Nigeria reached a significant economic milestone last week as its debt-to-GDP ratio exceeded 50% for the first time in history, following the latest publication of public debt figures by the Debt Management Office (DMO).
The DMO report reveals that Nigeria’s total public debt now stands at N121 trillion, comprising N65.6 trillion in domestic debt and a foreign debt portfolio valued at $42.1 billion (equivalent to N56 trillion when converted). This increase underscores a growing fiscal challenge amid moderate GDP growth, which was recorded at 2.74% in real terms, with a nominal GDP of N229.9 trillion as of December 2023.
Recent GDP figures indicate fluctuations, with the first quarter of 2024 showing a nominal GDP of N58.5 trillion, up from N51.2 trillion in the same period the previous year. Despite variations throughout 2023, culminating in a fourth-quarter GDP of N65.9 trillion and a trailing four-quarter total of N237.5 trillion, the debt-to-GDP ratio has notably surpassed the 50% mark.
Comparatively, neighboring countries like Ghana and South Africa present higher debt-to-GDP ratios of 84.9% and 72.2%, respectively, underscoring Nigeria’s historical preference for a lower ratio as a sign of economic robustness. However, mounting debt obligations have strained the government’s ability to meet financial commitments, exacerbated by a high debt service-to-revenue ratio.
Over the past eight years, Nigeria’s debt profile has escalated amid fiscal challenges triggered by fluctuating crude oil revenues and increased government spending. Under President Buhari’s administration, public debt soared from N12.6 trillion in 2015 to N97.3 trillion by the end of 2023, further ballooning to N121 trillion with additional borrowing and naira devaluation between December 2023 and March 2024.
The DMO attributes this rise primarily to fresh borrowing, amounting to N24.33 trillion during the period, including significant portions allocated under the 2024 Appropriation Act and through securitization of Ways and Means Advances approved by the National Assembly.
Moody’s, a global ratings agency, predicts that Nigeria’s interest expenditure on debt could consume up to 36% of the federal government’s revenue in 2024, exacerbated by the Central Bank of Nigeria’s aggressive monetary policy stance, which has driven local borrowing rates from 12.8% in 2023 to approximately 19% in early 2024.
As Nigeria’s debt-to-GDP ratio continues to rise, surpassing 50% for the first time, the country faces constrained fiscal maneuverability amid ongoing economic challenges. This milestone reflects a critical juncture for policymakers as they navigate sustainable economic strategies amidst burgeoning debt obligations and evolving global financial conditions.
Nigeria’s recent fiscal data underscores the pressing need for prudent debt management and strategic economic policies to stabilize its financial outlook and sustain long-term economic growth.
