…As debt service costs rise to N3.57trn
By Charles Ebi
Nigeria’s total public debt rose to N142.3 trillion as of September 30, 2024, representing an increase of 5.97% (N8.02 trillion) compared to N134.3 trillion in June 2024.
This is according to the latest data released by the Debt Management Office ,DMO, on Tuesday.
The increase reflects the combined effects of rising domestic borrowing and the impact of exchange rate depreciation on external debt when converted to naira terms.
Data from the DMO showed that Nigeria’s external debt in dollar terms grew marginally by 0.29%, from $42.90 billion in June to $43.03 billion in September.
However, the Naira equivalent of external debt surged significantly by 9.22%, rising from N63.07 trillion to N68.89 trillion during the same period.
The increase was largely driven by the naira’s depreciation against the US dollar, as the exchange rate weakened from N1,470.19/$ in June to N1,601.03/$ by the end of September.
Domestic debt recorded mixed performance, declining by 5.34% in dollar terms from $48.45 billion in June to $45.87 billion in September. In naira terms, however, domestic debt increased by 3.10%, from N71.22 trillion to N73.43 trillion.
The Federal Government accounted for the bulk of domestic debt, which rose from N66.96 trillion in June to N69.22 trillion by September. In contrast, domestic debt owed by states and the Federal Capital Territory ,FCT, declined slightly, from N4.27 trillion to N4.21 trillion.
It was further observed that Federal Government bonds remained the largest component of domestic debt, increasing by 4.47% to N54.65 trillion in September, up from N52.32 trillion in June. This represents 78.95% of the total domestic debt stock, an increase from 78.13% in the previous quarter.
The issuance of bonds in naira terms accounted for the majority of this growth. Also, Nigeria introduced its first domestic dollar-denominated bond, adding N1.47 trillion to the debt stock.
The second-largest domestic debt component, Treasury Bills, declined marginally by 0.66% to N11.73 trillion, from N11.81 trillion in the previous quarter. This reduction aligns with efforts to moderate short-term debt and mitigate rollover risks.
Promissory notes: Promissory notes, used to settle government obligations, grew by 5.80%, increasing from N1.67 trillion in June to N1.77 trillion in September.
FGN Sukuk: Federal Government Sukuk, an infrastructure funding instrument, declined by 9.14% to N992.56 billion, down from N1.09 trillion.
FGN Savings Bonds: Savings bonds increased by 16.11% to N64.09 billion, reflecting growing retail investor participation.
Green Bonds: Green bonds remained unchanged at N15 billion, maintaining their minimal contribution of 0.02% to the domestic debt stock.
Analysis of Nigeria’s external debt stock of $43.03 billion in September 2024 revealed a largely stable profile, with only minor adjustments in multilateral and bilateral obligations.
Multilateral debt: Multilateral obligations increased by 0.67% to $21.77 billion, maintaining their dominance at 50.60% of the total external debt. The increase was driven by additional disbursements from institutions like the World Bank, which added $513.06 million to its International Development Association portfolio, now at $16.84 billion.
Bilateral loans: Bilateral debt decreased slightly by 1.33%, falling from $5.89 billion to $5.81 billion. Loans from China, Nigeria’s largest bilateral lender, declined by $99.98 million, while obligations to France and Germany remained stable.
Commercial loans: Commercial loans, primarily Eurobonds, were unchanged at $15.12 billion, representing 35.14% of total external debt.
Nigeria raised $2.2 billion in December 2024 through its Eurobond auction, marking its return to the international capital markets. The funds were raised through two bonds: a 6.5-year $700 million bond at 9.625% and a 10-year $1.5 billion bond at 10.375%.
While total subscriptions exceeded $9 billion, only $2.2 billion was allotted. These funds are expected to support the 2024 budget amid revenue shortfalls and mounting public spending pressures.
The addition of Eurobond proceeds in Q4 2024 is expected to further increase the country’s external debt.
The rising debt profile, coupled with naira depreciation and increasing reliance on domestic borrowing, raises questions about Nigeria’s debt sustainability.
Meanwhile, Nigeria’s total debt service costs climbed to N3.57 trillion in the third quarter of 2024, up by N60 billion or 1.71% from N3.51 trillion in Q2.
This is according to the latest data from the Debt Management Office (DMO).
This increase reflects a combination of higher external debt service obligations and the impact of naira depreciation.
External debt servicing in Q3 amounted to $1.34 billion, translating to N2.14 trillion at the September exchange rate of N1,601.03/$, compared to $1.12 billion (N1.65 trillion) in Q2 at the June rate of N1,470.19/$. This represents a 29.70% rise in naira terms and a 19.44% increase in dollar terms.
The exchange rates used for the external debt were provided by the DMO in its reports.
The rise was primarily driven by higher obligations to multilateral and bilateral creditors, alongside significant interest payments on commercial loans.
Multilateral debt: Payments totalled $712.66 million in Q3, up 6.04% from $672.01 million in Q2. This segment accounted for 53.26% of total external debt service costs, reflecting increases in principal repayments and interest charges. Payments to the International Monetary Fund (IMF) rose marginally to $406.98 million from $404.24 million in Q2.
Bilateral debt: Payments surged 325.52% quarter-on-quarter to $186.92 million, driven largely by obligations to China’s Exim Bank, which accounted for $182.04 million in Q3 compared to zero in Q2. Other bilateral creditors, such as the Exim Bank of India and the French Development Agency, recorded modest increases.
Commercial debt: Total obligations for commercial loans, including Eurobonds, rose 8.48% to $438.68 million in Q3 from $404.46 million in Q2. Eurobond interest payments dominated this category at $427.72 million.
Domestic debt servicing dropped to N1.43 trillion in Q3 from N1.86 trillion in Q2. Federal Government bonds continued to dominate, accounting for 87.41% of domestic debt service at N1.25 trillion, although this was a decline from N1.68 trillion in Q2.
Interest payments on Nigerian Treasury Bills ,NTBs, rose significantly, reaching N168.53 billion in Q3 from N107.48 billion in Q2, marking a 56.8% increase. This suggests an increased reliance on short-term borrowing instruments.
Other components of domestic debt service showed minimal changes:
FGN Sukuk bonds incurred N8.28 billion in interest payments.
Federal Government savings bonds accounted for N1.83 billion in interest.
There were no recorded repayments of principal on promissory notes or other debt instruments in Q3.
Economic analysts have repeatedly raised concerns over the rising debt service burden, which continues to consume a significant portion of government revenue.
With both external and domestic debt service obligations driving substantial fiscal outflows, the need for enhanced revenue generation and prudent fiscal management has become increasingly urgent.
The sharp rise in bilateral debt service costs, particularly to China’s Exim Bank, and the increased reliance on short-term instruments like NTBs highlight the pressing need for a comprehensive debt strategy to ensure sustainability.
As Nigeria grapples with rising debt obligations, external payments are becoming more vulnerable to exchange rate fluctuations, further straining government finances.
The situation highlights the importance of diversifying revenue streams and implementing structural reforms to reduce dependence on borrowing.
