Nigeria’s Public Debt Reaches N134.3 Trillion in Q2 2024: Impact of Naira Devaluation

Nigeria’s public debt climbed to N134.3 trillion ($91.3 billion) by the end of the second quarter of 2024, representing a 10.35% increase from the N121.7 trillion ($91.5 billion) recorded in the first quarter. This rise is largely attributed to the devaluation of the naira, emphasizing the country’s ongoing challenges due to currency volatility, as indicated in a report from the Ministry of Finance.

Although the debt level increased in naira terms, the dollar equivalent remained stable, highlighting the significant effect of currency fluctuations on the nation’s debt profile.

Domestic Debt Takes the Lead in Public Debt Composition

As of Q2 2024, domestic debt accounted for 53% of the total, reaching N71.2 trillion ($48.4 billion). In contrast, external debt comprised the remaining 47%, amounting to N63.1 trillion ($42.9 billion). This breakdown shows the government’s reliance on domestic borrowing, a trend shaping Nigeria’s debt strategy.

With the country’s debt-to-GDP ratio surpassing 50%, concerns have been raised regarding long-term fiscal sustainability. FGN Bonds dominate the domestic debt market, representing 78% of the total, with other instruments such as Nigerian Treasury Bills, Savings Bonds, and Sukuk contributing to the debt pool. On the external front, multilateral loans account for 50.4%, while bilateral and commercial loans comprise 13.7% and 35.9%, respectively, indicating Nigeria’s diverse borrowing avenues.

Focus on Sustainable Debt Management

During the recent IMF/World Bank meetings in Washington D.C., discussions centered around Nigeria’s active participation in the global debt market, despite the growing costs of financing since 2021. Finance Minister Wale Edun highlighted the importance of securing affordable financing to support Nigeria’s economic reforms and long-term resilience. Edun also reiterated the need for stronger international collaboration to ensure that domestic economic strategies deliver their intended benefits.

Rising Debt Servicing Costs Continue to Pressure Nigeria’s Finances

Nigeria’s debt servicing costs have surged dramatically in 2024. During the first half of the year, debt servicing payments reached N6.04 trillion, a 69% increase from N3.58 trillion in the same period of 2023. The rising cost is largely driven by the devaluation of the naira, which has increased the burden of foreign debt repayments.

According to data from the Central Bank of Nigeria, debt servicing now accounts for 50% of total expenditure and an alarming 162% of the total revenue generated in the first half of 2024, underscoring the growing strain on government finances.