November 20, 2024/CSL Research
President Bola Tinubu has formally requested the National Assembly’s approval for a new external borrowing plan of US$2.2bn to help finance the 2024 budget deficit of N9.7trn. The request was detailed in a letter presented by the Speaker of the House of Representatives, Tajudeen Abbas, during Tuesday’s plenary session. According to the letter, the borrowing plan includes a US$1.7bn Eurobond and US$500m through Sukuk financing. These funds are part of the provisions outlined in the amended 2024 Appropriation Act to address the fiscal shortfall.
According to recent data from Nigeria’s Debt Management Office (DMO), the country’s total public debt in Naira terms reached N134.30trn (US$91.35bn) at the end of Q2 2024. This reflects a 10.35% increase from N121.67trn (US$91.46bn) in Q1 2024 and a significant 53.69% rise from N87.37trn (US$113.42bn) in Q2 2023. The total debt figure includes the combined domestic and external debt stocks of the Federal Government, 36 state governments, and the Federal Capital Territory. The quarterly increase of 10.35% (N12.63 trn) was largely driven by the depreciation of the Naira, which increased the Naira value of external debt, along with a rise in domestic debt.
Nigeria’s external debt in Naira terms rose to N63.07trn in June 2024, up from N56.02trn in March 2024, while domestic debt increased to N71.22trn from N65.65trn during the same period. The N5.58trn rise in domestic debt was primarily driven by new borrowings by the Federal Government to finance the 2024 budget deficit. For external loans, multilateral and bilateral borrowings are largely on concessionary terms, while commercial and syndicated loans are obtained on commercial terms. As of June 2024, borrowings from multilateral sources amounted to $21.6bn, representing 50.4% of the total external debt. Bilateral loans accounted for US$5.9bn, or 13.7%. Borrowings through Eurobonds on commercial terms totalled US$15.1bn, making up 35.2% of external debt.
The new borrowing aims to address immediate fiscal needs, but its long-term impact will depend on the government’s ability to enhance revenue generation and manage the growing debt burden. Nigeria’s public debt is already substantial, with a significant portion of government revenue directed toward debt servicing, raising concerns about the sustainability of the debt. In 2023, total debt servicing amounted to N8.56trn, accounting for 37% of the Federal Government’s expenditure and 69% of its revenue, according to the 2025–2027 Medium-Term Expenditure Framework and Fiscal Strategy Paper (MTEF & FSP).
Additional borrowing could further worsen Nigeria’s debt-to-GDP ratio. As of the 2023 fiscal year, the debt-to-GDP ratio stood at 42%, surpassing the benchmark the Debt Management Office (DMO) set. Our in-house projections indicate this ratio could rise to 51.5% by the end of the 2024 fiscal year, significantly exceeding the IMF’s forecast of 46.5%. Moreover, reliance on external borrowing in foreign currencies heightens exposure to exchange rate volatility. Any devaluation of the Naira would increase the cost of debt repayment, compounding the financial strain on the economy. Strengthening domestic resource mobilisation is crucial to reducing the government’s reliance on borrowing and ensuring fiscal sustainability.
