Nigeria’s debt burden continues its unrelenting surge

Nigeria’s public debt stock has soared again according to the latest official record that helps to take the debt burden to the top of the issues that will define the legacy of outgoing president Muhammadu Buhari who has superintended over the biggest debt accumulation in Nigeria’s history.

The Debt Management Office’s (DMO) latest quarterly data release on Nigeria’s debt stock shows that total public debt increased by around three percent q/q to NGN44.1trn or USD102bn as of September 2022. This does not include over N22trn in ways and means borrowing and which the government now seeks to convert to long-term bonds. The Senate has already rejected initial plans by the leadership of the upper house to stream roll this request.

The rising public debt stock continues to raise concerns about the nation’s debt sustainability, particularly in view of underperforming revenues.

The public debt burden of Africa’s most populous nation has been rising steadily, increasing by 16% on a y/y basis, government records indicate.

In terms of composition, the domestic and external debt components make up roughly 61% and 39% of the gross public debt respectively. This compares with the target split of 70% to 30% outlined in the DMO’s debt management strategy for 2020–2023.

A report by analysts at FBNQuest say based on 2021 GDP, the nation’s total debt stock has risen to around 25.4% of GDP compared with 24.7% as of Q2 ’22. Given the DMO’s public debt ceiling of 40%, the total public debt implies excess borrowing of NGN25.3trn above that limit.

The total public debt covers the external and domestic debt stock of the federal and state governments. In line with convention, it excludes sovereign debt owed by state-owned agencies like the Asset Management Corporation of Nigeria and the FGN’s ways and means advances.

Read also: Ghana’s debt overhang foretells Nigeria’s fate

According to data from the CBN, the bank’s ways and means advances to the FGN amounted to c.NGN23.8trn as at end-Oct ’22. Consequently, if the ways and means advances are added to the public debt stock, the nation’s gross public debt would rise to around 39% of (2021) GDP.

In a bid to address the ways and mean advances, the FGN has disclosed plans to securitise the debt through bonds with a 40-year tenor with an interest rate of 9%.

The FGN’s aggregate revenue outturn for the eight-month period to Aug ’22 was a paltry NGN4.6trn, representing a -36% shortfall relative to the budget target. The total debt service cost of NGN3.5trn over the same period implied a debt-service to revenue ratio of near 83%.

The nation’s legislature recently approved a 2022 supplementary budget of NGN820bn which will be funded by new borrowings. This will increase the fiscal deficit to around NGN8.2trn from NGN7.4trn envisaged in the initial 2022 budget.

Analysts including the World and the IMF have continued to urge Buhari to implement much needed fiscal reforms such as the elimination of subsidies, and a broadening of the tax base in order to reduce the fiscal deficit and the rise of public debt.

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