Between January and December 2024, Nigeria’s public debt profile may rise by a whooping N32.66 trillion to hit N130 trillion.
This is as both federal and state governments continue to raise capital from the debt market to meet their budgetary demands.
This is a raising concerns for economic experts and public affairs enthusiasts as they worry about the country’s debt-to-gross domestic product ratio, among other fears.
The projection was made in a report by Afrinvest, an investment management company, titled, ‘Bank Recapitalisation, Catalyst for a $1 trillion Economy, ‘unveiled in Abuja recently.
Debt stock already rose by N24.33 trillion in Q1 2024
Nigeria has already embarked on the path leading to the N130 trillion debt stock projection, which includes external and domestic debts.
Data from the National Bureau of Statistics (NBS) showed that the debt which stood at N97.34 trillion at the end of 2023 has already by jumped by N24.33 trillion to stand at N121.67 trillion in the first quarter of 2024, representing a growth rate of 24.99 per cent on a quarter-on-quarter basis.
According to the forecast by economic and financial experts at Afrinvest, the country may further incur additional N8.33 trillion debt before the end of 2024.
Afrinvest estimated that the fiscal deficit, total public debt stock, debt-to-GDP, and debt-servicing-to-revenue rate would exceed N13 trillion, N130 trillion, 55 per cent, and 60 per cent by 2024 year-end, respectively.
Components of the debt
As of Q1 2024, Nigeria’s public debt stock stood at N121.67 trillion, comprising N77.5 trillion (63.6 per cent) in domestic debt and N44.2 trillion (36.4 per cent) in external debt.
The domestic debt includes N44.8 trillion in Federal Government bonds, N20.3 trillion in Treasury bills, and N12.4 trillion in other domestic debt.
The external debt is made up of N14.3 trillion from multilateral creditors, N10.9 trillion from bilateral creditors, and N19 trillion from commercial creditors.
The Afrinvest report
According to the latest report by the investment management firm, the 2024 budget is based on ‘overly optimistic’ revenue assumptions, which could lead to a repeat of the historically disappointing budget performance.
“The expectation of a 43.9 per cent share of the projected revenue from oil and other minerals is unrealistic,” the report stated.
Afrinvest’s assessment of the 2023 actual budget revealed a sustained under-performance, with actual revenue outpacing the budgeted amount by 7.6 per cent to N11.9 trillion.
However, aggregate expenditure rose by 31.8 per cent to N18.8 trillion, leading to a higher deficit of N46.9 trillion.
“The share of Federal Government’s debt in total public debt stock rose 44.6 per cent year-on-year to N87.31 trillion, accounting for 89.7 per cent of total public debt stock by year-end,” the report noted.
Afrinvest further stated that “the Federal Government’s expansive borrowing plan could rub off negatively on banks’ deposits, given the attractive yields on risk-free papers as compared to interest on banks’ deposit.”
It added, “We believe banks would continue to battle heightened risks of asset deterioration, partly induced by the consumption-tilted budgetary patterns.”
Meanwhile, Afrinvest commended the Central Bank of Nigeria’s move to streamline the number of Bureau De Change operators, sustained the policy on the collapse of the previous multiple forex segments, and resumed periodic sales of forex to approved BDCs at a discounted rate.
“The CBN supervision of BDC operations has been enhanced, and compliance has improved due to higher stakes of the operators,” the report noted.
However, Afrinvest warned that “what should have been a short-term pain from this policy action has become endemic, due to the weak forex reserve war chest to adequately meet up with market demand.”
The report recommended exploring alternative sources of forex, such as bilateral loans, natural resource-tied loans, debt-for-nature swaps, and asset concessions, to provide extended short-term reliefs.
“For the forex market to experience sustainable tranquillity, traditional forex inflow sources – oil production, remittances, and foreign portfolio investment – must be revitalised by supportive fiscal policies. Standalone, these policies will only deliver short-term relief on the forex debacle,” the report stated.
