Nigeria’s total public debt climbed to N142.3 trillion as of September 30, 2024, marking a 5.97 per cent increase (N8.02tn) from N134.3 trillion recorded in June 2024.
The debt, which includes both external and domestic obligations, underscores the significant impact of exchange rate depreciation on external borrowings when converted to naira.
According to data from the Debt Management Office, external debt in dollar terms experienced a marginal rise of 0.29 per cent, increasing from $42.90 billion in June to $43.03 billion in September. However, when measured in naira terms, external debt surged by 9.22 per cent, growing from N63.07 trillion to N68.89 trillion within the quarter. This sharp increase was driven by the depreciation of the naira, with the exchange rate weakening from N1,470.19/$ in June to N1,601.03/$ in September.
Conversely, domestic debt decreased by 5.34 per cent in dollar terms, falling from $48.45 billion in June to $45.87 billion in September. In naira terms, however, domestic debt rose by 3.10 per cent, from N71.22 trillion to N73.43 trillion during the period. The Federal Government’s external debt increased to $38.12 billion in September from $38.01 billion in June, while the combined external debt of states and the Federal Capital Territory (FCT) slightly rose from $4.89 billion to $4.91 billion.
In terms of domestic debt, the Federal Government’s obligations increased from N66.96 trillion to N69.22 trillion, while state and FCT debt saw a minor reduction from N4.27 trillion to N4.21 trillion.
Overall, Nigeria’s total public debt in dollar terms declined by 2.70 per cent, from $91.35 billion in June to $88.89 billion in September. However, the burden in naira terms remained substantial.
The rising debt profile, particularly in naira terms, raises concerns about debt sustainability, given the volatility of the exchange rate and its impact on the local currency cost of external obligations.
Analysis by The PUNCH indicates that the Federal Government’s domestic debt stock of N69.22 trillion as of September 30, 2024, was primarily driven by increased issuance of Federal Government bonds and a rise in promissory notes, reflecting the government’s reliance on domestic borrowing to finance fiscal obligations.
A breakdown of the debt by instruments reveals that Federal Government bonds remained the largest component, increasing by 4.47 per cent to N54.65 trillion in September from N52.32 trillion in June. This accounts for 78.95 per cent of the total domestic debt stock, up from 78.13 per cent in the previous quarter. The rise was primarily driven by naira-denominated bonds, with a newly introduced dollar-denominated bond adding N1.47 trillion to the domestic debt stock.
Nigeria recently launched its first-ever domestic dollar-denominated bond, attracting over $900 million in subscriptions. The $500 million bond, coordinated by the Africa Finance Corporation, marked a milestone in Nigeria’s economic development and demonstrated growing investor confidence in the country’s capital market. Issued with a five-year tenure and an annual coupon of 9.75 per cent, the bond achieved a 180 per cent subscription rate.
Nigerian Treasury Bills, the second-largest domestic debt component, saw a slight decline of 0.66 per cent, decreasing from N11.81 trillion to N11.73 trillion. This aligns with efforts to moderate short-term debt instruments amid concerns over rollover risks and rising interest rates.
Promissory notes, issued to settle government obligations such as contractor payments, grew by 5.80 per cent to N1.77 trillion in September from N1.67 trillion in June. This includes a notable rise in foreign-denominated promissory notes, which increased from N1.18 trillion to N1.19 trillion due to currency fluctuations.
FGN Sukuk, a key infrastructure funding instrument, decreased by 9.14 per cent to N992.56 billion from N1.09 trillion, while FGN Savings Bonds rose by 16.11 per cent to N64.09 billion from N55.20 billion, reflecting increased participation from retail investors. The Green Bond component remained unchanged at N15 billion, maintaining its minimal 0.02 per cent contribution to the domestic debt stock.
The overall increase in domestic debt highlights the Federal Government’s growing reliance on local markets to finance budget deficits in the face of constrained foreign exchange reserves and limited external borrowing options.
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