The naira value of Nigeria’s total external debt for its 36 states and the Federal Capital Territory (FCT) surged by 23.76% from June 2023 to December 2023, climbing from N3.350 trillion to N4.146 trillion.
As per the data released by the Debt Management Office (DMO), the combined external debt of the 36 states and the FCT was $4.349 billion as of June 30, 2023, equivalent to N3.350 trillion based on the exchange rate of N770.38/$.
However, by December 31, 2023, despite only a 6% increase in the total external debt, amounting to around $261 million, the naira value soared by N796 billion to N4.146 trillion.
The escalation in the naira value of the sub-national external debt is attributed to the substantial depreciation of the naira during the six months. While the exchange rate of N770.38/$ was utilized in computing the naira value of the external debt in June, it rose to N899.39/$ by December, reflecting a difference of N129.01.
Over the six months from June 30 to December 31, 2023, the naira depreciated by 17.92%, ending the year at N907.11/$ from N769.25/$ in June 2023.
Considering the current exchange rate of approximately N1250/$, the naira value of the subnational external debt would significantly increase from the figure provided by the DMO.
The depreciation of the naira also impacts the federal government’s external debt, with an additional N1.737 trillion added to its naira value due to the currency’s depreciation, as reported by Nairametrics.
The heightened naira value of external debt burdens state governments with exorbitant debt servicing costs. States like Lagos and Kaduna, with external debt stocks of $1.24 billion and $587.07 million, face challenges in managing their debt obligations.
Kaduna State Governor, Sen. Uba Sani, recently highlighted the burden of servicing the state’s substantial external debt inherited from his predecessor. He noted that the state’s debt has led to significant deductions from its monthly allocation from the Federation Account Allocation Committee (FAAC), diverting resources from critical sectors to debt servicing.
