Nigeria’s Debt Profile to Hit N187 Trillion as World Bank Disburses $2.5 Billion
- Nigeria’s debt profile has been projected to rise to N187.79 trillion in 2025 amid increased borrowing
- A report by an investment company, Cardinalstone, projected that the country’s debt level will increase due to the naira depreciation
- The report stated that Nigeria’s dollar-denominated domestic bond causes the debt increase
Legit.ng’s Pascal Oparada has reported on tech, energy, stocks, investment and the economy for over a decade.
Nigeria’s debt profile will hit an unprecedented N187.79 trillion in 2025 as the country grapples with increasing borrowing costs, declining naira, and heightened government borrowing.
The projection is according to a recent report by an investment firm, Cardinalstone, which projected that the country’s debt would reach N153.04 trillion last year.
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Why Nigeria’s debt is rising
The country’s dollar-denominated domestic bond, oversubscribed by $9 billion, is causing the debt.
Others include regular borrowings via Nigeria Treasury Bills (NTBs), bonds and the recent Eurobond sales to raise $2.2 billion.
Cardinalstone projected that FG's debt would hit N187.79 trillion in 2025 due to a sharp rise in borrowings, raising concerns about debt sustainability.
Nigeria’s debt has grown astronomically, jumping from N49.85 trillion before 2023 to N134.30 trillion by the end of the first half of 2024.
The increase shows the impact of naira devaluation, excessive government borrowing, and rising borrowing costs.
DMO estimates Nigeria’s debt profile
Data from the Debt Management Office (DMO) shows that Nigeria’s economy has about $43 billion as external debt, accounting for 47% of the total debt as of the second quarter of last year.
The Nigerian government owes the more significant part of the debt, borrowing about N56 trillion, while the 36 states and the Federal Capital Territory (FCT) owe N7 trillion in external debt.
The data breakdown shows that the federal government depended on domestic borrowings, which account for 53% of total debt.
The Nigerian government owes N66 trillion in domestic debt, and the state governments, including FCT, have N4 trillion.
The country’s debt has skyrocketed from 53% in Q1 2024 to 58% in Q3, exceeding DMO’s public debt ceiling of 40%.
Despite the country’s debt-to-GDP ratio being slightly below the IMF’s 60% ceiling for developing markets, Nigeria’s weak revenue profile and FX volatility risks could excavate debt levels, straining the economy further.
With Nigeria’s debt profile increasing, the debt-to-service ratio will remain high, meaning a large chunk of the government’s earnings will be used for debt servicing instead of capital expenditure.
According to the report, Nigeria’s debt service increased by 69% per year to N6 trillion in the first six months of 2024, representing 50% of aggregate spending.
Experts worry over Nigeria’s debt levels
The debt service shows that a debt-service-to-revenue ratio of 162% grew from 128% in the first half of 2023, showing the large portion of government revenue earmarked for debt commitments.
Analysts have expressed worry over the escalating debt levels, warning that it could cause a debt crisis for the country, which faces high living standards.
The report by Cardinalstone says that Nigeria faces some notable debt obligations.
The country's Eurobond maturities will be about $1.33 billion annually in the next decade. This includes coupon payments and total annual debt servicing costs of $2.24 billion.
Nigeria’s total debt profile rises to N134trn
Legit.ng previously reported that Nigeria's debt stock hit N12.6 trillion near the end of the second quarter of last year.
The rise is 10.35% from the N121.7 trillion recorded in the first quarter 2024.
A document by the Nigerian government shows that the increase was due to the naira depreciation.
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Source: Legit.ng
