Nigeria recently surpassed a significant economic milestone, as its debt-to-GDP ratio crossed 50% for the first time. This announcement followed the Debt Management Office’s publication of the latest public debt figures.
Nigeria’s total public debt stands at N121 trillion, comprising N65.6 trillion in domestic debt and a foreign debt portfolio amounting to $42.1 billion, which converts to N56 trillion in local currency.
By December 2023, Nigeria’s nominal GDP totalled N229.9 trillion, with a modest 2.74% growth in real terms. This growth underscores Nigeria’s debt-to-GDP ratio has now breached the 50% mark for the first time.
Current Debt-to-GDP Analysis
In the first quarter of 2024, Nigeria reported a nominal GDP of N58.5 trillion, up from N51.2 trillion in 2023. In the subsequent quarters of 2023, they recorded nominal GDP figures of N52.1 trillion and N60.6 trillion, respectively, with a fourth-quarter GDP reaching N65.9 trillion. This cumulative GDP over four quarters totals N237.5 trillion.
Based on the 2023 GDP figure of N229.9 trillion, Nigeria’s debt-to-GDP ratio stands at 52.9%, marking a historic high for the country. Using the trailing four-quarter GDP figure of N237.5 trillion, the ratio slightly decreases to 51.2%.
Significance of the Rising Debt
Previously, Nigeria viewed its relatively low debt-to-GDP ratio as a sign of economic resilience, implying room for further borrowing. As of 2023, Ghana, South Africa, Kenya, and Egypt reported significantly higher ratios, indicating more extensive borrowing capacity. However, Nigeria faces challenges meeting its debt service obligations due to a high debt service-to-revenue ratio.
With Nigeria’s debt-to-GDP ratio now exceeding 50% and continuing to rise, the country’s capacity for additional borrowing diminishes amid ongoing economic challenges.
Evolving Debt Profile
Over the past eight years, Nigeria’s debt profile has expanded amidst fiscal challenges driven by low crude oil revenues and increased government expenditures. Under the Buhari administration alone, public debt escalated from N12.6 trillion in 2015 to N97.3 trillion by 2023.
From December 2023 to March 2024, Nigeria’s public debt in Naira terms surged by N24.3 trillion, attributed to new borrowings and currency devaluation. Fresh borrowing in the first quarter of 2024 amounted to N7.71 trillion, including N2.81 trillion from new domestic borrowing and N4.90 trillion from securitization of Ways and Means Advances approved by the National Assembly.
Moody’s, a global ratings agency, forecasts that Nigeria’s interest payments on debt could consume up to 36% of the federal government’s revenue in 2024. This increase is partly due to the Central Bank of Nigeria’s stringent monetary policy, which raised local borrowing interest rates from an average of 12.8% in 2023 to approximately 19% in the first five months of 2024.
