Nigeria's debt officially becomes a course for concern

Nigeria's debt for the first time in its history has become a course for concern. This new alarming development for Africa's largest economy is due to its increased debt-to-GDP ratio coupled with its high debt service-to-revenue ratio. A recent report published last week denotes that the country's debt-to-GDP ratio is now over 50%.

Nigeria's Debt Management Office recently released a report detailing the country's total public debt stock.

The report showed that Nigeria's current total outstanding domestic debt stands at N65,646,263.25, while its total outstanding external debt stands at N56,024,618.24. Total debt amounts to N121,670,881.49.

According to Nairametrics, the country's total GDP was N229.9 trillion in nominal terms towards the end of last year, yet it widened at a rate of only 2.74% in real terms. Thus, the country's debt-to-GDP ratio has surpassed 50% for the first time.

This new development leaves little room for Nigeria to acquire more loans at a time when the country's economy is at its most vulnerable. With a lower debt-to-GDP ratio, Nigeria typically spends a smaller proportion of its national budget on interest payments.

Nigeria's incremental debt

Since the previous administration which lasted 8 years, Nigeria's debt has been on the rise. The 8 years encapsulating the aforementioned administration, spanning 2015 to 2023 saw the country's debt rise from N12.6 trillion to N97.3 trillion. This would mean that a debt of N10.6 trillion was incurred annually on average.

However, in the first quarter of 2024 alone, N7.71 trillion was added to the already ever-expanding debt stock, allowing the country's debt to cross a threshold typically seen as unsustainable.

The Tinubu administration recently acquired a $500 million loan from the World Bank, with the promise to get an additional $2.25 billion.

Amongst Africa's largest economies, Nigeria has always boasted a relatively low debt-to-GDP ratio compared to countries like Kenya, Ghana, and South Africa, which all have 70.1% 84.9%, and 72.2% respectively.

The report by Nairametrics notes that while these countries have considerably larger debt-to-GDP ratios than Nigeria, Nigeria's capacity to satisfy debt service commitments has always been hampered by its high debt service-to-revenue ratio.