Nigeria’s debt-to-GDP ratio rose to 55% as of June 2024, marking a significant increase from 42.4% in December 2023.
This is based on data from the Debt Management Office, which indicates that Nigeria’s external debt now stands at $42.9 billion, while its domestic debt has risen to N71.2 trillion.
Nigeria’s public debt has increased this year due to a combination of factors, including exchange rate depreciation and a rise in domestic borrowing, often at higher interest rates.
Nairametrics earlier reported that the debt-to-GDP ratio crossed 50% for the first time at the end of March 2024, following the release of updated GDP figures.
The debt-to-GDP ratio is a critical metric for sub-Saharan African countries, as it measures fiscal sustainability, influences access to affordable financing, and impacts public investment capacity.
What the data is saying
Using the exchange rate of N1,505/$1 as of June 30th, 2024, the total public debt becomes N135.6 trillion.
- Nigeria’s trailing four quarters GDP ending June 30th, 2024, printed at N246.3 trillion indicating a total debt to GDP ratio of 55% for the period under consideration.
- This figure compares to a debt-to-GDP ratio of 42.4% as of December 2023.
- At the time, the total public debt of N97.4 trillion was made up of a total external debt of $42.4 billion and domestic debt of N59.1 trillion.
Nigeria’s debt-to-GDP ratio has historically been viewed as one of the lowest in sub-Saharan Africa, with the debt service-to-revenue ratio often identified as the primary challenge.
- However, a combination of exchange rate depreciation and increased local currency debts has pushed Nigeria’s debt-to-GDP ratio higher.
- High debt-to-GDP ratios increase vulnerability to external shocks, strain public resources, and undermine long-term development goals.
- Despite the rise, Nigeria still ranks below other African countries such as Ghana (82.9%), South Africa (72%), and Kenya (70%).
While these countries have significantly higher debt-to-GDP ratios compared to Nigeria, the key challenge for Nigeria remains its ability to meet debt service obligations due to its high debt service-to-revenue ratio.
Nairametrics earlier reported that the country’s total debt service payments surged by 39.77% from $2.56 billion between January and September 2023 to $3.58 billion in the same period of 2024, highlighting the growing financial strain on public resources.
Debt servicing accounted for 73.97% of total foreign payments of $757.41 million for the month. The federal government recently announced it is proposing a budget of N47.9 trillion in line with its medium-term expenditure framework.
The budget will be backed by fresh N9.2 trillion in new borrowing which will be used to finance the budget deficit in 2025.