The Depth of Nigeria’s Debt

Nigeria’s public debt has been on the rise. Despite securing debt relief during the Olusegun Obasanjo-led administration, successive governments have continued on a borrowing spree — the federal government’s component of the public debt surging 658 percent to N26.9 trillion in the last 21 years from 1999 to 2021

Data from the DMO (Debt Management Office) showed that federal government borrowings (local and foreign debt) climbed from N3.55 trillion in 1999 to N26.91 trillion at the end of March 2021 (the country’s latest official figure).

This represents a 658 percent increase in 21 years, comprising the administrations of Olusegun Obasanjo, Umar Musa Yar’Adua, Goodluck Jonathan, and the current administration President Muhammadu Buhari.

During the tenure of former president Olusegun Obasanjo, the debt level of the federal government reduced from N3.55 trillion in 1999 to N2.42 trillion at the end of 2007. The 8-year term of Obasanjo resulted in a dip in FG’s local and foreign debt level, representing a 31.8 percent decline. The country’s exchange rate was between N98.02 to N116.8 to a dollar during the tenure. Analysis of the figures showed that external debt decreased from $28.04 billion by 1999 to $2.11 billion at the end of 2007. However, the domestic component increased from N798 billion to N2.17 trillion within the same period. The huge decline in foreign debt was a result of the substantial reduction following the pay-off of the outstanding debts owed to the London Clubs of Creditors in the first quarter of 2007.

During the tenure of former president Umar Musa Yar’Adua/Goodluck Jonathan-led government between 2007 and 2011, domestic debt of the federal government moved from N2.17 trillion to N5.62 trillion. The foreign component of the debt also increased from $2.11 billion to $3.5 billion within the period. The country’s exchange rate also moved from N116.8/$1 to N156.7/$1. The combined debt profile increased from N2.42 trillion to N6.17 trillion in four years, representing a 155 percent jump. 

Of the debt figure, Jonathan completed the tenure from May 2010 to May 2011 after the death of Yar’Adua. The period saw a surge in the federal government’s debt from N4.94 trillion to N6.17 trillion. This represents a 24.9 percent increase in one year. At the beginning of former President Goodluck Jonathan’s tenure in 2011, the federal government had an accumulated debt of N6.17 trillion. Analysis of the debt figure showed that local debt amounted to N5.62 trillion while foreign debt stood at $3.5 billion (about N548.65 billion, using the exchange rate of N156.7/$1). By the end of 2015, the foreign debt component hit $7.3 billion, while domestic debt increased by N8.4 trillion. The country’s exchange rate also stood at N197/$1. Overall, the federal government component of the total public debt increased from N6.17 trillion in 2011 to N9.8 trillion in 2015, representing an increase of N3.63 trillion or 58.8 percent.

The tenure of president Mohammadu Buhari by the Budget Office’s medium-term expenditure framework and fiscal strategy paper from 2015 showed that the administration incurred N7.63 trillion in domestic debt from June 2015 to December 2020.

On external borrowings, President Buhari increased debt from $7.3 billion in 2015 to $28.57 billion as of December 2020. This means that the president incurred $21.27 billion on foreign loans to the country’s debt portfolio. The country’s exchange rate moved from N197 to a dollar in 2015 to N381 at the end of December 2020. Analysis of consolidated debt showed that the external debt increased by 291.37 percent while domestic debt grew by 86.31 percent in the last six years of the Buhari government. Overall, the Buhari-led government has had an accumulated debt of N17.06 trillion as of March 2021, using the N381 exchange rate. This represents a 173.2 percent increase from when he was elected president in 2015.

Fast forward to 2022

As at September 2022 The House of Representatives joined the growing number of Nigerians that had expressed concern that the country might be approaching a debt trap, as the Debt Management Office (DMO) revealed that Nigeria’s total debt as at June this year stood at N42.84 trillion.

The legislative proclamations came on the same day President Muhammadu Buhari, in separate letters, requested the Senate and House of Representatives to approve the issuance of promissory notes totaling over N402 billion for the defrayal of some federal debts.

A breakdown of the debt figures released by the DMO yesterday showed that the bulk of the federal government borrowings were done domestically, with 72.53 per cent being FGN bonds.

A statement posted on the DMO’s website revealed that Nigeria’s total public debt stock, comprising the debt obligations of the federal, state governments, and the Federal Capital Territory (FCT) rose by N1.24 trillion within three months, from N41.60 trillion ($100.07 billion) as at March 30, 2022 to N42.84 trillion ($103.31billion) by June 30, 2022.

Latest data released by the DMO also indicated that domestic debt stock for the review period stood at N26.23 trillion ($63.24 billion) due to new borrowings by the federal government to part-finance the deficit in the 2022 Appropriation (Repeal and Enactment) Act, including fresh borrowings by state governments and the FCT.

From the N26.23 domestic debt stock standing during the reference period, the 36 states and FCT owed N5.281 trillion, while the federal government accounted for the balance of N20.949 trillion.

The DMO explained that total public Debt to GDP as of June 30, 2022, was 23.06 per cent, compared to 23.27 per cent as of March 30, 2022, noting that the Debt Service-to-Revenue Ratio remained high.

It said, “The total public debt stock, representing the domestic and external debt stocks of the Federal Government of Nigeria, the 36 state governments, and the Federal Capital Territory, was N42.84tn ($103.31 billion) as of June 30, 2022. The comparative figures for March 30, 2022 was N41.60tn ($100.07 billion).”

DMO stressed that external debt remained the same at N16.61trillion ($40.06 billion) from the first quarter (Q1) to the second quarter (Q2) 2022, adding that 58 per cent of external debts are concessional and semi-concessional loans from multilateral lenders, such as the World Bank, the International Monetary Fund (IMF), AfreximBank, and African Development Bank (AfDB), and bilateral lenders, such Germany, China, Japan, India, and France.

Meanwhile, an analysis of the DMO figures showed that domestic debt service between April 30 and June 30, 2022 gulped N664, 728,501,948.46. This was, however, less than the N668, 685, 710,112.98 committed to debt service in the first three months of 2022 (Q1).

Debt service instruments on which the amount was expended included Nigeria Treasury Bills (NTBs), Federal Government Bonds, and FGN Savings Bonds, among others. As at June 30, 2022, the total domestic debt stock of the country’s economic nerve-centre stood at N797, 305,312,602.53.

Statistically it shows that the depth of Nigeria’s debt has increased over the years, this increase negatively led to the devaluation of naira to other major currencies worldwide.