Nigeria’s debt-to-GDP ratio has surpassed 50% for the first time, according to the latest public debt figures published by the Debt Management Office (DMO).
The country’s public debt portfolio now stands at N121 trillion, comprising N65.6 trillion in domestic debt and $42.1 billion (N56 trillion) in foreign debt.
As of December 2023, Nigeria’s gross domestic product (GDP) in nominal terms was N229.9 trillion, with a real growth rate of only 2.74%. This increase in debt has pushed the debt-to-GDP ratio to 52.9%, marking a significant milestone.
In the first quarter of 2024, Nigeria’s nominal GDP was N58.5 trillion, up from N51.2 trillion in the same period in 2023. The nominal GDP figures for the second and third quarters of 2023 were N52.1 trillion and N60.6 trillion, respectively, while the fourth quarter saw a rise to N65.9 trillion, resulting in a trailing four-quarter GDP total of N237.5 trillion. Using this figure, the debt-to-GDP ratio is 51.2%.
This rise in the debt-to-GDP ratio highlights Nigeria’s increasing debt burden. Historically, Nigeria has pointed to its relatively low debt-to-GDP ratio as a sign of economic resilience, suggesting there was room for additional borrowing.
For comparison, Ghana had a debt-to-GDP ratio of about 84.9% in 2023, South Africa 72.2%, Kenya 70.1%, and Egypt 95.8%. Despite having lower ratios, Nigeria struggles with a high debt service-to-revenue ratio, which complicates its ability to meet debt obligations.
Over the last eight years, Nigeria’s debt profile has steadily increased, driven by low crude oil revenues and rising budgetary expenditures. Public debt rose from N12.6 trillion in 2015 to N97.3 trillion in 2023 under the Buhari administration. Between December 2023 and March 2024, public debt increased by N24.3 trillion, a surge attributed to new borrowing and naira devaluation.
The DMO noted that the fresh borrowing amounted to N7.71 trillion in the first quarter of 2024, including N2.81 trillion as part of the new domestic borrowing provided in the 2024 Appropriation Act and N4.90 trillion from the securitization of the N7.3 trillion Ways and Means Advances approved by the National Assembly.
Moody’s, a global ratings agency, has projected that Nigeria’s interest spending on debt could consume up to 36% of the federal government’s revenue in 2024.
The Central Bank of Nigeria’s (CBN) hawkish monetary policy has pushed interest rates on local borrowing from an average of 12.8% in 2023 to around 19% in the first five months of 2024, exacerbating the financial strain.
With Nigeria’s debt-to-GDP ratio now over 50%, the country faces limited options for further borrowing while managing current economic challenges.
The rising debt profile underscores the urgency for Nigeria to address its fiscal policies and debt management strategies.
