The Debt Management Office (DMO) has announced that the federal government’s domestic debt stock reached N66.957 trillion by the first half of 2024, representing an 8.74% rise from N61.578 trillion at the end of Q1.
During the second quarter of 2024 alone, the government added N5.379 trillion to its domestic debt through financial instruments including FGN Bonds, Nigerian Treasury Bills (NTB), FGN Savings Bonds, and Promissory Notes, with the DMO and the Central Bank of Nigeria (CBN) facilitating these transactions.
At the end of Q1 2024, the total domestic debt of the federal government was N61.578 trillion, which marks a 15.62% increase from N53.258 trillion at the close of December 2023.
This indicates that the government took on N8.32 trillion in additional debt within the first three months of the year, showcasing a more aggressive borrowing trend in Q1 compared to Q2 2024.
The rise in debt stock can be attributed to the government’s pressing need to finance the economy, prompted by a significant budget deficit forecast of N9.1 trillion at the start of the year, which is roughly 3.8% of GDP.
The deficit has surpassed initial estimates, leading to the introduction of a supplementary budget of N6.2 trillion later in the year.
Moreover, the Central Bank of Nigeria’s (CBN) efforts to combat inflation by reducing excess money in circulation have also played a role in the increasing debt stock.
To support this goal, the CBN has consistently raised the monetary policy rate, making government securities more attractive to investors as they are deemed risk-free and offer tax-exempt returns.
As a result, Nigeria’s money supply (M3) experienced a year-on-year growth of 56.32%, climbing to N101.461 trillion in June 2024, up from N64.906 trillion in June 2023.
By the end of September 2024, the money supply had further risen to N108.954 trillion.
However, a potential drawback of the CBN’s tightening monetary policy is the significant increase in the cost of servicing these borrowings.
As of June 2024, FGN Bonds remained the primary debt instrument in the federal government’s domestic debt stock, accounting for N52.315 trillion, or 78.13% of the total domestic debt.
Out of the N13.699 trillion raised in the first half of the year, FGN Bonds contributed N8.055 trillion, representing 58.8% of the additional debt incurred.
Nigerian Treasury Bills (NTBs) were the second-largest contributor, with a total debt stock of N11.808 trillion, making up 17.64% of the domestic debt.
During this period, the federal government raised N5.286 trillion through NTBs, which accounted for 38.59% of the total debt raised in H1 2024.
Promissory Notes had a debt stock of N1.671 trillion, comprising 2.5% of the domestic debt, with N342.654 billion raised through this instrument, representing 2.5% of the additional debt incurred.
FGN Savings Bonds, the smallest contributor, accounted for only N55.2 billion of the total debt stock, or 0.08%, with additional debt raised through this instrument amounting to N16.091 billion, a mere 0.12% of the total debt incurred.
