Nigeria’s total public debt has surged to N87.38tn at the end of the second quarter of 2023, marking a significant increase of 75.29 percent or N37.53tn compared to the N49.85tn recorded at the end of March 2023. The Debt Management Office (DMO) revealed that this substantial debt includes N22.71tn in Ways and Means Advances from the Central Bank of Nigeria (CBN) to the Federal Government.
The DMO report emphasized that Nigeria’s public debt comprises both domestic and external debts of the Federal Government, the 36 states, and the Federal Capital Territory. The major contributor to this surge in public debt was the inclusion of N22.712tn in securitized FGN’s Ways and Means Advances.
Additional factors contributing to the increase in debt stock were new borrowings by the Federal Government and sub-national entities from local and external sources. The DMO expressed optimism that reforms initiated by the current administration, along with recommendations from the Fiscal Reform and Tax Policies Committee, would impact debt strategy and enhance debt sustainability.
Previously, the DMO had projected that Nigeria’s public debt might reach N77tn after the National Assembly approved the restructuring of the CBN’s Ways and Means Advances. This facility allows the CBN to finance shortfalls in the government’s budget.
The breakdown of Nigeria’s total debt reveals N54.13tn in domestic debt and N33.25tn in external debt. Domestic debt accounts for 61.95 percent of the total, while external debt makes up 38.05 percent.
The DMO had warned in its 2022 Debt Sustainability Analysis Report that Nigeria’s projected revenue of N10tn for 2023 could not support additional borrowings, emphasizing the threat to debt sustainability posed by a high debt service-to-revenue ratio.
To address these concerns, the DMO recommended revenue generation initiatives, fiscal reforms, and private sector involvement in funding capital projects to reduce government borrowing. The agency also suggested the privatization or sale of government assets as a means to reduce borrowing.
President Bola Tinubu’s administration has expressed its commitment to break the cycle of overreliance on borrowing for public spending, focusing on improving revenue and the business environment. However, the devaluation of the Naira and increased domestic borrowing have contributed to the rise in public debt.
Economic experts have stressed the importance of examining the reasons behind government borrowings, particularly whether they are used for productive purposes that stimulate economic growth. The country’s high debt levels may affect any gains achieved through subsidy removal and other economic reforms.
While Nigeria’s debt structure primarily comprises multilateral loans with extended repayment periods, experts advise addressing revenue challenges and managing the cost of governance to ensure debt sustainability.
