Nigeria’s total debt is expected to rise to N130 trillion by December 2024, up from N121.67 trillion in the first quarter of the year, according to a report by Afrinvest.
The report released by Afrinvest, an investment management company, titled, ‘Bank Recapitalisation, Catalyst for a $1tn Economy,’ raises concerns about the country’s debt-to-gross domestic product ratio.
According to the Debt Management Office, the debt stock has grown by 24.99% between Q1 2024 and Q1 2023 on a quarter-on-quarter basis.
Nigeria’s public debt stock was N121.7tn as of Q1 2024, with N77.5tn (63.6%) of the amount coming from domestic debt and N44.2tn (36.4%) from external debt.
Afrinvest predicts that the fiscal deficit, total public debt stock, debt-to-GDP ratio, and debt-servicing-to-revenue rate will exceed N13.0 trillion, N130 trillion, 55%, and 60% by the end of 2024, respectively.
Afrivest attributes the debt increase to overly optimistic revenue assumptions in the 2024 budget, which may lead to disappointing budget performance.
“The expectation of a 43.9 percent share of the projected revenue from oil and other minerals is unrealistic.”
The report states that The Federal Government’s debt accounts for 89.7% of the total public debt stock, which rose by 44.6% year-on-year to N487.3tn.
It will be recalled that N18.32 trillion in income and a N9.18 trillion deficit were projected in the N28.7 trillion 2024 budget that President Bola Ahmed Tinubu signed.
Last month, the Senate approved an $800 million loan request from the World Bank, following a $2.25 billion loan approval in June 2024.
The report also noted that the Federal Government’s expansive borrowing plan could negatively impact banks’ deposits, given the attractive yields on risk-free papers compared to interest on banks’ deposits.
Additionally, Afrinvest warned that the forex market’s stability is threatened by the weak forex reserve war chest, which is unable to meet market demand.
The report recommends 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. It also emphasises the need for supportive fiscal policies to revitalise traditional forex inflow sources, such as oil production, remittances, and foreign portfolio investment.
Nigeria’s public debt Stock projected to hit N130tn by year-end
