Nigeria’s total public debt increased marginally by 0.61% to N87.91 trillion in the third quarter of 2023, according to the latest data from the Debt Management Office (DMO). The debt stock comprises the domestic and external obligations of the federal government, the 36 state governments, and the Federal Capital Territory.
However, the external debt component of the total debt decreased for the first time in a year, dropping from $43.16 billion in June to $41.59 billion in September. The DMO attributed the decline to the redemption of a $500 million Eurobond and the repayment of $413.855 million as the first principal installment of the $3.4 billion loan obtained from the International Monetary Fund (IMF) in 2020.
The DMO said the servicing of these debts, as well as other obligations, demonstrated the federal government’s commitment to honoring its debt obligations. It also stressed the importance of President Muhammadu Buhari’s initiatives and actions towards revenue generation for Nigeria’s overall fiscal balance.
The breakdown of the external debt shows that Nigeria owed the IMF $2.82 billion as of September; the World Bank’s International Development Association, $14.09 billion; and the International Bank for Reconstruction and Development, $488.19 million.
Other multilateral creditors include the African Development Bank, $1.64 billion; Africa Growing Together Fund, $22.98 million; African Development Fund, $973.02 million; Arab Bank for Economic Development in Africa, $5.15 million; European Development Fund, $34.30 million; Islamic Development Bank, $236.11 million; and International Fund for Agricultural Development, $266.64 million.
The country also owed bilateral creditors such as China, $4.81 billion; France, $563.17 million; Japan, $55.34 million; India, $23.66 million; and Germany, $134.92 million.
On the commercial side, Eurobond amounted to $15.11 billion and syndicated loans were $300 million.
The domestic debt stock, which stood at N50.19 trillion as of September, consists of FGN Bonds worth N43.17 trillion; Nigerian Treasury Bills, N4.7 trillion; Nigerian Treasury Bonds, N25.98 billion; FGN Savings Bond, N33.92 billion; FGN Sukuk, N742 billion; Green Bond, N15 billion; and promissory notes, N1.47 trillion.
The DMO said the total domestic debt service from July to September was N1.79 trillion.
Nigeria’s debt profile has been a source of concern for many analysts and stakeholders, who have warned of its implications for the country’s economic growth and development. Some have also questioned the transparency and accountability of the debt management process, as well as the efficiency and impact of the borrowed funds.
The DMO has maintained that Nigeria’s debt level is sustainable and within the acceptable threshold for developing countries. It has also said that the borrowing strategy is aimed at reducing the cost of debt service, diversifying the sources of funding, and creating a long-term debt portfolio.
Nigeria is not alone in facing the challenge of rising debt amid the global economic downturn caused by the pandemic. Many countries, especially in Africa, have seen their debt burdens increase as they struggle to cope with the health and social impacts of the crisis.
According to the World Bank, the average debt-to-GDP ratio for sub-Saharan Africa rose from 57% in 2019 to 65% in 2020, the highest level in almost two decades. The Bank also estimated that 17 countries in the region were in debt distress or at high risk of debt distress as of October 2020.
To address this situation, the international community has launched several initiatives to provide debt relief and support to the most vulnerable countries. These include the G20’s Debt Service Suspension Initiative (DSSI), which allows eligible countries to defer their debt payments to official bilateral creditors until June 2021, and the IMF’s Catastrophe Containment and Relief Trust (CCRT), which provides grants for debt service relief to the poorest and most affected countries.
Nigeria has benefited from both initiatives, saving about $1.9 billion and $3.4 billion respectively. However, some experts have argued that these measures are not enough and have called for more comprehensive and coordinated actions, such as debt restructuring, cancellation, or forgiveness.
As Nigeria and other African countries continue to grapple with the debt challenge, they also need to explore alternative and innovative ways of financing their development needs, such as mobilizing domestic resources, attracting foreign direct investment, and leveraging the private sector. They also need to ensure that their debt management is transparent, accountable, and aligned with their national priorities and the Sustainable Development Goals.
By doing so, they can hope to overcome the current difficulties and achieve a more resilient and inclusive recovery.
Source: Business Day
