June 10, 2022/CSL Research

The Debt Management Office (DMO) said on Tuesday that Nigeria’s total public debt stock increased to N41.60tn in the first quarter of 2022 from N39.56tn as of December 2021. The public debt stock covers the total domestic and external borrowings of the Federal Government and state governments, including the Federal Capital Territory.

According to the DMO, the increase in total public debt stock includes new domestic borrowing by the FGN to partly finance the 2022 budget deficit and the US$1.25bn Eurobond issued in March 2022 as well as disbursements by multilateral and bilateral lenders. It added that there were also increases in the debt stock of the state governments and the FCT.

Based on FY 2021 GDP data at current prices, the debt to GDP ratio comes to about 24.0%, below Nigeria’s self-imposed limit and IMF benchmark of 40% and still significantly below those of African peers like Ghana and Kenya. However, with the inclusion of borrowings from the CBN (Ways and means- estimated at 17.5trn as of December 2021) and the stock of AMCON debt (estimated at about N4.4trn), the debt profile would be about N63.5tn, and debt to GDP ratio comes to c.36.6%. This raises strong debt sustainability concerns.

The relatively moderate debt level of the country has increasingly become vulnerable due to high-interest payments, which continue to absorb a significant portion of federal government revenues. Debt service to revenue was estimated at 76.1% as of November 2021.

Nigeria’s fiscal deficit has surpassed the target by an average of c.65% over the last 5 years due to ambitious revenue estimates and volatile crude oil prices. Government expenditure for 2022 was estimated at an all-time high of N20.13 trillion (including supplementary budget), and revenue projected at N10.1 trillion will likely underperform estimate. Persistent fiscal spillage has resulted in debt servicing to revenue averaging 70% over the last 5 years.

This trend will likely persist and calls for fiscal consolidation. We reiterate the need for the government to cut expenditure and propose reforms that could scale down the size of the government, reduce governance costs and ease the fiscal burden on the government.

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