Unpacking the drivers of Nigeria’s rising debt stock

Nigeria’s total debt stock rose from ₦49.85 trn in March 2023 to ₦121.67 trn in March 2024 (an increase of 144%).

But when expressed in dollars, it shows that the debt fell from $108.30 bn to $91.46 bn (a 15.54% decline) during this period.

Same debt, but different interpretations, when expressed in two different currencies. The problem with this inconsistency is that it can be exploited to support different views in the argument for and against the country’s debt accumulation.

Well, economists often apply a constant price of a base year as a way of resolving issues like this.

In the attached report, the ADSR Team examines this issue.

After controlling for devaluation effect, it is found that Nigeria’s total debt (valued at March 2023 exchange rate) effectively rose from $108.30 bn to US$184.72 bn as of March 2024.

Further analyses to unpack Nigeria’s ₦121.67 trn debt shows that:

• 40.80% of the current debt is existing debt stock
• 18.58% is existing securitised CBN Ways & Means (W&M)
• 10.42% is the new domestic borrowing incurred in the last one year, including new W&M
• -0.21% is a net reduction in external borrowing, and
• 29.99% of the current debt is due to naira devaluation.

*Hence, exchange rate is a major driver of Nigeria’s debt.