle government obligations, grew by 5.8 per cent, increasing from N1.67 trillion in June to N1.77 trillion in September.

While the Federal Government Sukuk, an infrastructure funding instrument, declined by 9.14 per cent to N992.56 billion, down from N1.09 trillion.

The DMO also reports that savings bonds increased by 16.11 per cent to N64.09 billion, reflecting growing retail investor participation.

It, however, said green bonds remained unchanged at N15 billion, maintaining their minimal contribution of 0.02 per cent to the domestic debt stock. Analysis of Nigeria’s external debt stock of $43.03 billion in September 2024 revealed a largely stable profile, with only minor adjustments in multilateral and bilateral obligations.

Multilateral obligations increased by 0.67 per cent to $21.77 billion, maintaining their dominance at 50.6 per cent of the total external debt.

The increase was driven by additional disbursements from institutions like the World Bank, which added $513.06 million to its International Development Association portfolio, now at $16.84 billion.

Bilateral debt decreased slightly by 1.33 per cent, falling from $5.89 billion to $5.81 billion.

The report also shows that loans from China, Nigeria’s largest bilateral lender, declined by $99.98 million, while obligations to France and Germany remained stable.

In the area of commercial loans, primarily Eurobonds, were unchanged at $15.12 billion, representing 35.14 per cent of total external debt.

Nigeria raised $2.2 billion through its Eurobond auction in December 2024. That marked Nigeria’s return to the international capital markets. The funds were raised through two bonds: a 6.5-year $700 million bond at 9.625 per cent and a 10-year $1.5 billion bond at 10.375 per cent.

While total subscriptions exceeded $9 billion, only $2.2 billion was allotted. These funds are expected to support the 2024 budget amid revenue shortfalls and mounting public spending pressure.